Overcome roadblocks to a comfortable retirement

INVESTING

In your life, you will want to take many journeys.

Some are physical — perhaps you’ll finally visit the French Riviera or the Caribbean. Others involve personal growth — one day, you’ll finally become fluent in that foreign language you’ve been studying.

But of all the destinations you can identify, few will be as important as retirement — specifically, a comfortable retirement. And that’s why it’s so important to consider the roadblocks you might encounter on your road to the retirement lifestyle you’ve envisioned.

Here are four of the most common obstacles:

Insufficient investments: Very few of us have ever reported investing too much for their retirement. But a great many people regret that they saved and invested too little. Don’t make that mistake. Contribute as much as you can afford to your RRSP or other employer-sponsored retirement plan, and increase your contributions whenever your salary goes up. You may also want to consider the tax-exempt growth potential that a TFSA offers, so take advantage of that opportunity, too. And always look for other ways to cut expenses and direct this “found” money toward your retirement.

Underestimating your longevity: You can’t predict how long you’ll live, but you can make some reasonable guesses — and you might be surprised at your prospects. According to Statistics Canada, men reaching age 65 today can expect to live, on average, until age 83.5, while women turning age 65 today can anticipate living, on average, until age 86.6. That’s a lot of years — and you’ll need to plan for them when you create long-term saving, investing and spending strategies.

Not establishing a suitable withdrawal rate: Once you are retired, you will likely need to start withdrawing money from your retirement accounts. It’s essential that you don’t withdraw too much each year, obviously, you don’t want to run the risk of outliving your resources. That’s why you need to establish an annual withdrawal rate that’s appropriate for your situation, incorporating variables such as your age, the value of your retirement accounts, your estimated lifestyle expenses and so on. Calculating such a withdrawal rate can be challenging, so you may want to consult with a professional financial adviser.

Ignoring inflation: It’s been low in recent years, but inflation hasn’t disappeared, and it could rise at exactly the wrong time — when you’re retired. That’s why you’ll want your portfolio to include some investments with the potential to outpace inflation, even during your retirement years.

By being aware of these roadblocks, and taking steps to overcome them, you can help smooth your journey toward retirement — and once you get there, you may enjoy it more.