You Won’t Believe the Latest H&R Block Survey! How You Can Transform Your Odds of Retirement Failure into Victory!
You Won’t Believe the Latest H&R Block Survey! How You Can Transform Your Odds of Retirement Failure into Victory!
H&R Block presents some downright scary statistics in their latest survey. Here’s a thoughtful guide on how you can actively prevent them from happening to you.
The latest survey conducted by H&R Block Canada reveals a concerning trend among Canadians, with over half expressing a sense of lag in their retirement savings.
Here we show you solutions how to minimize your chances of retirement failure. Whether optimizing employer-sponsored pension plans, harnessing the advantages of Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP), or considering additional income streams like side gigs, this will hopefully provide some proactive strategies to improve your financial health.
Join us on this journey through the crucial steps and considerations that pave the way for a resilient financial future.
Here’s a breakdown of key statistics from the H&R Block survey, (a link to which you can find at the end of this article), along with actionable tips to improve your financial situation should you happen to identify with any of these categories.
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Side Gig Plans: Half of Canadians (50%) intend to pursue a side gig during retirement.
This is a positive point. If you don’t need a side gig it's great, but having side gigs in retirement can be highly advantageous, not only for financial reasons but also for overall well-being. Engaging in meaningful work or activities during retirement provides a sense of purpose, and studies suggest that individuals with a sense of purpose tend to lead longer, healthier lives (Source at End of Article).
Additionally, having a side gig can alleviate anxiety over cash flow by supplementing retirement income. This financial buffer provides a level of comfort and security, allowing retirees to enjoy their later years without the constant worry about financial stability. In essence, cultivating side gig plans in retirement can enhance both the quality and longevity of life.
START YOUR SIDE GIG EARLY! Starting your side gig early is a key strategic move to ensure its stability and success by the time you retire. Establishing your side hustle well in advance allows you to fine-tune your skills, build a client base, and navigate potential challenges before relying on it as a significant income source during retirement. This early start provides a buffer, allowing you to enter retirement with a well-established and reliable side gig that can contribute meaningfully to your financial security and overall satisfaction in the later stages of life.
Tax-Friendly Savings Understanding: A significant majority (55%) express a need for better comprehension of tax-friendly retirement savings options.
Work with an Accountant, or Learn: To understand Canadian tax strategies, begin by checking out the Canada Revenue Agency website. Attend workshops or take courses on tax planning, and or work with an accountant for personalized advice. Keep up with updates on tax laws through official publications. This mix of self-learning and professional help makes grasping Canadian tax strategies straightforward.
Financial Constraints: Over half (52%) of Canadians feel financially constrained, lacking sufficient funds at the end of the month for retirement savings.
A solution to this would be starting your side gig early, and paying yourself first! As stated before, kickstarting your side gig early and prioritizing paying yourself first lays a solid foundation to overcome financial constraints when contributing to retirement savings. By initiating your side hustle ahead of time, you create a steady income stream that can be directed towards retirement funds. Paying yourself first means allocating a portion of your side gig earnings directly to your retirement savings before addressing other expenses. This proactive approach not only ensures consistent contributions but also establishes a financial habit that strengthens your retirement portfolio, making it more resilient in the long run.
Reliance on Government Assistance: Nineteen percent (19%) plan to rely on government-assisted retirement plans, and 13% have not yet made specific retirement savings plans.
If you are one of these Canadians who are content to rely on the government to take care of you, you need to take action to change this immediately. Relying solely on government assistance plans and neglecting to make specific retirement plans is a VERY risky strategy that could lead to potential disaster. While government plans do exist, payouts from government plans like CPP and OAS are likely to be lower in the future. So depending solely on them is not very likely to be a secure long-term solution. Failing to make concrete retirement plans leaves one vulnerable to and increases the odds of financial hardships in the later stages of life. Planning for retirement is an essential step in ensuring financial security, and not doing so is setting oneself up for potential failure. It’s crucial to take proactive steps, considering personal savings, investments, working with an investment advisor portfolio manager, and other strategies to build a robust and reliable retirement plan.
Monthly Savings Confidence: Only 32% believe they set aside enough money each month for their retirement fund.
If you find yourself among the 68% who believe they aren’t setting aside enough money each month for retirement, it’s a clear signal to consider meeting with an Investment Advisor or Portfolio Manager. An advisor with expertise in financial projections can assess your current financial situation, identify areas for improvement, and develop a tailored plan to boost your retirement savings. They bring specialized knowledge in navigating investment options, optimizing savings strategies, and aligning your financial goals with a realistic retirement plan. Seeking professional advice from an Investment Advisor or Portfolio Manager can provide clarity, peace of mind, and a roadmap to ensure you’re on track for a more secure financial future in your retirement years.
RRSP Ownership: A majority (56%) of Canadians currently have an RRSP, with an additional 6% planning to set one up in the future.
If you’re among the 38% of Canadians without an RRSP and have no plans to set one up in the future, it’s crucial to start taking action now. An RRSP (Registered Retirement Savings Plan) plays a pivotal role in building a secure financial future, offering tax advantages and long-term savings growth. Delaying the establishment of an RRSP can result in missed opportunities to accumulate wealth for retirement. Starting now allows you to benefit from compounding returns over time, ensuring a more substantial financial cushion when you retire. Don’t underestimate the power of early and consistent contributions to an RRSP — it’s a key step towards securing a comfortable retirement.
TFSA Ownership: For TFSA ownership, the figure is slightly lower at 54%, and 6% plan to establish one at some point.
Similar to my point about the RRSP’s above, if you’re among the 40% of individuals who currently do not have a Tax-Free Savings Account (TFSA) and have no plans to establish one, it’s crucial to initiate action without delay. A TFSA provides a tax-advantaged environment for savings and investments, offering flexibility and potential long-term growth. By not taking advantage of this financial tool, you may miss out on opportunities for tax-free investment gains. Starting a TFSA now allows you to capitalize on its benefits, whether for short-term goals or building a tax-efficient retirement fund. Beginning immediately ensures that you make the most of the TFSA’s advantages and establish a solid foundation for your financial well-being.
Employer-Sponsored Pension Plans: Thirty-seven percent (37%) of Canadians have an employer-sponsored registered pension plan.
If you fall within the 37% of individuals with an employer-sponsored registered pension plan, EXCELLENT! You are well on your way to having a great retirement. BUT! It’s imperative to maximize all the benefits that your plan offers. For example, if you have a defined contribution plan and you are allowed to contribute 6% of your income for a 6% matching contribution from your employer, and you are only opting for 3%, this is not maxing out your benefit. Contributing only half of what you could means you’re not fully leveraging the potential benefits available to you. Ensuring you contribute the maximum allowable amount can significantly enhance your retirement savings. On the other hand, if you’re part of the 63% without an employer-sponsored plan, my earlier points regarding the significance of establishing an RRSP and TFSA become even more critical. These personal savings avenues play a pivotal role in securing your financial future, especially when employer-sponsored plans are not in place.
Prioritizing Standard of Living: A notable 5% indicate a preference for spending any extra money on maintaining a good standard of living rather than allocating it to a TFSA or RRSP.
If you find yourself in the 5% prioritizing your standard of living over allocating funds to a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), please reread my paragraph on Reliance on Government Assistance. This is inviting potential disaster. While maintaining a comfortable standard of living is essential, neglecting these financial tools can jeopardize your long-term financial security. Focusing solely on immediate comfort without strategically investing in these avenues will almost certainly lead to financial challenges in the later stages of life. It’s crucial to strike a balance that ensures your current lifestyle while securing a stable financial future through prudent savings and investment strategies.
Reduced Contributions: A substantial 65% of respondents anticipate contributing less to their TFSA or RRSP this year, citing increased living costs as a key factor influencing their financial decisions.
Many people are fighting inflation these days, and if you’re compelled to reduce your contributions this year due to these factors, like an increased cost of living, it’s understandable, but the key is to continue contributing at least something to your RRSP, TFSA, or other retirement plans. Consistency in savings is paramount, even if it means adjusting the amount temporarily. By maintaining contributions, even at a reduced level, you continue to benefit from the long-term growth potential and tax advantages these accounts offer. It’s a resilient strategy that ensures your financial well-being in the face of short-term economic challenges, allowing you to stay on track toward your retirement goals.
Bottom Line
Successful retirement planning hinges on a proactive mindset. Whether you’re optimizing employer-sponsored plans, leveraging TFSA and RRSP accounts, or exploring supplementary income through side gigs, the early and strategic approach is paramount.
Addressing financial constraints and working with investment advisors, portfolio managers, and accountants are pivotal steps. These actions lay the foundation for a secure and fulfilling retirement. Always remember, that the guidance that comes from financial professionals is indispensable, offering tailored advice for a resilient and prosperous financial future.
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Joe A. Macek, FMA, CIM, DMS, FCSI
Investment Advisor, Portfolio Manager
iA Private Wealth | iA Private Wealth USA
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