On the Horizon: Your Retirement Choices. Presented by: Janet Gray, CFP Money Coaches Canada June 2018

Transcription

1 On the Horizon: Your Retirement Choices Presented by: Janet Gray, CFP Money Coaches Canada June 2018

2 Disclaimer This presentation was prepared for general informational purposes only. The opinions expressed are solely those of the presenter and not necessarily those of the AOM Benefits Trust. The AOM Benefits Trust gives no warranties nor makes any representation as to the accuracy, suitability, or reliability of the information. The AOM Benefits Trust assumes no liability arising in connection with the use of or reliance on the information by any person. The information is subject to change without notice, and any use or reliance on it is at your own risk. The information provided is not, and should not be taken as, legal or professional advice.

3 Agenda: Your retirement path What are your options for RRSP? When can I start CPP? Or OAS? What if I retire early? Or later? How much money will I need? Where will my income come from? How much do I have to save now?

4 Step 1: What Does Retirement Mean to Me? Money is a big part of retirement but retirement isn t all about money!

5 Your Life and Financial Goals Picture YOUR retirement, and think of each aspect as a goal For each retirement goal, set a cost and a time frame Your Retirement Goals Cost/Value Time Frame 1 Reduce hours worked $25,000/year In 5 years 2 Take a course at the local college $500/year In 5 years 3 Visit the kids in California once a year $2,000/year In 6 years 4 Personal trainer/physical therapy $3,000/year In 6 years 5 Private insurance to replace work benefits $4,000/year In 6 years 6 Sell home and move to a condo Frees $50K In 15 years 7 Support my favourite charity $1,000/year Ongoing 8?? $????

6 Step 2: How Much Money Will I Need to Live in Retirement? Each person/family is unique The best way to estimate your spending in retirement: Start with what you are spending right now Think about what might change in retirement Build your own Spending & Savings plan

7 Retirement Lifestyle Expenses style%20expenses.xls

8 Spending & Savings Plan Cash Flow Monthly Annual Net Income Income $ Other $ Fixed Expenses Mortgage $ Utilities $ Property Tax $ Plan Ahead/Behind Savings $ Debt Payments $ Monthly Variable Expenses Groceries $ Fuel for Car $ Entertainment $ Annual or Lump Sum Expenses Home Repairs $ Clothing $ Travel $ Cash Flow Surplus or Deficit $

9 MCC Financial Freedom Calculator edom%20calculator.xls

10 Step 3: Where Will My Income Come From? The main sources of income in retirement include: Government benefits Canada Pension Plan and Old Age Security Registered Retirement Savings Plan Part-time Work Other Income Liquidation and/or annuitization of assets/savings

11 CPP retirement benefits First step, obtain a Statement of CPP Contributions from Service Canada Then use their online Calculator to estimate your benefits CPP retirement benefits can start anytime after age 60 up to age 70 CPP benefits are taxable Maximum CPP benefits today at age 65 = $13,610/year or $1,134/month

12 CPP retirement benefits-cont d The amount of your pension will depend on 3 factors: 1. How much you contributed to CPP (up to annual maximum) 2. How long you contributed (at least 85% of time eligible for max) 3. Your age when you starting taking CPP You can start taking CPP while you are still working up to age 70. Contributions will increase your retirement benefit. Employees are required to contribute to CPP up to age 65 (optional after 65) CPP contributions are always optional if you are self-employed

13 CPP retirement benefit- cont d Taking your pension before age 65 If you take the CPP retirement pension early, it is reduced by 0.6% for each month you receive it before age 65 (7.2% per year). If you start receiving CPP when you are 60 years old, you will receive 36% less than if you had taken it at 65. Taking your pension after age 65 If you take your pension late, your monthly payment amount will increase by 0.7% for each month after age 65 that you delay receiving it up to age 70 (8.4% per year). If you start receiving CPP when you are 70 years old, you will receive 42% more than if you had started at age 65.

14 CPP retirement benefit- Cont d General drop-out provision Over the course of your working life, you might have had periods where you had low or zero earnings. Such periods can occur for a variety of reasons, such as going to school, unemployment, or leaving the workforce to provide care to a family member. The CPP offers protection against this by automatically dropping a number of months of your lowest earnings when calculating your CPP benefit. This provision affects 17% of your contributory period, allowing up to eight years of your lowest earnings to be dropped from the calculation. This benefits all CPP contributors.

15 CPP retirement benefit- cont d Child-Rearing Provision for primary caregivers If you stopped working or received lower earnings to raise your children, you may be able to use the "child-rearing provision" to increase your CPP benefits. Note - do this at time of application for benefits. If you are deemed eligible, the child-rearing period of seven years will be excluded from the contributory period when calculating your CPP benefit amount, ensuring that you get the highest possible payment.

16 CPP retirement benefit- cont d The Canada Pension Plan (CPP) contributions you and your spouse or common-law partner made during the time you lived together can be equally divided after a divorce or separation. This is called credit splitting. Credits can be divided even if one spouse or common-law partner did not make contributions to the CPP. Credit splitting may help you qualify for benefits and can affect the amount of any current or future benefits under the CPP program for both you and your former spouse or common-law partner.

17 OAS retirement benefit Old Age Security is available to all Canadians over 65 years old if they meet the residency requirements The current annual benefit at age 65 is $7, ($586.66/month) It is taxable The amount of your OAS pension will be determined by how long you have lived in Canada after the age of years will provide you with the maximum benefit Partial benefit available after 10 years residency

18 OAS retirement benefit -cont d Defer receiving your benefit after age 65 You can apply as late as age 70 for an enhanced OAS benefit. If you delay receiving your OAS pension, your monthly pension payment will be increased by 0.6 percent for every month you delay receiving it, up to a maximum of 36% at age 70.

19 OAS retirement benefit- cont d In addition to the OAS pension, there are three types of OAS benefits: Guaranteed Income Supplement If you live in Canada and you have a low income, this monthly nontaxable benefit can be added to your OAS pension. Allowance If you are 60 to 64 years of age and your spouse or common-law partner is receiving the OAS pension and is eligible for the Guaranteed Income Supplement (GIS), you might be eligible to receive this benefit. Allowance for the Survivor If you are 60 to 64 years of age and you are widowed, you might be eligible to receive this benefit.

20 Midwives Group Retirement Savings Plan Midwife plan members receive an additional 20% of their income from the Ministry of Health, earmarked specifically for benefits. The AOM Benefits Trust remits your benefits funding to pay your benefits premiums, 10% service fee, and (optional) selffunded leave savings. The remaining amount is contributed on a monthly basis to your GRSP. Investments are selected by you: Target date funds (based on year of retirement) Pre-built portfolios (conservative, aggressive, moderate) A la carte investment funds (fixed income, equities, etc.) Managing your GRSP contributions is your responsibility To check on your GRSP, go to

21 Other RRSP Considerations Spousal RRSPs Income Splitting via pensions Home Buyers Plan (HBP) Life Long Learning Plan (LLP) Locked In Retirement Accounts (LIRA) Transfer to RRIF or annuity at age 71 (latest)

22 What is a Registered Retirement Income Fund (RRIF)? Transfer from your RRSP (by end of the year you turn 70, or earlier) Creates an income flow based on (required minimum) payment schedule Flexible to maximum withdrawal amount and types of investments Fully taxable At death, beneficiary receives account balance

23 What is an Annuity? Transfer from your RRSP (by end of the year you turn 70, or earlier) Creates a guaranteed monthly income for a set time period or lifetime (depending on options chosen) No investments Fully taxable like income At death, options to guarantee ongoing income to spouse/partner

24 Tax Free Savings Account (TFSA) Savings/investing vehicle to hold various investments similar to an RRSP Can hold mutual funds, stocks, GICs, cash, etc No tax deduction at time of contribution No tax paid when withdrawn Very flexible If using for retirement savings, be sure it is the best fit for you and your behaviour! Midwives can set up TFSA with Desjardins (personal contributions); benefits funding can go to TFSA only once you reach your RRSP limit (must provide Notice of Assessment)

25 Tax-Free Savings Accounts -cont d The TFSA contribution limit for 2018 is $5,500. You can also carry forward any unused contribution room from previous years. As of 2018, if you are opening your first TFSA, this gives you a total of $57,500 available investment savings room, taxfree!

26 Part-time Work in Retirement Some will consider part-time or contract work What are you good at? Hobbies? Special skills? What will you be able to do? Use extra income for the extras in life

27 Other Income Rental income a rental property or cottage part of your own home Dividends from an active business or holding company you own Royalties from something you created

28 Liquidation of assets/savings In retirement, the most tax-effective way to withdraw your savings if needed for income is TFSA first, then non-registered, then RRSP If you can, leave your RRSP intact until you are required to withdraw as a RRIF in the year you turn 72. This strategy will defer the taxes owing on the RRSP withdrawals.

29 4 + 1 Ways to Close the Gap - STEW Save more Take Less (lower retirement expenses) Earn better ROI (reduce costs, increase risk?) Work longer Move or use the equity in your home

30 Keys to Remember Be clear of what you want have a conversation with your partner or someone you can trust Know your numbers live within your means Be Debt Free by retirement Use proven saving techniques Start small Automate pay yourself first

31 Retirement Resources Human Resources and Skills Development Canada (HRSDC) Service Canada Money Coaches Canada Jim Yih Learning for Life ed-reading-list/

32 Thank you. Janet Gray, B.A., B. Admin., CFP, CHS, EPC, CPCA, Certified Financial Planner/Money Coach Specialization: Financial Planning, Pre-Retirement Planning, Retirement & Pension Planning Money is a tool to achieve your goals. By working smarter not harder, you ll ensure money is never your master , janet@moneycoachescanada.ca

33 Contact us: View archived financial education webinars and download resources on our website (midwivesbenefits.ca) under Learning for Life