Saving isn’t enough to plan for retirement. Before all else, you need to identify your needs. Here’s an interview with financial planner Natalia Sandjian to help you find the right strategy.
“The most common mistake people make in planning their retirement is not thinking about it. The second most common mistake is that people don’t think about it early enough,” Natalia Sandjian readily admitted. “You should plan your retirement as soon as you enter the workforce. People often start thinking about it when they’re about 50 years old, which is far from ideal.”
People who work often have other priorities when they’re in their twenties and thirties, like buying a house or having kids. “They tell themselves that they have enough expenses for the moment, and that they’ll invest in their retirement later. But if you start saving early, compound interest will take care of good portion of your savings,” Mrs. Sandjian added.
“Not only should you figure out your ideal retirement age, but you should also calculate the cost of living for your current lifestyle (which is a good estimate for the future), get a statement of your current investments, and estimate the private and government benefits you plan on receiving upon retirement.”
The financial planner stresses that “Today, retirement is seen as a second life. New retirees say to themselves, ‘Now I can do something else.’ Some want to take on new projects or even keep working here and there, either because they want to or because they need to.”
As an expert, Mrs. Sandjian believes that expenses now stretch out over a longer period of time. For some, retirement lasts as long as their working life. People in the workforce also have to rely on themselves, as guaranteed revenues aren’t as high – private pension plans are increasingly rare, or at least not so generous, and government pensions aren’t enough.”
“There’s also a higher number of indebted retirees,” notes Mrs. Sandjian. “If you go back one generation, a mortgage was paid off by retirement; nowadays, people in their 50s or 60s come to us to refinance their property. Customers would basically like to maintain their lifestyle when they retire. Their greatest fear by far is having to lower their quality of life. They’re afraid of not being able to continue doing what they love. These aren’t grand, unrealistic dreams! In fact, people sometimes even stop themselves from dreaming because the financial aspect of retirement worries them so much.”
“The financial planner develops a personalised strategy that considers the customer’s priorities and respects their lifestyle and temperament. A thirty-something customer just starting their career, overwhelmed by a bunch of expenses but who has plenty of time ahead of them, won’t have the same investment strategy as a prudent fifty-year-old who wants to start withdrawing in the next decade,” Natalia Sandjian asserts.
Young working people should review their retirement strategy every five years or after any major life event (birth of a child, marriage or divorce, inheritance or new job), whereas people close to retirement would benefit from a yearly review.
“It’s a common mistake to think that you can save without having a plan. Without setting goals, your chances of succeeding are small.” The key to all this? Contacting an investment advisor.
At 20 years old: Save periodically, according to your financial capabilities. Investing as little as $25 per month makes a difference in the end; plus, it gets you into the habit of saving.
At 30 years old: Don’t give up on contributing to your retirement, even if this is when people are most in debt and their income is going towards many different needs.
At 40 years old: Keep up with the habit of saving and increase your contribution according to your capabilities. A well-balanced budget will allow you to save as well as spend at your discretion. And if you receive a tax refund, you can treat yourself with part of it.
At 50 years old: Maximise your contributions; you can even be more aggressive if you see that you’re not in line with your retirement goals.
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