Reaching 50 often brings a new perspective on retirement planning. For many, it’s a wake-up call to take a closer look at their savings and make necessary adjustments. The good news is that it’s never too late to boost your retirement savings, and there are several strategies specifically designed for those in their 50s and beyond.
In this blog, I’ll explore 14 practical ways to boost your retirement savings after 50.
Maximize Catch-Up Contributions
Take full advantage of your Registered Retirement Savings Plan (RRSP) contribution room. Your RRSP contribution limit is 18% of your earned income from the previous year, up to a maximum amount that changes annually. Catch up on any unused contribution room from previous years. RRSP contributions are tax-deductible, potentially lowering your current tax bill while building your retirement savings.
Utilize the Tax-Free Savings Account
Maximize your Tax-Free Savings Account (TFSA) contributions. The TFSA allows you to save or invest money without paying taxes on the growth or withdrawals. Contribution limits accumulate yearly, so if you haven’t been using your TFSA, you may have significant room available. Use this tax-sheltered account to supplement your retirement savings, especially if you’ve maxed out your RRSP.
Consider Working Longer
Extending your working years, even by just a few years, can significantly impact your retirement savings. This strategy gives you more time to save and allows your existing savings more time to grow. It also reduces the years you’ll need to rely on your retirement savings. Consider retiring with part-time work to ease the transition while boosting your savings.
Delay CPP and OAS Benefits
While you can start receiving Canada Pension Plan (CPP) benefits at age 60 and Old Age Security (OAS) at 65, delaying these can increase your monthly payments. For every year you delay CPP (up to age 70), your benefit increases by 8.4%. OAS increases by 0.6% for every month you delay (up to age 70). This can result in substantially larger income streams during retirement.
Reassess Your Investment Strategy
As you get closer to retirement, it’s important to review and potentially adjust your investment strategy. While you may need to be more conservative, don’t become too risk-averse. Consider working with a financial advisor to find the right balance between growth and security. A well-balanced portfolio can continue to grow your savings even as you near retirement age.
Reduce High-Interest Debt
High-interest debt can be a major obstacle to saving for retirement. Focus on paying off credit card balances and other high-interest loans as quickly as possible. By eliminating these debts, you’ll free up more money to put towards your retirement savings. Consider using the debt avalanche method, where you pay off the highest-interest debt first while making minimum payments on others.
Downsize Your Home
If you’re living in a larger home than you need, consider downsizing. Selling your current home and moving to a smaller, less expensive one can free up a significant amount of money. You can use the proceeds from the sale to boost your retirement savings. Additionally, a smaller home often means lower utility bills and maintenance costs, allowing for more ongoing savings.
Start a Side Hustle
Starting a side business or taking on part-time work can provide extra income to boost your retirement savings. Look for opportunities that align with your skills and interests. This could be consulting in your field of expertise, selling handmade items online, or tutoring. Dedicate the income from your side hustle directly to your retirement accounts to maximize its impact.
Take Advantage of Spousal RRSPs
If you’re married or in a common-law relationship, consider using spousal RRSPs to balance your retirement savings. The higher-earning spouse can contribute to the lower-earning spouse’s RRSP, potentially leading to tax savings now and in retirement. This strategy can help equalize retirement income and potentially reduce the overall tax burden in retirement.
Explore Rental Income Opportunities
If you have extra space in your home or own a second property, consider renting it out for additional income. This could mean renting out a spare room, creating a basement apartment, or using platforms like Airbnb for short-term rentals. Rental income can provide a steady stream of cash to boost your retirement savings. Be sure to understand the tax implications and local regulations regarding rentals.
Cut Unnecessary Expenses
Review your budget carefully and look for areas where you can cut back. Small savings can add up over time. Consider reducing dining out, canceling unused subscriptions, or finding more cost-effective options for services you use. Redirect the money saved from these cuts directly into your retirement accounts. This strategy can help boost your savings without drastically changing your lifestyle.
Maximize Employer Matching
If your employer offers an RRSP match or a pension plan, make sure you’re taking full advantage of it. This is essentially free money that can significantly boost your retirement savings. Even if you’re contributing to catch up in other areas, prioritize getting the full employer match. Review your company’s matching policy and adjust your contributions accordingly.
Consider a Conservative Leveraging Strategy
If you have a low-interest line of credit or mortgage, you might consider borrowing to make RRSP contributions. This strategy can work if the tax refund and investment returns outweigh the interest costs. However, this approach carries risks and should only be considered after careful analysis and possibly consulting with a financial advisor.
Automate Your Savings
Set up automatic transfers to your retirement accounts to ensure consistent savings. This “pay yourself first” strategy helps prioritize retirement savings before you have a chance to spend the money elsewhere. Start with whatever amount you can afford and gradually increase it over time. Automating your savings removes the temptation to skip contributions and can make saving feel less painful.
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