Weathering the retirement storm

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Retirement crisis concept as a couple of adirondack chairs sinking in the ocean during a thunder storm as a metaphor for financial investment problems for retiring seniors who lost their savings or broken dreams symbol.By Sandy Cardy

Special to the Financial Independence Hub

Retirement is not just a destination; a time in the future. It’s also a journey; one that requires planning and nurturing along the way — not unlike your health.

While I’m not going to pretend saving money is easy, joining the ranks of those who have comfortable retirement savings may be a more realistic goal than you think. Achieving your savings goals requires a steady income, a commitment to saving, short-term sacrifices, and a smart investment strategy.

The climate

A 2013 study by the BMO Wealth Institute shows that Canadians – especially baby boomers — are falling short of their retirement income goals. Some 46 per cent of people asked expressed doubts about their ability to retire comfortably. (Source)

In the US, the outlook is equally bleak, according to the National Institute on Retirement Security (NIRS) report: The Retirement Savings Crisis: Is it Worse Than We Think?  “The average working household has virtually no retirement savings. When all households are included— not just households with retirement accounts—the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.” (Source)

But it isn’t all bad news. There are a lot of things that we can do to help stabilize our financial situation — now and in the future. There isn’t just one strategy to help you achieve your retirement goals. Here are a few of my tips:

Hire an expert

Even if you are self-disciplined, are saving money and are financially savvy, you shouldn’t manage your retirement money alone. That’s why it’s important to put this in the hands of a financial expert — the same way it’s important to practice self care for your health, but you can’t do it without the help of a doctor.

You need to ensure you save enough for retirement and decrease the chance you will run out of money once your paycheques stop. Get a referral for a qualified professional to help you with your finances, either through a reputable organization, a personal friend or family member.

Pay yourself first

As a general rule of thumb, as soon as you start regular work, save at least 6% of your pretax income. So if you earn $50,000, 6% equals $3,000 per year, or $250 per month. The best way to save is to set up regular fixed automatic contributions (from your bank account to a retirement account) every payday so you don’t have a chance to spend it.

Even if your budget is a little tight, this strategy will force you to make adjustments in your spending habits in other areas. The key here is to pay yourself first rather than last – if you wait to accumulate monthly savings after you have paid all your bills and other expenses, there likely won’t be anything leftover.

Have an emergency fund

While having an emergency fund has always been part of an overall sound financial plan, it’s something that I am more keenly aware since my own health crisis of 2012, where I was diagnosed with cancer. In the past I suggested an emergency fund be 6 months of necessary expenses, i.e., mortgage, groceries, utilities, transportation. I’ve since revised that figure to one year, and to allow for options outside of conventional medical system such as naturopathy — a health emergency fund. Remember that emergency monies should be kept liquid, like in a Tax Free Savings Account (TFSA) in Canada, or in the UK, cash ISA. Americans should use a savings account due to the withdrawal restrictions of IRAs.

It’s your legacy; and it’s about your health, your finances and the impact they have on your family and your future. It’s your job to make sure your journey runs as smoothly as it possibly can and that —wherever possible— you are ready for what life throws your way.

 

Sandy-Cardy-photography-3Sandy Cardy is a bestselling author (The Cottage The Spider Brooch and The Second Wife) and one of Canada’s most respected tax and estate planning experts. Diagnosed with cancer in 2012 and now cancer-free and thriving, she speaks and teaches widely on how to make sound personal and financial decisions, embrace radiant health, and live our lives to the fullest. You can sign up for Sandy’s newsletter and download her eBook (7 Steps for Finding the Right Financial Advisor and 7 Steps for Finding the Right Health Care Provider) on her website. You can also find her on Facebook, here and Twitter, here. This article originally appeared on Sandy’s website and is republished here with her permission

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