My Finances

Is your retirement decades or just years away? Are you contributing to a private pension plan you think will cover all the bases?

Whatever your situation, consider this: according to Quebec's Régie des rentes (RRQ) and other specialists, you may need to invest additional funds into your plans to ensure you'll have enough to meet your retirement needs.

The 2008 financial crisis completely transformed the global economy. Long term investment yields collapsed and stock markets everywhere entered a period of volatility that has proved tough slogging for pension plans and retirement funds.

And that's not the only big challenge such funds face. As life expectancy increases, people are adding years to their lives and drawing on their retirement savings for longer. Pension funds have had to adjust to this new and much more costly reality.

If you're counting on government pensions to help tide you over when you retire, you might want to count again, because there's a good chance they won't be sufficient to let you keep your standard of living. To maintain the same lifestyle after retirement, the average person will need 70% of their employment income. Government pensions will cover about 40% of an average annual income of $45,000, i.e., $18,000 at 65 years of age. That still leaves 30%, or $13,500, to cover.

Survey after survey shows that Canadians are woefully unaware of the income gap they could be facing in retirement.

That's why everyone needs to take responsibility for retirement planning by contributing to their RRSP or TSFA.

How?

• Set up automatic withdrawals from your savings account to your RRSP. Regular contributions are a key part of a successful strategy.
• If your employer offers a group RRSP, sign on. Contributions are deducted directly from your paycheque, and you immediately benefit from a tax deduction.
• Think about taking out an RRSP loan if you have unused contribution room--and using your tax refund to pay down your loan.
• Contribute to your TSFA to round out your RRSP investment.
• Ask for advice from your advisor at your caisse.

If you've put together a winning retirement savings strategy, don't hesitate to share it with the readers of this blog.