Financially Speaking

Retirement is coming at you faster than you expected – but that’s okay because you expect those years to be fulfilling, brimming with new experiences and activities. And you will enjoy the retirement lifestyle you’ve dreamed about if you plan now to be sure you’ll have the financial resources you’ll need for all your retirement years. And that could be for a lot of years. According to Statistics Canada, life expectancy for seniors has been on an upward trend over the last 15 years.

The foundation of your retirement plan is your retirement income – so you need to know where it will come from and how much it will be. Check these sources:

• The federal government offers: o the Canada Pension Plan/Québec Pension Plan (CPP/QPP) that provides about 25% of your average annual earnings during your working life, up to certain limits. They are indexed annually for inflation and are taxable.
• Old Age Security (OAS) benefits usually begin between age 65 and age 67. Benefits are taxable, indexed for inflation, and ‘clawed back’ in increasing amounts as your individual net income climbs above a threshold amount.
• Your company pension plan – possibly a defined benefit (DB) plan that guarantees a specific pension for your lifetime or perhaps through a defined contribution (DC) plan that doesn’t guarantee the amount of your future benefits.
• Your registered and non-registered investments.

To be sure your retirement income will last a lifetime:

• Know the retirement lifestyle you want.
• Estimate your retirement spending for essentials that aren’t easily reduced and discretionary expenses that you can control.
• Assess your investment strategies. Consider a conservative strategy for essential expenses and a more growth-oriented strategy for investments to support your discretionary spending.
• Manage your withdrawals from retirement savings. Establish a withdrawal rate that matches the size of, and expected return on, your retirement savings over the number of years you plan to make withdrawals.
• Tax plan efficiently. Consider tax-reduction strategies like income-splitting, sharing CPP/QPP benefits with your partner, limiting fully taxable RRIF withdrawals, allocating assets effectively, using a Tax-Free Savings Account, and taking advantage of the tax-sheltering benefits of your RRSP by making your maximum contribution up to the end of the year you turn 71.