There is a little-known secret to maximizing the amount of income you might have in retirement, or how much money you may be able to leave behind to a loved one, and that secret is to meet with an experienced financial planner before you retire.
With retirement income often being made up from personal savings, pension plans, and government benefits, there are many different options and choices you will face as you near retirement that will affect how much income you will receive from each of those sources. With different combinations of options and choices, many different and widely varying outcomes can be modeled and compared to find the ideal combination of options.
Financial planning software can be an immensely valuable tool for helping you make the best decision on some of these options. For example, doing a financial plan allows for easy comparisons of starting CPP and OAS at different ages, and seeing what the effect of when you start receiving each is on your overall retirement income. Optimizing the age(s) you start receiving each can have a significant impact on what percentage of your retirement goal you will be able to reach, or if you can exceed that goal. CPP/OAS, personal retirement savings, and work pensions are all interconnected, and what age you decide to start your government benefits at will affect how much of your retirement income will need to come from your personal savings and/or pension.
Another small change that can have a huge impact on how far your retirement savings will go is what order you deplete the different account types (RRSP/TFSA/Non-Registered) you have money saved in. Depending on how much you have saved and what types of accounts your money is invested in, optimizing the withdrawal order (or mix) can make a major improvement on how long your money may last or how much you may be able to leave behind to loved ones. Having a well-developed withdrawal strategy can also reduce how much tax you will have to pay as you deplete your RRSPs over time, leaving even more money for you to enjoy.
These are just two small but very important changes that can potentially combine to make a huge difference in how much you might get out of your nest egg. An experienced and talented financial planner can be worth their weight in gold (figuratively) by being able to determine the optimal combinations of a few factors in your retirement scenario. This is all without needing to assume you will retire with more money, earn a higher rate of return, retire later, or live fewer years in retirement.
Aside from being able to determine the best age to start receiving government benefits and what plan to draw down on retirement savings yields the best results, a financial planner can also give you far greater clarity on the level of income you should be able to expect in retirement. Multiple different retirement assets can be built into one plan, which can be used to give you a single dollar amount of how much income per month (net of tax, adjusted for inflation) you may be able to have throughout retirement. While this isn’t a guarantee, multiple different scenarios can be created to give a range of results, which can give you a better idea of the worst- and best-case scenarios.
The best part of all of this, is that it is very quantifiable. What is meant by that, is you can immediately put a dollar amount on the improvements that can be made to your overall retirement plan by fine-tuning and optimizing it. Depending on the scenario, someone who may be a bit short of reaching their retirement goal when default assumptions are used, can end up with hundreds of thousands of dollars left at the end of their plan when time is spent figuring out the best combination of a few important variables.
If you haven’t had a financial plan put together for you before, or if you want a second opinion on a plan you have already had done, please contact us and we would love to make sure you get the most out of your retirement.
- Dennis Rubeniuk, Investment Advisor
Dennis Rubeniuk is an Investment Advisor at Endeavour Wealth Management with iA Private Wealth Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Dennis Rubeniuk who is an Investment Advisor for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
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