When retirement is on the horizon

Visions of retirement are quite different from person to person, but the financial planning to get there is similar for everyone. Here are five essential items on your pre-retirement to-do list.

  • Set the date
    Setting the date is the fun part — it gives you a specific day to look forward to! Even more important, it provides a target date we can use to project whether your current investment program will provide your desired retirement income. You’ll know whether you’re on track, ahead of the game, or need to adjust your goals. This is also the time for you and your partner to discuss the pros and cons of retiring at the same time versus staggering your dates.
  • Safeguard your nest egg
    You want to keep your retirement date even if the stock market takes a serious fall just before you retire. To make a portfolio less vulnerable to a downturn, it’s gradually re-positioned to increase the proportion of lower-risk investments. This has the added benefit of providing assets well suited to provide income.
  • Plan your government benefits
    Old Age Security (OAS) benefits normally start at 65, but you can defer benefits up to five years. By deferring, benefits increase by 0.6% per month, or 7.2% each year. Waiting until 70 gives you a 36% increase.With CPP and QPP, you can also choose to defer benefits for five years or to start five years early, at age 60.Whether it’s best to begin OAS or CPP/QPP benefits earlier or later depends on several factors, including your health, life expectancy and retirement goals. If you want the money to support your lifestyle now, you might want to take the benefits ahead of schedule. If you’re working into your retirement years, you may want to defer them.
  • Purchase any required insurance
    If you currently have group life and health insurance from your employer, you may need to replace some or all of that coverage upon retirement.You may also need permanent life insurance for estate planning purposes, from covering final expenses to offsetting your estate’s tax bill. You might also consider long-term care insurance, as premiums are more economical the earlier you purchase.
  • Take care of debt and expenses
    Paying off your mortgage and any highinterest debt is more manageable while earning income than when drawing retirement income, so you may want to make it a priority. Home repairs and renovations are also easier to manage financially during income-earning years.

If you have any questions about financial planning in the pre-retirement years, including how to apply for government benefits, please talk to us.

CPP/QPP: Now or later?

The table below illustrates the effect of deferring or advancing receipt of CPP/QPP pension income. It’s based on the maximum benefit payable in 2017 (amounts are adjusted annually for inflation). Your entitlement might be different; the benefit is based on the number of years and amount contributed.

CPP/QPP Pension Income*

Age that Benefits Begin

Monthly Benefit

Annual Benefit

60

$713

$8,556

61

$793

$9,516

62

$873

$10,476

63

$954

$11,448

64

$1,034

$12,408

65

$1,114

$13,368

66

$1,208

$14,496

67

$1,301

$15,612

68

$1,395

$16,740

69

$1,488

$17,856

*www.servicecanada.ca, Canada Pension Plan, How much could you receive.

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