Nancy Graham August 2, 2018 Personal Wealth Congratulations, You’re Ready To Retire! Now What??? At its highest level, retirement planning isn’t rocket science. The sooner and more aggressively you fuel up your retirement assets, the sooner you’ll be launching into your ideal retirement – whether that means selling your business, quitting your day job, or simply shifting the balance between your personal and professional activities that you enjoy the most. The thing is, you may be so busy preparing for your ideal retirement, you may not have any time left to think about the aftermath. And yet, it’s likely you haven’t got money to burn. So now that you’ve funded your retirement, what’s the most tax-efficient way to spend down those reserves? That’s an excellent “No Dumb Question.” Investing a few minutes today should help ensure you don’t waste your best tax-saving choices in retirement. For now, I’ve got one easy decision for you: Subscribe to my YouTube channel, and I’ll keep you notified of future posts. In retirement, while you may get lucky and enjoy a financial windfall you weren’t counting on. Once you’ve moved past your primary earning years, you know you’re best off charting a course based on the assets you already have “on board.” Thankfully, most of us with a career — or a few — under their belt should have enough wealth to safely sustain them in retirement. That’s the good news. But it also means you probably have a wealth of possibilities to consider when deciding which assets to tap first, next, and so on. For example, you’ve got your own ordinary and tax-free saving accounts. You’ve got your Canada Pension Plan, Old Age Security, RRSPs… Then there’s your company retirement plans. If you’re a business owner, you may still have assets tied to your business. If you’re an executive, you may have stock options or other sources of compensation to consider. Now multiply all that by two if you’re married. And then add any property interests you may want to sell during a downsizing. Clearly, if you want to burn all of your retirement “fuel” as efficiently as possible, you’ve got some serious financial and tax planning opportunities ahead, as you approach and enter into retirement. Often, retirees want to tap into taxable savings first, leaving the tax-sheltered reserves untouched for as long as possible. BUT, when you turn 71 the government requires you to convert your RRSP into a RRIF and start paying out certain taxable amounts each year. So we have to factor this in. Then there’s deciding the best time for you and your spouse to start taking CPP benefits. I’ve covered this in a past video, and it shows that it’s a pretty personal decision, with no single answer for everyone. If you’re a business owner, you’ll want to wind down your business interests in alignment as well. For example, are you planning to make use of your lifetime capital gain exemption? As I mentioned in a past video, you’ll want to prepare for this one several years ahead of time. Fortunately, guess what? You’re definitely not the first person who could use some help sorting all this out! At PWL, we’ve been through this … well, let’s just say this isn’t our first rodeo. We’ve got some seriously road-tested processes for getting our clients ready for retirement. I can’t speak to how every advisor goes about it, but our retirement planning process begins with separating out cash inflows and outflows. In other words, we account for all the places your retirement money will be coming from – and I mean all of them. Then we estimate how much money you’re going to need for the lifestyle that you’ve got in mind. If your inflows and outflows don’t line up, we’ve got tools like the Monte Carlo analysis to help you decide how to bridge the gap. So, part of your retirement planning processes involves those left-brained activities like financial and tax planning; investment and wealth management. But retirement planning is also highly personal. All the calculations in the world won’t add up if they’re not going to get you to where you really want to go. So we ask our clients to think through a ton of questions with us. When do you want to retire? When can you afford to retire? How much would you like to spend? How much can you afford to spend? Do you want to downsize your house or stay put? What are your favourite activities, and how much time do you plan to spend on them? Are there acquisitions you hope to make in the next little while, like a new car or a cottage? Who and what is important to you? When and how might you want to transfer wealth? With all that empirical and personal information in hand, you can more thoughtfully dip into your wealth. At PWL, we establish “buckets” that represent your spending wants and needs. Then we help you fill them from your various “pools” of money. We establish an order and priority – a retirement plan – that makes sense for you, your assets, and your tax-efficient use of them. Then we rinse and repeat, because “set and forget” won’t cut it. Your investments may perform better or worse than expected. You and your personal circumstances may shift. Regulatory changes may throw a monkey wrench into your best intentions. For all these reasons and more, you’ll want to revisit your retirement plans at least once a year to make sure you’re staying on track. So, as you can see, retirement planning may not be rocket science. But it’s not a walk in the park either! Here’s one small step you can take today: Subscribe to my “No Dumb Questions” channel for more targeted advice and keep your own questions heading back my way. Share: Facebook Twitter LinkedIn Email CIRO Advisor Report