Retirement Planning

Saving for retirement is a balancing act.  You need to be able to “live for today” and “save for tomorrow.” Striking this balance is a challenge, but the good news is you have lots of options. There are numerous ways you can save for retirement.  My role is to help to choose the best option.

Today the average life expectancy is about 82 years for females and 77 years for males. Medical advances have also resulted in improved health among seniors. The fact that people are living longer and healthier lives underscores the importance of starting to save and plan ahead as soon as you can. After all, the money you set aside in your pre-retirement years will help shape your lifestyle in retirement.

There are three possible sources of retirement income:

● Employer-sponsored retirement plans (if you have one)

● Government benefits

● Your own savings and investments

The reality of today’s world is that your own savings and investments will determine what kind of lifestyle you can afford in retirement.

How you’ll spend your retirement years is entirely up to you. They could be the most enjoyable years of your life, filled with travel and all the leisure activities you never had time for while you were working. Or they could be years of endless penny pinching and never having enough money to make ends meet.  Creating a financial strategy for retirement takes planning and discipline.

Government benefits and benefits earned while you were with an employer will begin at different times, depending on your age when you retire. You can use your non-registered funds – those not in an RRSP – whenever you need them, or use them to purchase an annuity. With your RRSPs, you have several options.

At retirement, your RRSP is no longer strictly a savings vehicle – it becomes a key source of income along with your company pension.  By the end of the year in which you reach age 71, you must convert your RRSP or Locked-in Retirement Account (LIRA) to one of the RRSP or LIRA maturity options available that year.  Of course, you can cash in your RRSP and withdraw the savings. I don’t recommend this due to the tax implications – you pay tax on the full amount.  Further, you may not need your RRSP funds immediately or all at once. 

Maturity options for RRSPs include a Registered Retirement Income Fund (RRIF) and/or a life annuity, and for LIRAs (in Manitoba) the options include a life annuity, Life Income Fund (LIF), or Locked-in Retirement Income Fund (LRIF).  Ultimately, your retirement income strategy will depend on your goals, income needs and the value of your retirement savings.

Consider this at retirement – you’ve been investing in tax-sheltered RRSPs throughout your career.  Not only have you reduced your income tax bill, but you haven’t paid a nickel of tax on your investment earnings.  That is, until the day you start making withdrawals.  The pitfalls of not preparing for this are significant.  At the very least, you could be in a pinch at tax time.  Worse than that, you could seriously cut into your retirement savings.

Whether it’s with your RRSP, Tax-Free Savings account (TFSA), or non-registered investments, tax planning and other wealth management strategies are crucial to maximizing your retirement income.

As an accredited accountant and investment manager,  I can help ensure you are making the most out of your retirement savings for optimum wealth management.