What you need to know:
Now that you're in retirement, an important element of your financial plan is to protect what you've worked so hard to save. You need to preserve your capital with the time in retirement to give you the financial flexibility and confidence to live your life in a style to which you have become accustom. Fortunately, there are ways to invest that are low risk but can help you protect your savings.
When you are retired it is important to establish a time frame to start to de-accumulate your savings. It is important to understand how much you will need for living expenses on an annual basis.
Since your savings have been built, you may want to choose investments that are lower risk sacrificing some higher returns in an effort to help protect your investments and ensure you have enough to live comfortably in retirement.
The key is to add consistent returns to the savings that you've already built to help you get the most out of your retirement. Higher returns can bring higher risk, which brings higher volatility. The amount of potential return needs to be balanced with the amount of risk that you are willing to take.
RRIF or Annuity?
If you're looking for more flexibility and the opportunity to manage your assets, then a RRIF may be a good option. If you're looking for a more guaranteed investment, an annuity may be right for you. You can also talk with a Scotia advisor to learn what the best alternative is for you.
How do pension plans affect my income?
Retirees between the ages of 60 and 70 can start receiving payments from the Canadian Pension Plan as well as Old Age Security. It is important to factor in these supplemental sources of income when determining your income needs during retirement.
What's the benefit of a lower-risk profile?
In retirement, you likely want to protect what you've worked so hard to build. If you have investments in higher-risk products, you may want to consider moving them to lower-risk products, like a GIC that will protect your principal investment while still earning a return.
What plans and products can help you protect your retirement income.
Tips & Hints
Minimize the tax you pay
In retirement, one way to maximize your cash flow is to minimize the taxes you pay. Taxes are generally the biggest expense and you often need every penny of income to make ends meet while leaving enough of a nest egg to ensure that you do not outlive your savings. The problem with this is that not all investments are taxed alike. Since cash and bonds are taxed at ordinary income rates, you'll want to shield them from taxes in your retirement plans the most. You may also want to consider a TFSA where all earnings are tax-free. When looking for recommendations on minimizing the taxes you pay, it is best to seek a tax professional who can advise you in this area.
Withdrawing from a spousal RRSP
Once a Canadian reaches the age of 71, they can no longer contribute to a spousal RSP. At that time, the spousal RRSP will be converted into a RRIF or an annuity and the income will be taxed in your spouse's name at his or her tax rate. However, if your spouse withdraws funds within 3 calendar years of your contribution, that amount will be added to your taxable income in the year of the withdrawal.
Pre-Authorized Contributions (PACs) help build your savings easily and conveniently through automatic contributions on a regular basis. It makes saving routine and hassle-free.
Bank the Rest
With Bank the Rest™, each purchase you make gets rounded up, to the next $1.00 or $5.00, and the difference goes right into your savings or investment account. So, your savings grow with each purchase.