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Planning Your Financial Goals Before Retirement

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The most important financial planning decision you will make in your life is when to retire and how much money you will need to live comfortably in retirement. This decision will determine the amount of savings you need to accumulate and the type of investment portfolio you should have. It will also determine whether or not you can afford to retire on your own terms.

The good news is that it’s never too late to start saving for retirement. If you’re already in your 50s or 60s, though, it’s going to be a lot harder to build up enough savings for a comfortable retirement. You’ll probably have to work longer than you’d like and cut back on some of your expenses, but there are still ways you can save for retirement even if you don’t have a lot of money.

Defining your personal financial goals is one area of money management where a lot of people fall short. They don’t have a plan for how they are going to achieve their goals, and they don’t have a way of measuring whether or not they are on track.

Unfortunately, it is common to see people focused on the short-term goal of basically making it month-to-month, or not having any goals at all and taking things day by day. In the end, these individuals end up in significant financial stress or debt.

So how do you plan for goals?

Before you can even define your financial goals you have to be clear about where you’re starting from. You have to have a baseline of what your expenses are now and what your income is now. The best way to do this is to use a simple budget. A budget doesn’t have to be complicated or time-consuming, in fact, it can be as simple as tracking your income and expenses for one month.

You can use a spreadsheet, a simple notebook or a pen and paper. Any system is fine as long as you are consistent with it. Once you have a month of expenses and income tracked then you can look at the difference between income and expenses.

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If your expenses are greater than your income then you’ll want to look at where your money is going each month. You may find that you are spending a lot more than you thought on things like eating out or entertainment. You may find that you are not saving enough money or putting enough money into retirement. Whatever the reason, once you know where the difference is between what you are making and what you are spending then it’s time to determine how much money you need to make in order to meet your financial goals.

There are a number of different personal financial goals that people have. Some people may want to travel more or they may want to pay off their house or they may want to retire early.

The first step to planning a successful retirement is to have a clear vision of what you want your life to look like when you are no longer working. Determine what your personal financial goals are and then determine how much money you need in order to accomplish those goals.

Then, once you know that figure, you will be able to work backwards from your goal to determine how much money you need to earn each month in order to reach your goal.

Here are some strategies you can use when planning your financial goals before retirement:

1. Find a Quiet Place To Think & Plan Ahead

The first step to getting your financial goals in order is to walk to a quiet place with a pen and paper and just brainstorm those goals without distractions.

A) What do you want to achieve? Think about all of the different ways that you would like to spend the money that you’re earning right now, and write those down. For example:

  • Pay off that debt
  • Create an emergency savings plan
  • Start a college/university fund for your children
  • Save additional funds for retirement
  • Save for big expenses like a new car, or a vacation trip once you retire

B) Income: How much money will you need in order to maintain the lifestyle you want? What are your sources of income? How do they compare with the expenses you will incur?

C) Expenses: What are the main expenses you expect to incur during retirement? What are the best ways to reduce them? Which expenses can be reduced or eliminated altogether?

D) Investment: How much money do you need to save up in order to live comfortably during retirement? What are the best investment strategies for reaching your goals? Which investments should be prioritized and why?

E) Taxes: How will taxes affect your income and savings during retirement? Are there any tax-saving strategies that can help maximize your savings and minimize your tax liability? What steps should you take now in order to avoid being taxed on your Social Security benefits in the future?

F) Health Care: Which health care options might be available to you during retirement? Do you need to consider private insurance plans? What health care costs can be expected during retirement, how much they will cost, and how they can be managed effectively?

2. Avoid The Savings Goal Traps

Next, let’s focus on two traps that many people fall into when setting savings goals. It’s important when you’re brainstorming savings goals not to get caught up in these two different traps.

The first trap is that you just don’t think that it’s possible to save money. We’re telling you right now that saving money is a possibility.

The second trap that people fall into is they create large savings goals but they don’t really have the income to back it up. Saving for a million-dollar house isn’t a realistic goal if you’re only making $25,000 a year. You want to think about what’s possible and also what’s relevant to your life now. Also be realistic with the time frame for the goal and realize how long it will take to save up the amount of cash needed for the goal. Try to find a good balance.

3. Work With Your Certified Financial Planner To Craft A Financial Plan For Retirement

Once you know how much money you need to make each month in order to reach your goal then it’s time to create a plan of action for how exactly you will accomplish that goal.

To help you with planning these retirement goals, reach out to Pension Solutions Canada and ask to schedule a call with one of our Certified Financial Planners. We’ll assess your situation and assist you with creating a realistic retirement plan with goals you can successfully achieve. The team at Pension Solutions Canada specializes in helping individuals prepare for retirement and protect their assets. We can also help you with estate planning, address tax minimization, and answer all of your retirement and pension questions. Call us at 1-888-554-6661.

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