21 November, 2017

Things to Consider if You’re Retiring Soon

Things to Consider if You’re Retiring Soon

Retirement is an important life event, so be sure to cover all the details

Planning for retirement is a popular topic, but usually it’s discussed from a long-term perspective. Although you may hear great ideas on how to save for retirement down the road, what if you’re almost ready to retire? Sure, you still want to continue investing so you can adequately fund your whole retirement, but your focus needs to expand to help get your funding in place right now. Let’s look at three important things to do.

1. Convert your RRSP. Maybe. You’ve likely contributed to a registered retirement savings plan (RRSP), either as a primary source of retirement income or to supplement a workplace pension plan upon retirement. (Note, you must convert an RRSP to a registered retirement income fund (RRIF) no later than December 31 of the year you turn 71). Upon conversion, if prior to age 71, you’ll be required to withdraw a prescribed minimum percentage of your plan’s assets each calendar year. This is an important consideration because RRSPs are often a client’s main source of retirement savings, which means they will be a main source of retirement income, so it’s good to plan the timing and amount of the anticipated income amount. We can work together to complete the forms, choose appropriate investments for your RRIF and devise a withdrawal schedule that meets your needs.

2. Start the CPP process. You may begin receiving monthly Canada Pension Plan (CPP) payments as early as age 60, although you’ll receive proportionately less than the full amount calculated for someone who is 65. However, if you can wait until somewhere between ages 65 and 70, you’ll receive increased CPP payments. The CPP process isn’t automatic so you’ll need to take action. As long as you’re at least one month beyond your 59th birthday, have worked in Canada while making one or more valid CPP contributions, and plan to receive your first payment within the next 12 months, you can apply for CPP.

3. Get your workplace pension in order. If your company offers a pension plan, you’ll have paperwork to complete once you’ve notified the human resources department of your intention to retire. There are typically two types of employer-sponsored pension plans: defined benefit (DB) and defined contribution (DC). With DB plans, you receive pension payments based on your earnings and years of service at your company, which is responsible for investing the plan’s assets. With DC plans, you’re responsible for investing your assets. The amount of your payments will depend on how well you’ve invested. Don’t forget other workplace pension plans you’ve participated in. When you leave a company, your plan’s assets can either stay invested at the company until you retire, be transferred to an RRSP or a locked-in account that you access upon retirement, or be taken in cash.

Call our office today if you’re approaching retirement and we will create a retirement plan for you.