Protecting my retirement income

Get the information you need to enjoy your retirement to the fullest.

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.

Time

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.

Risk

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.

Return

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.

Your options

What plans and products can help you protect your retirement income.

A Registered Retirement Income Fund (RRIF) is a tax-deferred retirement plan. You use a RRIF to generate income from the savings accumulated under your Registered Retirement Savings Plan (RRSP). It requires you to start drawing an income starting in the year you turn 71. A RRIF works much like an RRSP since your investment returns grow tax-sheltered within the plan. But, instead of making a contribution to your plan each year, you are required to withdraw a minimum amount commencing the year after the plan is opened.  You are required to pay tax on income drawn from a RRIF every year you withdraw. This is for RRSP holders who turn 71 and still want to earn income in retirement.

Learn more | RRIF Calculator

A Tax-Free Savings Account (TFSA) is a registered plan where investment income and gains within the plan are 100% tax-free. You can contribute up to $5,500 annually into your TFSA and any unused contribution room carries forward. Anyone looking for tax-free savings can secure a TFSA.

Learn more | TFSA Calculator

A Guaranteed Investment Certificate (GIC) is a low risk, secure investment option that offers interest on your principal investment. You invest a set amount of principal and earn interest at either a fixed or variable rate over a period of time. Anyone looking for principal security and guaranteed returns can secure a GIC.

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A Market Linked GIC, such as a Scotia Equity-Powered Guaranteed Investment Certificate (EPGIC) is a GIC that offers principal protection and the benefits of the return potential of equity investments. You can invest a set amount of principal, like a traditional GIC term, but your return is linked to the performance of a basket of shares. Anyone looking for 100% principal guaranteed investment and is willing to forgo the guaranteed return of a traditional GIC in exchange for the potential to earn a higher return.

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Mutual Funds, such as ScotiaFunds®, are professionally managed investment vehicles that offer are a convenient and affordable way for investors to access investment opportunities domestically and around the world. The investment focus of a mutual fund can be very narrow (a specific sector or country focus) or quite broad (diversified across the major asset classes). Investors seeking a convenient way to access the growth and/or income potential of financial markets can secure Mutual Funds.

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Portfolio Solutions combine a diversified mix of mutual funds for a variety of risk tolerances in the convenience of a single investment. Portfolio Solutions may be diversified across different asset classes (e.g. stocks and bonds), geography, economic sector and/or company size in an effort to take advantage of market opportunities and manage risk. Portfolio Solutions can be a convenient way to help you achieve your financial goals – whether your goal is to generate regular income or to maximize the growth potential of your nest egg over the long term.

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High interest savings accounts, such as the Savings Accelerator or MomentumPLUS Savings accounts, are savings accounts that help you grow your savings even faster with higher interest rates than a regular savings account. You can earn higher interest on your savings with no monthly fee. A high interest savings account is for anyone who is looking to build their savings through earning interest on their principal and not have their money locked into a specific term.

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A retirement income solution, such as the Scotia Guaranteed Investment Optimizer (GIO), is a plan built to meet your need for income, especially in retirement. You select how often you want to be paid and how much you want to receive per payment. A GIO provides these payments while guaranteeing your principal. Retirees who want a steady stream of income that can be customized so it fits their lifestyle should consider a retirement income solution. The GIO also supports the Scotiabank Student GIC program. 

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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.

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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.

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Pre-Authorized Contributions

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.

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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.

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