Retirement is a major transition for everyone and is the main reason that people save money. The government established Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plan (RRSP) to help Canadians prepare for their retirement. It is our belief that using these investment vehicles to their fullest advantage is of upmost importance to people and their ability to retire comfortably.
We offer peace of mind and the ability to not have to worry about where your next check is coming from after you retire, We ensure people are Ready to Retire.
Being Ready to Retire means planning in advance
Planning can occur at any stage of life. While those who are closer to retirement will have more certainty on a couple of important factors (date of retirement, approximate income sources, approximate expenditures), it is much easier for us to work with clients who have been planning starting at a much younger age. It also allows us to plan to use the various accounts (TFSA/RRSP, etc.) in the most effective way.
Take RRSPs as an example. Many retirees have said that they feel like RRSPs were not as effective as they could have been because they end up paying tax on them in the end. We help to educate clients that, used correctly, RRSPs can be the best savings tool available to us. We look at “tax-rate spread” for our younger investors. Take this chart as an example:
As we can see, on the “tax spread” alone you have made excellent use of the RRSP account in your retirement. Not to mention the tax-deferred growth you most likely had on your investment.
However, if you were younger and making $35,000, it makes less sense to use RRSPs as your savings vehicle, as the “tax spread’ is much lower (non-existent). This is just one of the many reasons that planning ahead for our clients can help make them Ready for Retirement.
Being Ready for Retirement means having a cash flow you can count on.
If you are within 3 years of retirement, or have retired 3 years ago or less, you are in the "Retirement Red Zone". What we are referring to is a time in your life where choices you make with your investments and spending habits will have a major impact on your retirement years. This is a time where you begin setting your budget, adjust your investment portfolio to suit your new income requirements and plan out your first big trip or purchase. In all of the planning we do, this is probably the most critical time to review, adapt and update our client’s financial priorities. We have developed a program for those approaching this critical transition in their lives to help navigate them through the process.
Out of this program, we help to determine where our client’s next pay check is coming from. For most of our retiring clients, the thought of not having a steady pay check is a major source of stress. We help to alleviate this stress by creating a cash flow that they can count on.
It is very important to have liquid, low risk investments that provide this income, as you don’t want a market event to affect your ability to live your life the way you want to. We work to strike a balance between long-term capital appreciation, and short-term security for money you need on a day-to-day basis.
Even if you are not approaching the "Retirement Red-Zone" it is always good to know that you have a plan in place to reach retirement on your terms.
This publication is solely the work of Trevor Polay for the private information of his clients. Although the author is a Manulife Securities Advisor, he is not a financial analyst at Manulife Securities Incorporated (“Manulife Securities”). This is not an official publication of Manulife Securities. The views, opinions and recommendations are those of the author alone and they may not necessarily be those of Manulife Securities. This publication is not an offer to sell or a solicitation of an offer to buy any securities. This publication is not meant to provide legal, accounting or account advice. As each situation is different, you should seek advice based on your specific circumstances. Please call to arrange for an appointment. The information contained herein was obtained from sources believed to be reliable; however, no representation or warranty, express or implied, is made by the writer, Manulife Securities or any other person as to its accuracy, completeness or correctness.