Top 5 Financial Moves to Make in Your Fifties
Your fifties are a crucial time for financial planning. Retirement is near, and the decisions you make will play a big role in ensuring financial security in your later years. Whether you're catching up on savings or fine-tuning your plans, here are the top five financial moves to make in your fifties.
1. Maximize Your RRSP and TFSA Contributions
As you enter your fifties, it’s crucial to maximize your contributions to retirement savings accounts such as your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). When you file your 2024 tax return, your RRSP contribution limit will be 18% of your previous year's income, up to a maximum of $31,560. Also, any unused room from previous years will be carried forward. The yearly TFSA contribution limit is $7,000 for this year and any unused room from previous years also carries forward.
Why is this important?
Your fifties are often your peak earning years, and using these tax-advantaged accounts allows you to lower your taxable income (in the case of RRSPs) and grow your savings tax-free (TFSAs). Maxing out these contributions can make a big difference in building a retirement nest egg.
2. Pay Off Debt with Focus on High-Interest Loans
3. Review Your Retirement Plans and Government Benefits
Take some time to review your retirement goals. Think about when you’d like to retire and what kind of lifestyle you hope to have. This includes reviewing your Canada Pension Plan (CPP) and Old Age Security (OAS) benefits. CPP can be taken as early as age 60, but the earlier you take it, the smaller your payments will be. The longer you delay (up until 70), the larger your payments will be.
By reviewing these benefits now, you can decide how they fit into your overall financial plan. It’s also a good idea to use online retirement calculators to estimate your income needs in retirement and see if your savings are on track.
4. Diversify and Rebalance Your Investment Portfolio
In your 50s, it's essential to rebalance your investment portfolio to reflect how close you are to retirement. If you’ve are currently in higher risk investments, it might be time to shift towards more conservative investments. You don’t want to take on too much risk with your retirement savings, especially as you get closer to needing that money. However, maintaining some growth in your portfolio is still important.
5. Plan for Healthcare Costs in Retirement
Healthcare costs are often overlooked in retirement planning, but they can be pricey, even in Canada. While our healthcare system covers many basic services, there are still out-of-pocket costs for things like prescription drugs, dental care, vision care, and long-term care.
Consider purchasing *extended health insurance* to cover these expenses or set aside savings specifically for health-related costs. It’s also wise to look into long-term care insurance, as the cost of care in retirement homes or nursing facilities can be high. Planning for these expenses now will help you avoid financial strain later.
Your fifties are a crucial time for setting yourself up for a comfortable retirement. By following the above steps, you’ll be better equipped to enjoy your golden years with peace of mind. Acting today will set the foundation for a more secure and stress-free retirement.
If you would like to learn more, we are here to help! Our Retirement Information Consultants have various financial planning designations and are available to help you with your financial literacy journey.
To book an appointment, call 306-787-3170 or email: ric@plannera.ca.