Your financial goals are exactly that – yours. While you might be looking to buy a home, your friend could be putting a child through school and your sister could have her eyes on a new vehicle. For most people, though, saving for retirement is one of their most important goals. Your current age will typically determine how you approach the planning process, as retirement might be around the corner or it could be decades away. Let’s look at how strategies may differ based on your age.

When retirement is more abstract than reality

If you’re in your twenties but are already thinking about retirement planning, good for you! As you enter the workforce and earn a steady paycheque, it’s tempting to focus on instant gratification. You might be like a kid in a candy store, only the temptations have gone from sugary treats to the latest electronic devices, splurgy nights out, etc.

How much you save for retirement at this life stage largely depends on factors like your income level, your regular expenses and the student debt or other loans that need paying off. In your thirties, even though you’re likely earning more as your career develops, you might also have more (and bigger) expenses, such as a mortgage and young kids to raise.

If you can put away money for retirement, you’ll stand to benefit from compound growth (i.e., your investment income may earn its own income), since you have many years until retirement to multiply your wealth. If you haven’t yet gained significant investment experience, professionally managed solutions like mutual funds and exchange-traded funds are simpler than buying individual stocks.

Also think about tax efficiency via RRSPs and TFSAs, as registered plans/accounts generate tax-effective income to help build wealth faster. It might be valuable to start (or continue) working with an advisor who can put you on track for financial independence – and keep you there. An advisor can help you create a customized budget designed to address your current financial obligations while saving methodically for the future.

When retirement comes into greater focus

Once you reach your forties and fifties, life has usually evolved. Most people are firmly established in their careers and are approaching (or have reached) peak earnings years. It’s a great opportunity to use your higher income to reduce debt and still invest for retirement while the opportunity for years of wealth compounding remains. If you have significant investment experience under your belt, consider investing in a broader range of sophisticated products and strategies designed to meet complex financial and tax-mitigating needs that often arise in this age group.

Of course you want to enjoy a comfortable lifestyle but keep your eyes on the big prize – retirement! – and try to minimize large discretionary expenses that could put a dent in your retirement savings. Budgeting lessons from your younger days are useful at this life stage as well, plus you might want to begin estate planning in conjunction with your overall financial and retirement plan. In your fifties, start compiling a list of potential future sources of retirement income (including likely inheritances), so you can gain a rough sense of whether you’ll have enough cash flow to fund your retirement.

When retirement is on your doorstep

You’ve worked hard for decades and it’s time to strategize about your impending retirement. Assess the current state of your finances, perhaps with guidance from an Alterna Advisor. Determine what your income stream will look like once you retire, including Canada Pension Plan and Old Age Security benefits, plus any workplace pension you have and RRSP assets that’ll soon need transferring to an income-paying account like a RRIF. As well, if you wish to continue working on a full-time or part-time basis, that’ll fortify cash flow.

Income needs depend on factors like desired retirement lifestyle, expected lifespan, living arrangements, health/personal care needs, etc. Since many people are retired for decades, your cash flow should keep pace. This will likely mean continuing to invest so your wealth can keep growing to cover a longer life and manage the impact of inflation. You might benefit from a less-aggressive investment approach at this age to help protect your capital. You can still achieve some growth through equities while also generating cash flow through fixed income.

Feel free to contact an Alterna Advisor to discuss retirement planning strategies suitable for your life stage and personal circumstances.