How to build a retirement 'paycheque' to replace your work paycheque
There is always a big focus at this time of year on putting the right amount of money into your registered retirement savings plan. Quite frankly, that can be the easy decision.
The tough part is actually building a retirement “paycheque” in the most tax-efficient way once your regular paycheque disappears.
Over the years, we have received thousands of questions from clients related to a wide range of financial and planning issues. Without a doubt, the highest number of questions relate to managing the transition from a workplace paycheque to a different source of funding your lifestyle.
The first thing to remember is that you may not need to replace the paycheque. You only need to create the cash flow to cover your expenses.
If you are lucky, your paycheque covered more than just your expenses. Now in retirement, some expenses have likely disappeared, too. One obvious example is your RRSP contribution and any pension deductions. You may also finally be at the point where your children are fully off the payroll. Depending on the job you were doing, there might be travel, clothing or other work-related expenses that have disappeared. Maybe life insurance and long-term disability insurance are no longer required.
Once you know what you need to live, then comes the task of building your retirement paycheque from your various assets. To complicate this, there may be benefits to drawing certain assets sooner and other assets later.
One of the biggest questions is whether to take your Canada Pension Plan (CPP) at age 60 or later — any time up to age 70. The benefit is that your pension payment will grow by 8.4 per cent for every year you delay between age 65 and 70. The risk is that you may not live long enough to truly
Read more on financialpost.com
