Retirement Planning

Retirement. Almost everyone likes to think about it, but how many of us actually plan for it? When you’re busy balancing work and family, retirement planning is usually not at the top of your “to do” list. Yet it’s important to do it now because with a well-thought out plan, you’ll have the funds you need to enjoy your retirement.

What will you need for retirement income?

When we help you with your retirement planning, one of the first things we do is determine the income you’ll have when you retire. These sources may include:

  • Government benefits such as Old Age Security or Canada Pension Plan
  • Company pension plans
  • Real estate income
  • Business income
  • Investment income from RRSPs, savings, and other assets

Normally, the income source that varies most is your investments and savings. But how do you know if you’re saving enough money to live comfortably during retirement? To determine this we use financial projection software that considers various amounts you could set aside in savings along with inflation, rates of return, tax rates, life expectancy, sources of income, and other factors.  This tells you the amount of income you can expect with different contributions to your savings. With this information, you’ll know how much money you need to set aside to enjoy retirement.

What risks might you face?

There are generally four major risks that can impact your retirement income.

  • Stock market fluctuations: Many retirees have suffered from reduced income in the recent stock market crashes. I’ll help you set up a diversified portfolio to weather these financial storms.
  • Inflation: A solid retirement plan must consider inflation. For example, at the historical average inflation rate of 4% per year, you’ll need $109,556 to buy $50,000 worth of goods 20 years from now.
  • Living a nice, long life: While we all want to lie a long, fruitful life, you’ll need money to do it comfortably. With our help, your retirement plan will ensure you have money for as long as you need it.
  • Health care costs: As you grow older, the chances that you’ll need to spend money on long-term care also increases. There are ways to cover this risk, if you plan ahead.

How can you save for retirement?

This is where retirement planning and financial planning clearly go hand-in-hand. Your overall financial plan will layout the groundwork to:

  • Reduce and consolidate debt so you save without burdening you daily budget,
  • Determine the best investment methods to grow your savings safely,
  • Protect you and your family from unexpected loss of income.

There are several ways you can set money aside to let it grow for your retirement. This list includes some of the more common methods.

Registered Retirement Savings Plans (RRSPs)
This is probably the most commonly known method of saving for retirement. You can put money or investments into an RRSP, where they grow tax free. You also get a tax deduction for any contribution you make to an RRSP during the year. When you retire, you draw income from your RRSP. This is when you pay taxes on the income. However, the presumption is you’ll pay less in taxes because you’ll be in a lower tax bracket.

Non-registered Investments
These investments are not registered as RRSPs. Therefore, they only grow tax-free if they are in a vehicle designed for that purpose, such as a Tax Free Savings Account. Non-registered investments are wide ranging and may include:

  • Stocks
  • Mutual funds
  • Segregated funds
  • Bonds
  • Term deposits for GICs
  • Real estate
  • Your business

Employer-Sponsored Pension Plans
Two types of these plans exist, and it is important to understand which one you belong to.

  • Defined Contribution Plan

This is very similar to an RRSP, except that both you and your employer contribute. Typically, you are allowed to make some decisions on various investment options. This means you stand to make greater gains when markets are on an upward trend, but also greater losses when they are in a downturn.

  • Defined Benefit Plan

In this pension, you receive a monthly income benefit when you retire. The benefit amount is based on your years of service, salary level, and contributions. Both you and your employer contribute to the plan, and your employer invests the contributions on your behalf. However, in this type of plan, your employer bears the risk of market downturns.

Individual Pension Plans (IPPs)
Individual Pension Plans, or IPPs, are a strong option for business owners, incorporated professionals, or executives of profitable corporations who are over the age of 50. There are several benefits including:

  • The corporation can make a significant tax-deductible contribution in the year the plan is established.
  • Contribution limits are much higher than those for RRSPs.
  • All contributions are tax deductible to the corporation.
  • You can use a wide-range of investment options.
  • Investments within the plan grow tax-free.
  • Your IPP is protected from creditors.

We’ll make your retirement planning easier and more profitable

There is a lot to consider when planning your retirement. We’ll walk you through the planning process and guide you through the ups and downs of stock markets.

Contact us for your free consultation. We’ll travel to your home or office, at a convenient time for you.