How to save for a debt-free retirement

Want to make sure your debts are retired before you are? These tips will help you pay off your debts while you save for retirement.

Will you be able to retire without loads of debt? If you’re like 25% of the retired baby boomers in a recent survey by Sun Life Financial, you could have stopped working and still be struggling with a mortgage and unpaid credit-card debt:

  • 1 in four (25%) of retirees are living with debt.
  • 1 in five (20%) of retirees are still making mortgage payments.

According to the survey, many retirees are carrying credit-card debt from month to month. They’re making car payments, they owe money for health expenses and they’re in debt for holiday expenses or vacation property. And while retirees face lingering debt, working Canadians are compromising their retirement savings.

  • Almost one-quarter (24%) of working Canadians are dipping into their retirement savings.
  • 63% of those Canadians pulled cash out of their RRSPs because they needed the money – to cover health expenses or pay off debts, for example.

Helpful advice about debt and retirement

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Should you buy critical illness insurance for your child?

Your child’s serious illness can affect the whole family physically, emotionally & financially. Child critical illness insurance can ease the strain.

Michael Ellis says he’ll never forget the day the doctor called him to tell him his daughter, Chloe was ill. Earlier that day, Chloe had blood work done, and the results showed her blood sugar levels were sky high. He knew his daughter wasn’t well, but he had no idea of the magnitude of the problem. “When the doctor called, he said, “I’m surprised she’s still standing, go to the closest emergency room immediately.”

Ellis rushed to his local hospital, and that day his daughter was diagnosed with type 1 diabetes. In the days after the incident, Ellis and his wife took time off to be at the hospital with their daughter until she was able to go home.

What is child critical illness insurance (CII)?

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Pay off your student loan or save for retirement?

Even if money is tight, you don’t have to choose one or the other. These tips will help you meet both current and future needs and stay on budget.

No sooner does a Canadian student graduate from college or university (with an average student loan debt of $28,000), than the pressure starts to save for retirement. Add those not-insignificant monthly student loan payments to other essential budget items – rent or mortgage, groceries, childcare, utilities, et cetera – and it’s easy to see why saving for retirement can look like an impossible dream.

The good news is you don’t have to choose between saving for retirement and paying off your student loan. With a little planning and dedication, you can make room today for tomorrow’s golden years.

Here are 5 simple steps to get you started:

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5 financial planning milestones

Your finances change as your life changes, be it marriage, a new job or a baby. Here are five major milestones an advisor can help you prepare for.

Congratulations! You’ve booked a meeting with an advisor – that’s a major first step in taking control of your financial future. You’re now about to move forward on a journey that, with some sound advice and a little bit of discipline, should move you closer to realizing your financial goals.

Planning for the future is exciting, but because nothing ever stays the same, you need to think big when you sit down with an advisor. That means considering what direction you want your life to go in over the long term, and preparing for any surprises that may pop up along the way (both welcome and not-so-welcome).

Just ask Sandra Schmidt, an advisor with Sun Life in Vancouver. She says, “Your finances change as your life changes, be it marriage, a new job or a baby. So you need to revisit your goals on a regular basis.”

To help you get started, here are five major milestones an advisor can help you prepare for:

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Have you had a family meeting about money?

by Dave Dineen

Who would look after your kids if something happened to you? Can your mother still live independently? The time to discuss such issues is now!

Be it Easter, Christmas, Thanksgiving or some other holiday, it’s always the right time of year to offer your family a gift no one outside the family could ever give: the wisdom and insights of a family financial meeting.

In our family, this kind of meeting has become an important tradition. Several generations gather to share something more substantial than a meal, more enduring than gifts, more meaningful than chitchat. The goal is to share our collective financial insights, experience and wisdom — to help each of us achieve our goals.

We devote some quiet time, free of distractions, so that each person in the family can answer a simple question: “What’s your financial priority and what are you doing about it?”

I can’t promise that every moment of the family financial meeting will be fun, or that all topics will be happy ones, but I can almost guarantee you’ll find the experience rewarding. You’ll feel like a better member of a stronger family.

Your family may be all in one community, or you may be scattered across the country or even across more than one country. But with Skype, distance is no excuse for not giving a family financial meeting a try.

What does a family financial meeting look like?

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Your retirement income pie: CPP is just 1 slice

By Susan Yellin

Government pension payments are rising, but they probably still won’t provide all the income you’ll need in retirement. So how will you fill the gap?

The Canada Pension Plan will begin phasing in contribution and payout increases in 2018, but the full benefit of those increases won’t be felt for decades. In the meantime, what does the average senior’s income look like?

According to these figures from Statistics Canada, senior families (those whose highest income-earner is age 65 or over) saw their median after-tax income steadily rise by 66.7% from 1976 to 2014, to $54,000. (Note that Statistics Canada is using constant 2014 dollars to factor in inflation and allow comparison across time in real terms.) Between 1976 and 1995, most of those gains came from increases in government transfers, including Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS). But since 1995, it’s the stock market, not government programs, that has been the main source of income gains for senior families.

Filling the CPP gap
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10 things you need to do when your spouse dies

By Sheryl Smolkin

When you’re newly widowed, you need to think clearly and make good decisions in the midst of your grief. This checklist can help you get through it.

Whether it’s a sudden loss or the result of a long illness, the death of your spouse is emotionally devastating and you will need time to grieve. However, many important decisions with financial implications must be made sooner, rather than later. For example, the funeral must be arranged, bills must be paid and the estate must be settled. It’s usual for you to be your spouse’s executor, unless you are too frail or otherwise physically incapable of these tasks.

This is a time when close family members or friends and trusted advisors can often do a lot of the leg-work. But ultimately you as the widow or widower must direct these people and make crucial final decisions.

Here are 10 practical things you need to do when your spouse dies:

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Pension income splitting versus spousal RRSPs

PENSION INCOME SPLITTING CAN BE A GREAT WAY to reduce taxes.  Couples can split their income once their Registered Retirement Savings Plans (RRSPs) become Registered Retirement Income Funds (RRIFs).  The rules allow a pensioner to transfer up to one half of his or her eligible pension income to a spouse.  Sounds great, right?  So why keep that spousal RRSP? Spousal RRSPs may still offer some advantages, particularly if one spouse earns significantly more income than the other.

Income splitting with a RRIF

Under the pension income splitting rules, you must be at least age 65 and convert your RRSP into a RRIF in order to split income.  Regular RRSP withdrawals do not qualify for pension income splitting.  For people who retire early, a spousal RRSP provides more flexibility.  This is because you choose how much to contribute to the spousal RRSP, which has the potential to equalize retirement income and save taxes.

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The top 5 RRSP mistakes and how to avoid them

by Chad Fraser

We asked a certified financial planner to reveal the most common RRSP mistakes he sees – and to suggest simple tips to help steer clear of them.

It’s a time-honoured ritual: In the first 60 days of the year, people across Canada gather up as much spare cash as they can, then dash to contribute to their registered retirement savings plans (RRSP) before the annual deadline hits.

There’s good reason to circle the cut-off date (it falls on March 1 in 2018): It’s your last chance to make a contribution that’s deductible against your income – thereby lowering your tax bill – from the previous tax year.

That tax deduction is just one of many benefits RRSPs offer.

Another? Tax deferral: Investments you hold inside your RRSP grow tax-free. And when you start taking your money out, after you’ve retired and converted your plan to a registered retirement income fund (RRIF), or used it to purchase an annuity, it’s taxed at your rate at the time of withdrawal, which should be lower than in your working years.

Sounds simple, right?

The truth is people still make plenty of blunders with their RRSPs. Today we’ll help you avoid 5 of the most common ones, with tips from Cliff Steele, a certified financial planner with Sun Life Financial.1

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Tips for buying travel insurance

by Joy Blenman

You may be in perfect health, or just going away for a day or 2.  But accidents can happen.  Here’s what you need to know about buying travel insurance.

Imagine you’re on vacation in the Caribbean.  The sun is warm, the water that surrounds you is a vibrant blue and the landscape is lush.  You’re in a picture-perfect paradise.  But suddenly, you begin to feel ill.  When you can’t shake it off, you decide to go to the local doctor, who treats you and assures you that you’ll feel better soon.  But then you feel worse, because as you leave the office, you get a hefty medical bill.

Nobody wants to pay for added expenses after splurging on a vacation, but a trip to the hospital overseas could leave you on the hook for a medical bill in the thousands or even tens of thousands of dollars.  Each year, there are countless headlines about Canadians who’ve run up exorbitant medical bills while on vacation without travel insurance.  Even a quick jaunt across the border to shop or catch a ballgame carries the risk of a crippling expense – and while your provincial health insurance may reimburse you for a small portion of the cost, your coverage is capped at the provincial fee limits for the treatment you received, if that treatment is covered at all.

And yet, only 47% of Canadians “always purchase travel insurance” before taking a trip, according to a 2014 Travel Health Insurance Association of Canada survey.

So why are so few of us insuring ourselves when we travel?  Insurance terms can seem complicated, but a good insurance provider will clarify what the jargon means and make getting insured a smooth process.

How to pick a good travel insurance provider

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