Planning Your Retirement   Life events

We’re living longer

and we want to remain active as long as possible.
These two realities have a major impact on our financial needs in retirement.

> HOW MUCH WILL YOU NEED?

> A WINNING DISBURSEMENT STRATEGY

> YOUR ESTATE ALSO HAS TO BE PLANNED 


HOW MUCH WILL YOU NEED?

This is the first question you must answer. It can be difficult to predict your financial needs, especially when you may need retirement income for 20 years or more. It is estimated that you should save 10% to 20% of your before-tax income. To estimate this amount, you must do the following:

  • Determine your retirement strategy 
    The earlier you retire, the more you must save.
     
  • Set your target 
    To maintain your standard of living in retirement, you will have to replace a portion of your employment income. The figure often cited is 70% of employment income. Of course, we can give you personalized guidance to define a precise target.

  • Establish the portion of your retirement income that will come from private and public plans
    (such as the Old Age Security pension and the Quebec Pension Plan)
    The more retirement income you need, the less likely it is that public plans will be able to replace it.

  • Calculate the difference between your target and the amount you will receive from public and private plans 
    The result will be used to determine the percentage of your annual income that you should save between now and retirement.

  • Select your investment vehicles

How many years will it take to reach your objective?
What type of retirement would you like to have?
Will 70% of your employment income be enough during retirement ?

TO MAKE INFORMED DECISIONS ABOUT ALL FINANCIAL MATTERS, CONTACT US!


A WINNING DISBURSEMENT STRATEGY   

You have probably accumulated retirement savings in various forms: an RRSP, a TFSA, a LIRA and other types of account, each with its own conditions for the withdrawal of funds. As retirement approaches, it’s a good idea to plan your withdrawals carefully. A poor disbursement strategy could have major tax implications and reduce your available savings.
Here are a few rules:

  • Establish your disbursement strategy in advance 
    At the same time, you can evaluate whether the savings you have built up will be enough to meet your needs and also make any necessary adjustments. Generally speaking, it is recommended that you make withdrawals in the following order: investment accounts, TFSAs and then registered accounts (RRSPs and LIRAs). In this way, you will benefit longer from the deferral of taxes that comes with registered accounts. Even so, everyone’s situation is different, and the accounts that should be prioritized will vary from one person to another. 

  • Ensure the necessary amounts are invested in the most conservative vehicles 
    It may be advantageous to transfer funds that you will be withdrawing into low-risk investments a year or two in advance.

  • Determine the right time to begin receiving your government pensions 
    The longer your life expectancy, the more advantageous it is to wait before starting to receive your Quebec Pension Plan (QPP). So, unless you have a major health problem or a family history that leads you to believe your life expectancy will be short, you can wait until you turn 70 to begin receiving the QPP. If you wait after the age of 65, your pension will increase by 8.4% for each year that you defer it until the age of 70. This represents a 42% increase over five years, which is very attractive! The same principle applies to the Old Age Security (OAS) pension. For each year that you defer it after age 65, your pension will be increased by 7.2% to a maximum of 36% at age 70. For example, in Quebec, a 65-year-old man can expect to live to age 85, and a woman the same age can expect to live to age 88. Given these life expectancies, it would be slightly more advantageous to wait until about age 68 to receive your OAS. 
 

AVENUES TO EXPLORE

Depending on your situation, several disbursement strategies are possible.

They may vary depending on such factors as your age, the type of account that you hold and the capital that you have accumulated. For example, if you plan to make withdrawals from an RRSP and you know that your income will increase over the years, several years before you plan to use such amounts you can transfer them to a TFSA to use up your contribution room. In this way, you’ll reduce the income from your RRSP in future years. Unlike withdrawals from a TFSA, withdrawals from an RRSP are taxable. In this way, you can increase your ability to take advantage of certain government programs, such as the OAS pension.

> Don’t forget that contributions to a TFSA are not tax-deductible, but withdrawals are not taxable. In contrast, an RRSP lets you deduct contributions from your taxable income, but the withdrawals are taxed.

> Good news for couples 
You may use your spouse’s age to reduce the amounts you are obliged to withdraw from your RRIFs. Given that these amounts increase as you age, this measure may be beneficial to you if your spouse is younger than you.  

> Surplus retirement income 
Does your income from investments such as your RRSP and your LIRA exceed your financial needs? If so, you may invest the surplus in a TFSA, if you have not already used up your contribution room, or in an investment account, to seek an additional return.


YOUR ESTATE ALSO HAS TO BE PLANNED  

If you’re getting ready for retirement, it’s also the time to prepare, or to update, your will and estate planning.
It’s a three-step process:

1. CALCULATE WHAT YOU WILL LEAVE AFTER TAXES

  • Do an inventory of your assets and estimate their value 
  • Calculate the tax payable on your death
  • Estimate the liquid assets that will be immediately available to your heirs 

2. OPTIMIZE THE TRANSFERRED ESTATE 

Using your estate balance sheet, a member of the FÉRIQUE Advisory Services team will assess your investment strategy as a function of tax considerations. To maximize your estate, various options will be presented to you by qualified specialists, such as:

  • Acquiring a life insurance policy
  • Making a donation or a bequest 

3. DECIDE HOW TO ALLOCATE YOUR ESTATE AMONG YOUR HEIRS  

  • Draw up your will
  • Prepare a protection mandate in case of disability
  • Plan your bequests
  • Select your executor carefully  

A WORD ABOUT TAXES 

Before your heirs receive anything, don’t forget that your accounts will have to be settled one last time with the tax authorities. On your death, all your assets are deemed to have been liquidated, just as if you had sold all your property at its fair market value and had cashed in all your savings in one fell swoop. This is referred to as a deemed disposition of assets. The capital gains on such disposition are added to the income earned in the year of your death, and your estate will be taxed accordingly. Because the tax treatment is different for the spouse, the children and the grandchildren of the deceased, you must choose your heirs carefully. 

To obtain an overview of your financial and family situation, you should familiarize yourself with your options and consult the appropriate specialists. 

contact us

Advisory ServicesFERIQUE Investment Services
Monday to Friday 8 a.m. to 8 p.m.
T 514-788-6485
Toll free 1-800-291-0337
client@ferique.com