By Janet Gray
Everyone’s talking about it. And likely more openly than in the past.
The topic de jour for many is …. Money.
Rightly so. There are concerns about the instability of our economy (nationally and globally) and uncertainty about what we are hearing from all levels and types of media sources. The bottom line in the discussions and conversations is how it will impact us at the personal level.
Will I be okay? My family? My friends? My community? Sleepless nights ensue.
Two of the main concerns for many Canadians over 55 are about having enough income to retire comfortably (and stay retired) and dealing with inflation effects.
Let’s talk about them, starting with retirement income.
Saving for any future goals takes some planning. You want to save enough but certainly not too little. And if you save too much, perhaps you are sacrificing more in the short term than necessary. It’s the Goldilock’s conundrum.
To calculate that sweet spot/amount of required savings, it’s helpful to estimate what your needs and goals might be in retirement. Often your current spending needs will be similar to your retirement needs minus the obvious subtractions like kids, less debt etc. Sometimes those subtractions are canceled out by increased travel and activities, especially in early retirement. Be honest here. This is your reality check.
And at least you now have a launching point.
Next, what will be your sources of retirement income? Some will have a defined benefit pension, to which they have contributed during their working careers, and will have a source of lifetime, guaranteed and indexed income in their retirement. Others may have a workplace RRSP and/or a personal RRSP, TFSA.
After age 60, you can apply for the Canada Pension Plan (CPP) and after age 65, you can apply for Old Age Security (OAS). Note that both CPP and OAS are guaranteed, lifetime and inflation protected.
You should then be able to estimate your future income stream, which depends on your CPP and OAS eligibility and your prior savings history. Compare that to your needs and goals to see if there might be a gap. It’s helpful to divide your expenses into non-discretionary needs (debts, bills, groceries) versus wants (travel, gifts).
Review your spending and goals regularly to allow for revisions. With the help of a financial professional, you can optimize your investments, review the timing of when to receive CPP and OAS, minimize taxes where possible, consider downsizing and more.
Inflation is also top of mind. Grocery prices are increasing all the time and because they are visible to us every time we shop, this is a continuing stressor. Recent tariffs and trade wars also add to that.
Try to control what you can. Go back to your spending details and see if there is a cost that can be trimmed, even if temporarily. Try to delay/reduce discretionary spending in the short term so that you can prioritize essential spending.
Look at current spending to see where cuts or decreases can be made. For instance, reduce fees on current services or less -used subscriptions. Often, the accumulation of smaller cost cuts can add up.
Set aside funds for emergencies or unexpected expenses. Create a grocery list that is mostly sales items. Consider shopping for items that are on sale, buy from thrift stores, use price matching or coupons.
It’s not always how much you save, it’s about how much you don’t spend in the first place.
Building your financial awareness about your unique situation is advisable to help reduce your stress and to put your energy where it is best used.
Janet Gray, CFP is an advice-only financial planner with Money Coaches Canada, based in Ottawa with service Canada-wide.
