Planning for Retirement

Planning for Retirement

Retirement can be both scary and exciting. It can be carefully planned for many years or land on our doorstep unexpectedly due to a layoff, illness or family crisis.

The financial implications can be the most substantial and important decisions of a persons’ lifetime. Also, most people will spend many years retired so careful planning is required. If you are fortunate, you have been a long-time employee with a defined benefit pension plan. You know you will have your guaranteed pension income arriving each month and your Canada Pension Plan and Old Age Pension benefits (all indexed for inflation) will form part of your monthly income.

For most Canadians, we will have to balance the spending of our RSPs and TFSAs in combination with CPP and OAS and figure out the optimal income to make sure we do not run out of money before we run out of time. Inflation, market conditions and unexpected spending can affect the retirement income plan.

Many clients wonder in which order to spend their investments, should you spend your RSPs first or TFSAs? How are income taxes affected with each decision? How about Estate taxation and the implications?

This uncertainty can make it very difficult to turn off an income tap simply because you choose to retire and sometimes people look to a life event to make the decision for them, a specific birthday (65) or a spouse’s retirement.

How do you feel confident about making the decision to retire? I would recommend making a retirement plan many years ahead of time, reviewing the plan often both before retirement and during retirement to make sure you are on track. I would also recommend stress testing this for factors such as inflation, taxation and long term care. This should take the guess work out of the math and give you the confidence that you are making a financially sound decision for the next 30+years.

If you have questions about retirement planning, income planning or estate planning, please reach out to schedule a time to review your retirement plan.