Retirement Transition - Why Your First Step should Be a Plan

Retirement Income Planning, Calgary

Let me save you a lot of grief and a lot of money. Don't retire and start making a bunch of financial decisions willy-nilly. Start with some planning first. There are several decisions in retirement that cannot be undone and can result in you losing thousands of dollars of potential income. You are planning out the next 30 + years of your life and it needs to be done properly.

It is possible to add an additional $56,000 of tax-free income from ages 65-70 if you delay CPP to age 70 and start only with GIS first.

By delaying CPP to age 70 you will also earn 42% more than you will at age 65 and 78% more than you will at age 60.

On the flip side, you can reduce or eliminate a potential OAS clawback by not delaying your RRIF conversion to age 71.

Confused yet?

The thing is - there are so many choices and every choice will have an impact on something else. It's called unintended consequences. Take the RRSP to RRIF conversion at age 71 for example. There are several potential downfalls. First, now you are forced to start taking the minimum annual payment of 5.28% and increasing each year. When you delay drawing down your RRSP you are now regulated to take a minimum amount of money on a higher balance. Secondly, if you are married and your spouse passes away prematurely, you now have two RRIFs to contend with and now you will have a higher minimum income to take and this could start reducing your OAS income and other government benefits. A third downside is the potential tax hit if the last surviving spouse dies and the entire RRIF is now income in one year. That could be a 48% tax bill in Alberta. 

Portfolio design 

How you grew your money is not the same as how you will withdraw your money. Maybe you had a genius strategy and are sitting on a large nest egg. What is the best order to get the most life-long income and pay the least amount of taxes? Should your TFSA and your RRSP/RRIF have the same strategy? 

Insurance. Medical benefits. Going to the dentist. Physio. Prescriptions. Travel insurance.

Estate and Will planning. Who will look after your affairs when you are too old to do it yourself? Who do you want to have what's left? What are the ways to avoid probate and simplify your estate?

Long-term care planning. Who's going to look after you when you get old? It will never happen to you. You will be the first person to grow old and just die in your sleep - painless - easy. Unlikely. Memory loss. Sickness. Bad knees. Downsizing your home. When? Before it's too late, I hope. How will you pay for it? Are you depending on government assistance? Well, I hope you have the time to wait because the list is growing faster than you may realize. Private facilities - be prepared to pay a lot of money.

Leaving your future to chance is not a plan!

What every soon-to-be retiree needs is a comprehensive plan that deals with the issues and questions outlined above. The proper order of taking income can ensure you have a sustainable level of income throughout life that can ensure you don't overspend and become a burden to others or underspend and die the richest person in the graveyard.

Check out our fee-only planning service here.

Retirement Income Planners,

Willis J Langford BA, MA, CFP

Nancy R Langford CRS

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Previous agents or companies only seemed interested in obtaining funds from us with no further support or contact.

Willis & Nancy have worked with us at least twice a year to make sure we are set up for success. They have been able to provide us with a visual picture of where we currently stand financially in order to determine if we are ready to retire or need a few more years. It has alleviated the stress we were feeling about retiring and having no idea of what that would look like.

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Deb & Garry

Debbie & Garry
Long-term Clients

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