Being your own boss allows you to enjoy freedom and various benefits. However, this requires good organization in order to save and plan for retirement.
As a self-employed worker, you question your future. You wish to predict income fluctuations and be able to cope with a less profitable period. Not benefiting from a pension fund, you must also save for your retirement.
Choosing between accumulating an emergency fund in your bank account, investing in a Tax-Free Savings Account (TFSA) or investing in a Registered Retirement Savings Plan (RRSP) can bring its share of questions.
Where to start?
First of all, you must consider certain elements to be able to determine the amount you will need for your retirement. For example:
- At what age would you like to retire?
- What will your financial obligations be (fixed costs, debts, loans, etc.)?
- What will your projects be (travel, family, volunteering, part-time work, etc.)?
The answers to these questions will influence the amount of savings you will need to accumulate so that your retirement meets your expectations. To know how much you will need to put aside, try our retirement calculator.
Contribute to an RRSP
Subscribing to a Registered Retirement Savings Plan (RRSP) will allow you to grow your money tax-free while reducing the amount contributed from your taxable income. Thus, you could, depending on your situation, obtain interesting tax refunds. Invested sums will only be taxed when they are withdrawn from your RRSP.
Plan an emergency fund
As a self-employed worker, you must also think about short-term contingencies and that is where the TFSA can be useful to you. Since it is impossible to predict what the future holds for you, it is prudent and advisable to build an emergency fund in addition to saving for your multiple projects. This fund will allow you to face the vagaries of self-employed life without having to borrow.
Generally speaking, think about putting three to six months of income or usual expenses aside. However, do not forget to adjust the amount of your emergency fund if your financial situation changes.
Save regularly
Set savings goals, contribute frequently — whether your savings are small or large — and ensure you have control over your financial future.
To facilitate the accumulation of your retirement savings, consider automatic contribution withdrawals from your bank account. Determine the withdrawal amount and frequency to reach your goals. This way, your savings will be integrated into your monthly budget and you will avoid having to pay out an amount in case of a glitch.
Do business with a financial security advisor, who can guide you and suggest savings products that best fit your situation.
