Building a Retirement Paycheque

You have saved for it, you have planned for it, you have dreamed about it. You are now beginning to think about transitioning to your retirement. While this is an exciting time of life, we find that many of our clients have mixed feelings about their approaching retirement. Some clients have many plans, while other clients wonder what they will do with their days and whether they should be working a little longer. Regardless of the attitude towards retirement, one of the big questions is always, “Where should my cash flow come from once I have retired?”  

This in turn can bring up additional questions such as:

• What age should I start my CPP and Old Age Security (‘OAS’) benefits and how much will they be?

• Which accounts should I draw money from first? 

• What are the tax consequences of these withdrawals?

• What can I do with my employer sponsored group plan?

• How much should I be taking out per month/year? 

• How long will my savings last?

• What about inflation?  How will that effect my purchasing power over time?

Everyone’s situation is unique, so there is not always a set answer to these questions. In addition, the answers can also depend on whether your end goal is to maximize your estate for inheritance purposes, or to maximize the cash flow you can draw off your savings throughout the years.

Some common retirement planning mistakes include not having a clear picture of your goals in retirement, not considering your overall financial picture, and neglecting to account for tax implications in your decision making.  Let’s look at the first question, for example. 

Decisions on when to start taking CPP and OAS can be based on a number of factors:

• Emotional Factors: “I have paid into the CPP for so long, I want to benefit from it as soon as possible.”

• Financial Need: “My employee pension does not kick in until age 65, so I am looking at taking the CP earlier to fill in the gap.”

• Tax Considerations: “My OAS and CPP payments will put me in a higher tax bracket, so perhaps I should withdraw some funds from my RRSP while I am still in the lower tax bracket and delay those payments.”  Or, for someone with a large RRSP, “Once my mandatory minimum Registered Retirement Income Fund (“RRIF”) payments kick in at age 71, my OAS payments will be entirely clawed back, so I may as well take it while I can.”

At Cumberland, we can help answer your questions and walk you through the process of setting up a retirement paycheque. From determining whether you have the necessary savings to retire and maintain your preferred lifestyle (on an inflation-adjusted basis), to providing solutions to how you can change your savings habits to attain your preferred lifestyle in retirement.  We can help to determine the most tax-efficient way to draw down your assets, when to start taking CPP and OAS, and finally, we perform the actual mechanics of setting up your retirement paycheque. We consolidate withdrawals from various types of accounts in pre-determined amounts and have them deposited to your bank account monthly.

Our job does not end when your job does. We continue to manage your portfolios and periodically revisit your plan to assess whether your desired retirement paycheque continues to be viable.

If you are approaching retirement and/or are interested in this type of conversation, please reach out to our team at perronteam@cpwm.ca .