Retirement Planning

Your financial needs during retirement depend on a number of factors, including where you’ll be living, how you’ll be spending your time, and whether you’ll continue to work. Here are a few things to think about when estimating your retirement costs:

• Where will you live? Will you live in an urban centre, a smaller town or a rural community, and how will those choices impact your cost of living? Do you plan to downsize to a smaller home after the children leave the nest, and use the equity to help fund your retirement? Or do you plan to stay in the same home as long as possible? Maybe a cottage or a getaway vacation home in a warmer location is on your wish list.

• What will you do? What will your day look like during retirement? Do you want to travel during retirement, or simply spend more time on your hobbies? Do you anticipate helping to support your children or grandchildren during your retirement ? Consider not only your day-to-day expenses, but how other activities – like travel or a golf membership will impact your living costs.

• When will you retire? Are you hoping to retire early, or will you delay retirement as long as possible? The earlier you retire, the sooner your employment income ends, and the sooner you’ll dip into your savings. Retiring before you turn 65 can also reduce the payments you receive from government programs or company-sponsored pension savings if you choose to take payments early.

• Will you work during retirement? You may want to maintain your industry network and take on the occasional consulting gig. If you own your own business, you might reduce your work hours to begin passing the reins to a successor. Perhaps you plan to take on a part-time job to keep yourself busy and active within your community. Paid employment during retirement can help you delay drawing on government or pension plan payments, which could help boost your payments in future years .

Old Age Security Pension (OASP): OASP  provides a monthly non-taxable benefit to most Canadians aged 65 or older and is not at all dependent on employment status or history. However, if you earn too much—currently, over $128,137 per person—the government will claw-back your benefits via the OAS “recovery tax.”

Canada Pension Plan (CPP): CPP is a government administered pension designed to benefit not only retirees, but also those who are disabled, and relatives of those who die after having paid into the CPP system. CPP benefits will be entirely dependent on how much you’ve contributed to the system over the years, though payroll taxes.

Guaranteed Income Supplement (GIS): GIS is provided only to retirees earning very low incomes. How low? The numbers frequently change, so best to consult the government’s eligibility tables.

Employer-sponsored retirement and pension plans: Your employer may sponsor a retirement plan, such as a group Registered Retirement Savings Plan (RRSP) or a registered pension plan (RPP). Under these plans, you and your employer (or just your employer) regularly contribute money to the plan. When you retire you may be eligible to receive either a regular income from the plan or a lump sum of money that you can convert into an income.

Personal retirement savings and investments: Two common sources of personal retirement income are Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs). RRSPs and TFSAs can be made up of various savings or investment products. You may also receive income from non-registered sources, such as personal investments like stocks and bonds, or personal savings accounts.