You’re 45 and have no retirement plan; what now? – Financial Post

“We have approximately two decades to make an impact on your future”

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Hitting your mid-40s with no retirement plan doesn’t mean your golden years are already tarnished.


While it would be wonderful to have a multi-pronged retirement strategy in place as your 50s barrel toward you, life — with its pandemics, inflation and steep housing and child-care costs — can devour the income of even the the thriftiest Canadians. When you can’t save today, thinking about tomorrow can be nauseating.

And it’s not as if Canadian workers are getting a lot of retirement help from their employers. As of January 1, 2020, only 37 per cent of Canadians were covered by a pension plan, according to Statistics Canada. When you strip away public sector employees, that number drops to a rather ghastly 22.4 per cent.

For 40-somethings worried that their savings and OPP/CPP payments won’t provide anything close to a comfortable, care-free retirement, there’s no need to panic, says Natalie Jamison, wealth advisor at Scotia Wealth management.


“When somebody tells me ‘I’m 45, and I have no planning done,’ my first reaction is, ‘I’m so glad you’ve come to me now rather than when you’re 63 or 64. We have approximately two decades to make an impact on your future,’” she says.

But to maximize that impact, you’ll need to get serious — about your spending habits, about your investment decisions and about the kind of life you want once you’ve abandoned the rat race for good.

The first step

There are differing views when it comes to initiating a retirement plan.

For Stan Tepner, investment advisor at CIBC Wood Gundy, the starting point is identifying the kind of retirement you want.

“You’ve got to have specific goals so you can be motivated to do things to meet those goals,” Tepner says.

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And when Tepner says specific, he means it. What kind of lifestyle do you want? Where do you want to live? How many kids do you expect to put through college, and how big of a legacy do you want to leave them when you die? Answering these questions will help lay the foundation of your retirement plan.

“Let’s say I have to have this many dollars by a certain age to accomplish what I want to do in retirement. That gets into questions of ‘What am I starting with?’, ‘What can I anticipate being able to bring in?’ or ‘What do I have to change to bring in those amounts?’” Tepner says.

For someone who has no plan in place, coming up with even a loose, theoretical structure for your future can be intimidating. But you can also get started with your retirement planning by looking backward.

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“One of the first questions I ask is, ‘Tell me what you’ve done in the last two decades,’” Jamison says. “‘What did you do from 25 to 45 that has caused you to get to today and have no planning?’”

Finding the root cause of your current financial situation can help clarify where your money’s been going (and how much of it’s been spent frivolously) and allow you to plan around when certain expenses, like child support or student loans, for example, are no longer a concern.

What are your options?

You don’t have to make a beeline for a financial planner tomorrow. You should definitely seek out professional help early on in this new, proactive phase of your financial life, but there are a few options you can start weighing on your own.

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Not everyone has the free cash or the desire to pump money into either of Canada’s two most common retirement vehicles, the tax-free savings account and the registered retirement savings plan.

Jamison says there can be confusion around what a TFSA actually is, possibly because of the use of the word “savings” in its name. A TFSA may better be explained as an investment account, as the money you put into it is meant to be channelled into investments. The gains on those investments are tax-free. A TFSA won’t earn you much otherwise.

If money’s tight, and you find yourself needing to choose between a TFSA or RRSP, Tepner says the decision should be based on your tax situation, as the money you put into your RRSP will be taxed when you eventually access it.

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“You put the money in your RRSP if your marginal tax rate is going to be lower when you retire than it is now. If it’s going to be higher when you retire, you put it in your TFSA,” he says.

Investment strategy

If fast-tracking your retirement savings is a priority, you may need to become a more aggressive investor and realize that risk, when it’s calculated, is not something to be afraid of.

“A lot of times we find that people are way too conservative with their money,” Jamison says. “When you have so little in savings, you’re afraid to lose what little you have. The flip side of that is, if you don’t boost your investment returns, you run the risk of not being able to retire.”

And really, what’s riskier in the long-run: Putting your money into high-upside growth stocks or purchasing government bonds and watching their minuscule returns get eaten up by inflation?

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What are you willing to sacrifice?

What you spend your money on today can have long-lasting implications for your retirement. If your cash is paying for wants rather than needs, it’s time to reevaluate your spending.

It’s not just about cutting back on simple things like Uber rides or nights out. Jamison says serious retirement planning requires real decisions, like potentially moving somewhere with a lower cost of living that’s more in line with your retirement goals. What would your retirement fund look like if your kids weren’t going to a $40,000 per year private school?

“It doesn’t matter if you earn $50,000 a year or half-a-million a year,” she says. “If every disposable dollar is being spent, you’re going to have a problem.”

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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