10 retirement planning questions, answered - MoneySense

10 retirement questions, answered

Most of you have probably asked yourself one of these questions

retirement planning


1. Am I saving enough for retirement?

Ah, the million-dollar question. Lets look at a specific example, shall we? Say you have a $50,000 per year salary and $160,000 in your RRSP at around age 60 and plan to contribute another $10,000 a year for 10 years. Is this enough to retire at age 70 and have enough to last until you’re 100? Well the answer is: it depends. You need to consider inflation and factor in CPP payouts, too. Learn more.

2. What’s the best way to drawdown my retirement savings?

An RRSP, TFSA and holding company. Which one should you tap when, to minimize your tax bill? Starting with the corporation might be a good idea but watch out how it may affect your OAS and CPP. Next, go for accounts like TFSAs and RRSPs. Here’s why.

MORE: 7 ways to prepare for retirement

3. Does the Couch Potato make sense for retirees?

The Couch Potato doesn’t necessarily have to be a long-term portfolio. Someone who’s nearing retirement may consider just shifting asset allocation to be a little heavier in bonds. The complexity begins when you consider whether you need monthly income or capital. You could systematically sell off investments as you need cash but that may rack up transaction costs. Here’s what to know before going this route.

4. How do I know it’s time to retire?

Can’t decide on when to stop working? You’re going to need to do some number-crunching to find the sweet spot between working enough to earn more income and also avoiding a higher tax rate. Here’s what to know. Plus, don’t forget to consider these 10 signs that may tell you it’s time to begin your golden years, like your friends all being retired or your health being affected by your job.

5. How can I boost my retirement income?

While avoiding a high tax bill? Well depending on your age, it makes sense to delay receiving OAS and CPP until as late as age 70. That’ll let you pick away at your RRSP without racking up a lot of tax payable. A financial plan is key, in this situation.  Learn the full strategy.

6. Should I have life insurance in retirement?

If you’re financially secure, this becomes an estate planning, tax and investment discussion. Continuing to pay into a policy “because you will die eventually is like wearing a winter jacket in the summer because it will snow eventually.” Learn more.

READ: Retirement’s changing face

7. How can I pay less tax when I finally draw down my RRSP?

Flipping the switch from accumulation to decumulation can be tricky. Here are strategies to pay the least amount of tax possible when you have spousal RRSPs.

8. Are RRSPs ever a total waste of time?

If you’ll have a sweet, hefty pension when you retire, contributing to an RRSP might feel a bit pointless. But here’s the thing. RRSPs are never a waste of time—they might just not be the best tool to achieve your financial goals. Depending on your situation a TFSA might be the better choice, for instance. More details here.

9. Should I use my RRSP to pay off debt in retirement?

Many retirees worry about pre-retirement debt in their golden years. Taking out money from an RRSP to clear your debts might sound like a good idea but there are plenty of considerations to take into account, like immediate tax consequence and whether tapping into retirement funds will leave you wanting in your golden years. Be careful— you don’t want this strategy to end up costing you more than you’d like.

10. Should I take a lump sum or monthly pension?

There are pros and cons of each option. For instance, a lifetime monthly pension is usually guaranteed and removes the stress of worrying about market swings. Meanwhile, a lump sum could leave you with money to pass on in an inheritance. Here’s what to consider.

Watch: Rethinking retirement