A carefree retirement for many of us is going to be a balancing act between your must-haves and your nice-to-haves. Prioritizing personal lifestyle preferences in the present and for the future is important at any age, and will help ensure you retire comfortably.
As you finish school and enter the work force, now is the time to start making the right financial decisions and get a jump start on savings. Focus on paying off your highest interest rate debt, and your credit card balances monthly, leaving this decade with no debt. Educate yourself about the investment instruments available in the market place.
By your 30s, you may find yourself juggling mortgage payments, an expensive young family and growing demands at work, while still establishing your career. You may not be able to avoid debt entirely, so borrowing should be focused on paying for things that help build your net worth, such as a home or education, while continuing to save. From there, paying down your mortgage quickly is important. Professionally, it's important to upgrade your skills through part-time courses and certifications.
By your 40s, you may find you're finally starting to get some financial traction, as your salary is likely higher, and your mortgage and family are not as financially demanding as they once were. This makes for a great opportunity to focus on paying off your mortgage and any other debt. As your savings may now be substantial, you may want to hire a financial adviser if you have not already done so, to help set retirement goals, and establish an investment portfolio. Unless you have a particularly high or low income, ensure you maximize your RRSPs for your retirement saving at this point.
Typically in your 50s you'll find yourself in peak earning years, and see a decline in spending on things that don't contribute to your day-to-day lifestyle. Once your mortgage is paid off and kids are financially independent, you can whisk the money once used toward them into your savings. If you haven't saved much to date, you probably have a lot of unused RRSP room, and when you start putting serious money away you can earn substantial tax refunds.
By the time you turn 60 your retirement dreams are likely surprisingly close. A typical middle-class couple with their home paid off needs only about 50% to 60% of the income they earned earlier in life to live an equivalent lifestyle. Picking up a part-time job can make a surprisingly big difference in supplementing your savings and wise investment strategies will help protect you from longevity risk of outliving your savings.
As you reach your 70s, your spending will slow down a bit, and though your income may be limited, there is a lot you can do to keep your financial picture healthy. As you simplify your lifestyle, you may choose to downsize to a smaller house or condo. Now is also a good time to plan your financial legacy, by making sure your will is up-to-date.