Planning for retirement is on the minds of many Canadians. The most common question is: How much do I need to save for retirement? Unfortunately, in terms of retirement savings, there is no one-size-fits-all answer.
Things to Consider when Planning Retirement
You can afford to retire when:
- you’ve acquired enough assets and benefits to create the income you need
- you’re able to sustain the lifestyle you want, throughout your retirement
The key to successfully managing your retirement is using the right combination of taxable and tax advantaged savings vehicles.
Registered Retirement Savings Plans come in several forms:
- Individual or Spousal Retirement Savings Plans (RSP)
- Group RSP
- Registered Pension Plans
- Locked-In RSP (assets transferred from a Group or Pension Plan)
When you invest in an RSP, the deposits are tax deductible and your investment growth is tax deferred. This means the income is fully taxable when you start taking income from your RSP.
Canadians that use RSPs are required to transfer them into a Retirement Income Fund (RIF) in the year in which they turn 71. They must then withdraw at least the minimum required income as set out by Revenue Canada, in the year in which they turn 72.
RSP’s are ideal for Canadian’s that:
- make more than $40,000 per year or
- have maxed out their Tax Free Savings Accounts
Tax-Free Savings Accounts (TFSA) are a great option for retirement savings. For Canadian’s making less than $40,000 per year they are the ideal savings vehicle. They are also the perfect compliment to pension income and offer more flexibility for accessing your savings.
Canadian’s accumulate assets in many different savings vehicles during their working years. A Financial Advisor can help you figure out which assets should be consolidated and which benefits should be used first. To ensure you maximize your tax savings and government benefits, the sequence and source of your Retirement Income should be carefully planned.
Don’t wait, contact Heidi to get started.