You have a vision for your retirement. Before you get there, you need to know how much your monthly retirement paycheque will be, how to manage your cash flow in retirement, and how to ensure your income will last for as long as you need it.
Throughout your career, you typically receive a paycheque from your employer or business. When you retire, you could have multiple sources of income: government benefits, registered assets (RRSPs, RRIFs, etc), pension plans, investment income and other assets. The sum of these will be your “retirement paycheque.”
Just as it’s important to have an effective investment strategy throughout your life, it’s important to have a customized plan for withdrawing retirement income from your investments, to make sure you are making informed decisions to keep them producing the income you require.
Establish the level of income you’ll need in retirement
Some people use the rule of thumb that you’ll need 70 to 80 per cent of your current household income to maintain your lifestyle in retirement. You may need more or less, depending on your personal retirement vision.
As your Consultant, I will help you merge your retirement vision with the financial realities of your retirement life:
Expenses: Identify expenses that you can decrease or eliminate once you retire. You might not need to commute, or you might consider moving from two cars to one. After a certain point you will not make RRSP contributions and you will cease paying into the CPP and EI programs. Establish a budget that breaks out essential expenses (the money you need to live) and discretionary expenses (the money for activities like travel).
Income: Calculate the income from government benefits plus employer sponsored plans. The gap between your expenses and the income you will receive from government and employer sources will need to be filled by income from your personal savings.
Your plan should create a steady income stream
In retirement, you may need an income for 20 years or more. So I’ll help protect you from outliving your savings.
Your money still needs to grow in retirement, to outpace inflation and the inevitable cost-of-living increases. We also need to take into account possible increased costs for medical and health care as you age.
Your plan needs to guard against market volatility. You will still want the benefits of a mix of investments to help protect against the downturns while delivering a cash flow that will sustain your retirement lifestyle.
Be tax efficient
An effective retirement withdrawal plan will allow you to take advantage of the tax benefits that may be available to you, such as the age credit, pension income credit, and other tax credits, while possibly avoiding Old Age Security clawback.
I will explore other options to be tax efficient, such as income splitting with your spouse, withdrawing only the minimum from your RIF, and investing in non-registered investments that offer preferential tax treatment.
You spend a lifetime preparing for retirement, and when you get there, you still have important decisions to make. We can look at your complete financial picture and help you create a comprehensive plan that will take you through all the years of your retirement.
David W. Page is a Kamloops rider who is very active in his community and is a member of the RFBA
Phone: (250) 372-2955 Toll Free: 1-800-897-9559
Fax: (250) 372-1567