It is a nightmare situation that no one ever wants to end up in. Running out of money during retirement can be a very stressful situation to be in as it often seems like there is no way out. However, if you do start to feel the pinch during your later years, there are some emergency steps you can take to help you turn your retirement into a more comfortable period of your life. Here are some things you can do in the event that you do start to run out of money.
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planning ahead
Retirement can seem almost a lifetime away when you’re young and healthy, but it soon sneaks up on us. The topic of aging can be uncomfortable for many of us, but it’s important to be prepared – nobody else can ensure a safe retirement for us better than ourselves. It’s not just about researching the best retirement fund to pay into; it’s also important to be aware of other avenues, to ensure you have the safest and wealthiest retirement possible, and ensure you’re comfortable after all those years of hard work.
Plan ahead
Don’t just let retirement creep up on you – in general, we need to start planning for our retirement fund in our twenties. While it’s impossible to predict every major life event, it’s sensible to plan for the worst case scenario. Determine what you’ll want your retirement fund for, and why you’ll need it. Do you plan on traveling a lot once you finish in your employment, or perhaps buy a second holiday property? Do you need to prepare for health care expenses, or support family members? Or do you simply want to live comfortably day to day? This will give you some indication of how much you expect to spend in your retirement, and therefore how much to save on a month by month basis.
Every one should have goals. If you don’t have goals, it’s a good idea to make some because when you set goals, you have something to measure your achievements against. Although most of us do have goals, we don’t all set up goals for the short, medium, and long term. We may only set short-term goals or perhaps we might just think about our retirement.
A short-term goal might involve saving for a much-needed vacation within the next year or perhaps saving up to buy a vehicle. A medium-term goal could be to save money for a down payment on a home, and a long-term goal could be to save for retirement or for your child’s education. By setting goals for different timeframes, you are more likely to achieve your dreams by following a disciplined approach.
Short-term goals such as saving for a vacation could be as simple as putting money into a locked-in account such as a GIC or investing in something like a Money Market or T-Bill. This way your capital is secure and you can still see some growth in your investment.
A medium-term goal such as saving up to buy your first home could be achieved by setting up an RRSP and taking advantage of the Home Buyer’s Plan. You could set up preauthorized payments into the RRSP on the same day you get paid and over time your money will grow.
An example of a long-term goal would be a couple who just had their first child They decide that it is important to them to fund their child’s future post secondary education. They set up an RESP (Registered Education Savings Plan for Canadians) and begin to contribute to it monthly. By doing so, they have time on their side and their funds have the time to grow enough to adequately provide the funding for their child’s education. Had this couple not had the foresight to set up the RESP right away, they would have had to come up with a lot more cash to help out their child.
Planning ahead and disciplining yourself to put money aside each month to contribute to funding your short, medium, and long-term goals is well worth it. Although you might feel that you are on a tight budget, you can take comfort in knowing that you are paying yourself first, and that your scrimping and saving will pay off as you achieve more and more of your goals.