2023-10-27 21:39:38
Careful planning is essential. Afterwards, all you have to do is take advantage of the present moment to enjoy a well-deserved retirement. (Photo: 123RF)
The art of cashing out in retirement
According to Retraite Québec projections, the province will have more than a million new retirees in the next ten years. These people who have spent most of their lives accumulating capital will have to enter “disbursement” mode. If you are one of these people, you may have a number of questions, because managing your money well will allow you to fully enjoy your retirement, in addition to giving you peace of mind regarding longevity. of your assets. Here are some key things to consider in the art of cashing out in retirement.
Establish a financial plan
Before you retire, it is essential to have a financial plan in place. This will help you know how much money you can withdraw each month without depleting your savings too quickly. To establish this plan, you will need to evaluate your sources of income, your planned expenses, your savings, your investments and all the retirement plans and government benefits to which you will be entitled.
Remember that your situation is unique. Be wary of rules of thumb that don’t apply universally. If you want a personalized financial plan, a financial planner will help you get the facts straight.
Diversify your assets
Adequate diversification of your assets will help reduce the financial risks linked to their volatility. It’s important to balance potential returns with the risks your investments face. It’s a process that involves first knowing your investor profile and risk tolerance. Additionally, how you intend to use your assets will impact when you need them and therefore the degree of risk you are able to accept.
Determine the best time to receive your government benefits
Government benefits such as those from the Quebec Pension Plan (QPP) and Old Age Security (PSV) constitute a significant portion of retirement income. The best time to receive these benefits is a complex decision. It depends on your age, financial needs, life expectancy, tax situation, health and estate planning.
It is generally a good idea to wait as late as possible to apply for your pension. If you can afford it, each month of deferral will increase both government pensions. This is an excellent way to reduce longevity risk, that is, the risk that you will exhaust your savings before your death. Obviously, there is no single answer as to the best time to start paying your public pensions. As mentioned above, this decision will depend on several factors specific to your situation.
Reduce tax bill
Planning your retirement disbursements using a strategic approach will help minimize their tax impact. Several tools are at your disposal to do this: income splitting, judicious use of the TFSA, meticulous planning of RRSP and RRIF withdrawals, as well as taking advantage of specific retirement tax credits.
We often talk regarding investing in tax-efficient vehicles, such as the RRSP. In fact, the RRSP allows you to defer taxes; you do not pay any on your contributions, but there will be a tax on the amounts upon withdrawal. This is advantageous if your income at the time of disbursement, and therefore your tax rate, is lower. It is therefore necessary to make a certain trade-off between short-term and long-term taxation.
Additionally, developing an estate plan and seeking advice from an experienced professional can help minimize the tax impact, thereby maximizing your retirement savings.
Enjoy the moment
In summary, the art of retirement spending is regarding managing your finances wisely to maintain a comfortable standard of living throughout your retirement. It is essential to plan carefully, diversify your assets, follow a realistic budget and remain flexible to meet unforeseen financial challenges. Afterwards, all you have to do is take advantage of the present moment to enjoy a well-deserved retirement.
Pascal Duguay, Pl. Fin.
GUEST EXPERT. According to Retraite Québec projections, the province will have more than a million new retirees in the next ten years. These people who have spent most of their lives accumulating capital will need to enter “disbursement” mode. If you are one of these people, you may have a number of questions, because managing your money well will allow you to fully enjoy your retirement, in addition to giving you peace of mind regarding longevity. of your assets. Here are some key things to consider in the art of cashing out in retirement.
Establish a financial plan
Before you retire, it is essential to have a financial plan in place. This will help you know how much money you can withdraw each month without depleting your savings too quickly. To establish this plan, you will need to evaluate your sources of income, your planned expenses, your savings, your investments and all the retirement plans and government benefits to which you will be entitled.
Remember that your situation is unique. Be wary of rules of thumb that don’t apply universally. If you want a personalized financial plan, a financial planner will help you get the facts straight.
Diversify your assets
Adequate diversification of your assets will help reduce the financial risks linked to their volatility. It’s important to balance potential returns with the risks your investments face. It’s a process that involves first knowing your investor profile and risk tolerance. Additionally, how you intend to use your assets will impact when you need them and therefore the degree of risk you are able to accept.
Determine the best time to receive your government benefits
Government benefits such as those from the Quebec Pension Plan (QPP) and Old Age Security (PSV) constitute a significant portion of retirement income. The best time to receive these benefits is a complex decision. It depends on your age, financial needs, life expectancy, tax situation, health and estate planning.
It is generally a good idea to wait as late as possible to apply for your pension. If you can afford it, each month of deferral will increase both government pensions. This is an excellent way to reduce longevity risk, that is, the risk that you will exhaust your savings before your death. Obviously, there is no single answer as to the best time to start paying your public pensions. As mentioned above, this decision will depend on several factors specific to your situation.
Reduce tax bill
Planning your retirement disbursements using a strategic approach will help minimize their tax impact. Several tools are at your disposal to do this: income splitting, judicious use of the TFSA, meticulous planning of RRSP and RRIF withdrawals, as well as taking advantage of specific retirement tax credits.
We often talk regarding investing in tax-efficient vehicles, such as the RRSP. In fact, the RRSP allows you to defer taxes; you do not pay any on your contributions, but there will be a tax on the amounts upon withdrawal. This is advantageous if your income at the time of disbursement, and therefore your tax rate, is lower. It is therefore necessary to make a certain trade-off between short-term and long-term taxation.
Additionally, developing an estate plan and seeking advice from an experienced professional can help minimize the tax impact, thereby maximizing your retirement savings.
Enjoy the moment
In summary, the art of retirement spending is regarding managing your finances wisely to maintain a comfortable standard of living throughout your retirement. It is essential to plan carefully, diversify your assets, follow a realistic budget and remain flexible to meet unforeseen financial challenges. Afterwards, all you have to do is take advantage of the present moment to enjoy a well-deserved retirement.
Pascal Duguay, Pl. Fin.
1698443853
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