Time to start retirement planning is right now
Whether your retirement begins tomorrow or somewhere down the road, the time to begin real retirement planning is now – especially when it comes to ensuring you’ll have the retirement income you need to realize all your retirement dreams. Here’s your retirement-planning quick-start guide.
• Decide when your want to retire
If you decide to retire early you’ll have fewer years to save for retirement. If you retire after 65, you can continue the tax-saving, income-building advantages of investments held in your Registered Retirement Savings Plan (RRSP) until the end of the year in which you turn 71.
• Decide on your retirement lifestyle
Will you keep working at least part of the time, or even start a business? If so, you can save less in advance because even a little extra employment income can go a long way.
• Conduct a retirement/income analysis
Estimate your monthly retirement-living expenses like utilities, insurance and mortgage payments. Also consider additional costs such as travel, hobbies and other forms of entertainment.
• Know your government sources of income
Find out how much income you can expect from government sources like the Canadian Pension Plan (CPP) or the Quebec Pension Plan (QPP) and Old Age Security (OAS). Get good info at servicecanada.gc.ca.
• Know your pension at work – if you have one
Determine whether your employer-provided pension plan is a defined benefit plan or a defined contribution plan. If it’s a defined benefit plan the Pension Administrator can give you a monthly benefit payout estimate. If it’s a defined contribution plan, you’ll have to do your own estimate of monthly pension.
• Add in your savings
Know what you can expect from investments held in your Tax Free Savings Account (TFSA), RRSP and other investments. Also know the rules governing the withdrawal of income and the taxes that may be applied.
• Do the math
Add up all sources of monthly retirement income including your savings and investment withdrawals. Compare this against your estimate of monthly retirement living expenses. If you come up short, you may need to re-think your planned retirement lifestyle, ramp up your savings strategies, or both.
• Aim to manage taxes in retirement
Strategies can include income or pension splitting with your spouse, sharing CPP/QPP benefits, and investing in a tax-advantaged mutual fund-based Monthly Income Portfolio.
From the Investors Group archive.