Are You Ready To Retire?

At MNP, we hear this a lot: "I have a pension through work (or pension savings) and I know what I will received from Canada Pension Plan (CPP) and Old Age Security (OAS). Am I ready to retire?"

If you haven't looked at the debts you'll still be carrying into retirement, maybe you're not ready to retire. People talk about saving for retirement, but there is not a lot of chatter about carrying debt into your retirement.

You've looked at saving plans. Now consider plans on how much is needed for monthly debt payments or even better, completely paying off debt before retirement.

Check Your Cash Flow

Work out your cash flow, what is your monthly income, what are your monthly expenses and what is left over to pay down the debts. This will help you decide if you can afford to go into retirement with the debt that you currently have.

Remember, the cash flow needs to be realistic and there is no time like the present to work it out.  Start tracking your expenses every month to find out where the money goes - don't forget, there are expenses that happen irregularly that need to be accounted for as well. Then put some thought into if you expect your expenses to be the same when you retire.

To calculate your retirement income (if you haven't already done so), research what your CPP and your OAS benefits will be. And if you have any other pension funds, how much you'll get each month out of them as well.

Any changes to income or expenses can throw your plan off kilter, so the more thought you put into the cash flow, the more accurate your projections will be.

Don't include the monthly payment on the credit cards, lines of credit or unsecured loans in the cash flow. The payment for these will be from what is left over after you have determined your living expenses.

Plan to Pay Down Debt

Now that you have your cash flow worked out, look at the unsecured debts, such as credit cards, lines of credit, and loans. What are the expected monthly payment. Will the amount left over cover the minimum payments, plus additional funds to start to bring down the debt? If you are only going to be able to make the minimum payments when you retire, you might not be ready to retire.

Consider paying debts down or in full prior to retiring, if you are have having trouble with the ability to pay the debts down or off before retirement, there is help out there.

A licensed Insolvency Trustee can meet with you to review your circumstances and look at your options to deal with your debts before you retire.