Financial advice is important for everyone, no matter which generation you fall into. While some principles – like saving for emergencies and investing for the long term – are true no matter what your age is, priorities often differ depending on your life stage.
To provide you with some Advice for Life, we’ve highlighted common financial priorities based on life stage, and some strategies to help address them.
If you’re a Millennial, your financial goals could focus on shorter-term needs, such as paying down debt, including student loans or saving for a down payment on a home.
Advice for life
- If you carry a student loan and other debt, like a balance on a credit card or a personal loan, focus on paying off the debt with the highest interest rate first. Even if the balance is small, higher interest rates accumulate more quickly and can cost you more over the long term.
- To save for a down payment on a car or a home, consider saving small amounts regularly through a Pre-Authorized Contribution (PAC). Try our interactive PAC video to see how your savings can grow.
- Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) each have unique benefits, and to maximize their effectiveness, your personal circumstances and goals should be considered. From a pure dollars-and-cents standpoint, looking at your tax bracket at different points in time will help you figure out what makes sense for you. Speak to a Scotiabank advisor about whether an RRSP, TFSA – or both – make the most sense for your current income level and needs.
As a “Gen-Xer,” your financial priorities may include paying off your mortgage, as well as saving for your retirement and your children’s education.
Advice for life
- One of the easiest ways to pay your mortgage off faster is by making your regular mortgage payments more frequent. Save interest and become mortgage-free sooner by choosing bi-weekly or weekly payments, rather than monthly payments. This simple step can save you money and take years off your mortgage.
- Chances are you’re already saving for retirement and you may be entering your peak earning years. While maintaining your savings habits, consider increasing your Pre-Authorized Contribution (PAC) as your income rises and supplement with lump-sum investments when possible, such as your tax refund. Changing your contribution frequency from a monthly basis to weekly or bi-weekly can also help you save even more.
- If you have children, helping pay for their education may be top of mind. Consider contributing to a Registered Education Savings Plan (RESP), using the Canada Child Benefit payments you may receive. Your child’s plan may be eligible to receive Canada Education Savings Grants, further helping to save for their future.
LATE BABY BOOMERS
As a late Baby Boomer, your financial goals are likely centred on retiring comfortably and formalizing a plan for your estate.
Advice for life
- As you approach retirement, consider accelerating your savings by increasing PAC contributions, making lump-sum investments when possible and maximizing your use of RRSPs and TFSAs.
- Market volatility can be unsettling, for even the savviest of investors. Check out our article “Advice for getting through market ups and downs,” where we provide you with some advice on how to manage – and potentially benefit from – market volatility.
- Should you wish to leave something for your family or a charity, consider establishing an estate plan. Thinking about how you plan to distribute your assets, how they will be transferred, and documenting it will give you peace of mind that your wishes will be met in an orderly and efficient way.
BABY BOOMERS AND THE SILENT GENERATION
For retired Boomers and members of the Silent Generation, your focus may be managing the wealth that you have.
Advice for life
- Enjoying your retirement should be a priority, and part of that is having the peace of mind that you will live comfortably for the duration of your retirement.
- To help ensure that your savings last for the duration of your retirement, careful consideration should be given to the rate at which your retirement savings are withdrawn. A common strategy is to employ the “4% rule.”† The rule suggests that a portfolio invested with an equal allocation to stocks and bonds will last 30 years if the retiree withdraws 4% of their savings in year one and adjusts that amount annually at the rate of inflation. Speak to your Scotiabank advisor to see which rate is appropriate for you.
- Your Scotiabank advisor can also help ensure that you have a prudent plan that includes the use of tax-deferral accounts, as well as tax-efficient cash flow options.
Scotia Aria® Retirement Program
The only retirement program of its kind in Canada
The journey to and through retirement is a long one, and your investment needs and priorities can change over time. The risks you face during your working years, such as failing to save enough, gradually shift to running out of money as you draw an income from your investments. As you move from one stage of life, the Scotia Aria Retirement Program can help you find the right balance between growing your savings, managing risk and drawing an income from your nest egg.
When starting out, your focus may be on shorter-term needs like paying down debt or saving for a down payment. While retirement may seem like a long way off, investing early will pay off over the long run. With time on your side, an investment approach that is focused on growing your retirement savings is ideal now.
The Scotia Aria Build Portfolios are designed to grow your retirement savings at a risk level you’re comfortable with.
As you get closer to retirement consider accelerating your savings further by increasing regular pre-authorized contributions and making lump sum investments to your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) when possible. At this stage, you’ve likely built a sizeable retirement nest egg. A portfolio that is designed to help manage volatility will become increasingly important.
The Scotia Aria Defend Portfolios are designed for long-term growth with a greater focus on managing the ups and downs of the market.
Your focus changes to managing the savings you have accumulated in retirement. However, just because you’ve stopped working doesn’t mean your investments should. A combination of investments that helps balance growth potential and regular income can help your savings last the duration of retirement.
The Scotia Aria Pay Portfolios are designed to provide regular income and modest growth to help you stay ahead of inflation.
A Scotiabank advisor will recommend a tailored combination of Build, Defend or Pay portfolios for you now and in the future. To learn more about the Scotia Aria Retirement Program, visit here or speak with your Scotiabank advisor.
† Bengen, William P. (October 1994). “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning: 14–24.
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