“Do I have enough to live well in retirement?” This is the question we hear most from retirees. The answer depends on your retirement income needs — the lifestyle you want to live.
The process is a matter of matching your resources to your needs in a manner that gives you confidence that your finances will last and the clarity and freedom to live an inspired life.
Should I take my Canada Pension Plan (CPP) as early as possible?
The answer to this is not cut and dry and usually comes back to ‘it depends’.
At Seven Elements, we consider your personal circumstances and the many factors that influence the decision to start receiving CPP retirement pension, including your health, financial situation and plans for retirement.
For example, if you’re healthy, expect to live a long life, or have access to other sources of income, you may opt to start receiving your CPP retirement pension later. This will result in a larger monthly pension which could help protect you from outliving your savings.
However, if you’d prefer to work less or you want the money now to pay off debts or to fund your retirement plans, you may choose to start receiving your pension before age 65. This will result in a smaller monthly payment which can help meet immediate needs, especially if you have little or no other income.
Should I wait until the mandatory age of 71 to start withdrawing from my RRSP?
The deadline to convert your RRSP to a RRIF is the end of the year you turn 71 and withdrawals start in the year you turn 72. At that point, you withdraw the minimum amount required to ensure a steady stream of “retirement income” for the rest of your days. However, there are circumstances where you could end up saving too much inside an RRSP where it may be appropriate to make strategic withdrawals in the years before converting to a RRIF at age 71.
When do early withdrawals from your RRSP make sense?
The reality is that most folks retire before age 71. It’s common to see your average tax rate drop noticeably in the few years where you don’t have much in the way of taxable income compared to when you were working. This is an opportunity to use lower tax brackets to your advantage. Making early, strategic withdrawals from your RRSP makes sense in this situation to.
How much income will I need when I retire?
How much you’ll need to save for retirement depends on your current income and the lifestyle you want to enjoy when you retire. As a general rule of thumb, retirement income should be about 70% of your final pre-retirement annual income to live comfortably, but this varies widely depending on individual lifestyle goals. At Seven Elements, we help build a Wealth Plan that factors in your retirement income from all sources including CPP, OAS, pensions, and part-time employment to ensure you live the life you want in retirement.
Should I start thinking about downsizing?
Many people plan to finance a good portion of their retirement by selling their current home, buying a smaller place, and investing the difference for income. In reality, this doesn’t always pan out as planned leaving them with far less profit than they might have hoped.
Done right, downsizing can be a good idea. You might walk away not only with more money but also a simpler life and less home maintenance and utility expenses for years to come. To reach that happy outcome, we help to steer around the unexpected pitfalls that make downsizing so unpredictable.
