Retirement Planning and Asset Preservation

Retirement Planning

What is retirement planning and at what age does one retire? Where once it used to be normal to leave the work force,for good, at age 65, today it is not so clear cut. Although, leaving the regular work force at 65 might still be considered the norm, with the population living longer and generally healthier, many people are electing to work as long as they possibly can. A politician's career, for example, can last into his 80's and many retirees are choosing to work as self-employed consultants or business people.

Retirement today may best be described as that phase of life when the main activity is not being engaged in working for a living. Some taxpayers, unfortunately, will not have the luxury to do so at 65 and may be forced to work well into their golden years.

People work to acquire, nurture and maintain their desired lifestyles. When a person retires he/she will still need money to survive or to maintain this lifestyle.

Three important factors which will determine how comfortably an individual lives in retirement are

  1. The amount of income they will receive in retirement
  2. The amount of expenses that they have to pay in retirement and
  3. How healthy they are to enjoy it.

Sources of income in retirement

  • Government pensions
  • Company pensions
  • Income from investments
  • Income from retirement savings

Government income includes the Canada Pension, the Old Age supplement and the Guaranteed income supplement for the most needy.

The Canada Pension income is guaranteed, but the amount received will depend on the amount of contributions made during employment and when an individual elects to start receiving the benefits. An individual may elect to start receiving benefits as early as age 60 and as late as age 70. The payment will be reduced by 5% for each year earlier than 65 and increased by 5% for each year later than 65. You have to apply for this income.

The Old Age amount starts at age 65, but is subject to a claw back when your net income reaches a maximum threshold

Company pensions may be based on a defined contribution plan or a defined benefit plan. Most companies offer a defined contribution plan where the employee and employer make contributions and benefits

Investment income includes income from GIC's and term deposits, mutual funds and stocks etc.,business income

Retirement savings include income from RRSP's, RRIF's, Annuities, RPP's

See Income Tax Calculations


Good retirement planning is a crucial step in ensuring that you can live comfortably when you are older and no longer able or willing to work.


Retirement planning looks at several scenarios which a taxpayer may face during retirement.Depending on the scenario, an individual will face different challenges

  1. Government pensions, Company pension, investment income, retirement savings
  2. Government pensions, Company pension, investment income, no retirement savings
  3. Government pensions, Company pension, no investment income, retirement savings
  4. Government pensions, Company pension, no investment income, no retirement savings
  5. Government pensions, no company pension, investment income, retirement savings
  6. Government pensions, no company pension, no investment income, retirement savings
  7. Government pensions, no company pension, investment income, no retirement savings
  8. Government pensions, no company pension, no investment income, no retirement savings
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Scenario 1. The individual has the most choices with income from all sources. The tax payer may have sufficient funds to maintain his lifestyle without having to draw significantly on retirement savings

Scenario 2. This individual may still have sufficient funds to maintain her lifestyle, but might need to have high investment income to compensate for the lack of retirement savings

Scenario 3. In this case the individual may have sufficient funds to maintain her lifestyle, but may have to rely more heavily on her retirement savings to compensate for the lack of investment income.

Scenario 4. The individual will depend solely on government and company pension. In this case, there may some cash flow challenges.

Scenario 5. With no company pension the individual will need to have sufficient income from investments and retirement savings

Scenario 6. The individual may have to rely heavily on retirement savings or seek employment income to supplement his income

Scenario 7. Here the individual will rely heavily on investment income and may have to seek employment income to supplement her income

Scenario 8. This individual may have to seek supplementary employment income to survive

Retirement planning -The Impact on income


Retirement Expenses

Although individuals retire, there are still some expenses which they must pay. These include the necessities like food, clothes and shelter. They might also include incur expenses to finance existing debt or their leisure activities such as hobbies and travel. They might want to buy a new vehicle or want to help fund a child or grandchild's education needs.

The amount of expenses will have a very serious and large impact on an individual's retirement well-being. Ideally, you want to retire with little or no debt.

Some experts suggest that an individual will require about 80% of her pre-retirement expenses once she retires, because employment related expenses will no longer exist. This may or not be true. An individual may very well experience an increase in expenses if, for example, she chooses to spend the extra money on travel and vacations.

Retirement planning pulls all these factors into account and then allows the tax payer to increase wealth during retirement by tax efficient investing and capital preservation

Impact of RRSP withdrawals Retirement Planning and the Wealthy

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