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Guided OutcomesTM
Unbiased. Expert. Insights.
How much do I need to retire?
January 23, 2020
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Introductions
Janice Holman, CFA CFP25 years of experience with investments, retirement and education15 years with Eckler, Principal of the firmLead our financial wellness initiatives
Eckler Ltd. Consultants and Actuaries – since 1927Canadian firm, 300+ staff nationallyDon’t sell financial products
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Does thinking about retirement cause you worry?
#1 question asked
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Today
3 Step plan to figuring out how much you need
1. How much will your spending be?
2. Sources of retirement income
3. Making up the difference.
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1. How much will your spending be?
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Need to develop a life visionbefore
knowing how much is enough.
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Phases in retirement
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Lots of things to think about
Where will you live?
Will you have paid off debts?
Will you have dependents?
Where will your family be?
How will you spend your time?
Do you have any physical challenges to be mindful of?
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Cash Flow Exercise
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How long does it need to last?
AGE MALES FEMALES
80 77 8485 61 7290 41 5395 20 31
Probability person will be alive at these ages.
65
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2. Sources of retirement income
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Government
CPPOASGIS
Workplace
Defined Benefit Pension Plan
Defined Contribution Pension Plan
Personal
RRSPTFSA
SavingsRental income
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Canada Pension Plan (CPP)
You and your employer(s) contribute
Your CPP pension is based on your earnings/contributions – you may however exclude up to 8 years if you’re not earning an income plus additional years at home raising children to a limit
Must apply - between ages 60 - 70
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Canada Pension Plan (CPP)
§ Earliest start age: 60 – with a reduction § 0.6% per month = 7.2% per year
§ Latest start age: 70 – with an increase § 0.7% per month = 8.4% per year
§ If you start your pension before age 65 and are working, you are required to contribute to CPP – the extra contributions will serve to increase your pension
§ From age 65-70 if still working you can choose to contribute to CPP
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CPP
Maximum Monthly Yearly
2020 $1,175 $14,110
Average Monthly Yearly
October 2019 $672 $8,075
https://www.canada.ca/en/employment-social-development/services/my-account/request-pac.html
How do I know how much I’ll receive?1. Obtain a Personal Access Code (PAC) from Service Canada
2. Log on to Service Canada http://www.servicecanada.gc.ca
• Indexed with inflation each year, so it will keep up with cost of living
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$XXX.XX
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$XXX.XX$XXX.XX
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Accumulated CPP Payments
Delay to age 65 – will have received more $ by age 73, than if started at 60Delay to age 70 – will have received more $ by age 81, than if started at 65,
will have received more $ by age 77, than if started at 60
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Old Age Security (OAS)§ Eligibility is based on Canadian residency
§ Full pension after 40 years residence, partial pension after 10 years residence
§ Earliest start age: 65
§ Latest start age: 70§ increase of 0.6% per month = 7.2% per year
§ Max payment Q1 2020
§ $613 monthly
§ $7,362 annually
§ Indexed with inflation
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Receiving OAS
You’ll get a letter right after your 64th birthdayAutomatically get it
if you want to delay receiving you need to complete a form
Need to apply if so, apply right away
Don’t get a letter - apply
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Guaranteed income supplement (GIS)
Available to those collecting OASLow income, living in Canada
Amount depends on marital status and income
Go to www.canada.ca to see possible amounts
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GIS
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Workplace pension plans
Defined Benefit:Amount based on a formula:
1% x Years of Service
Guaranteed to be paid for life
Defined Contribution:Contributions made into investment accountYou decide what to do with your savings pot at retirementDrawdown over time, or buy guaranteed income for life, or combination
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RRSP
18%
$27,230Maximum(2020)
RRSP
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Tax Free Savings Account
TFSA$6,000Annual
Maximum(2020)
$69,500Accumulated
limit(2019)
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#2 – Bringing it all together
Government
CPPOASGIS
Workplace
Defined Benefit Pension Plan
Defined Contribution Pension Plan
Personal
RRSPTFSA
SavingsRental income
$650+ $613$1,263
$? $?
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Taxed in retirement?
Income Taxed?CPPOASGISDefined Benefit Pension PlanDefined Contribution Pension PlanRRSPTFSAOther
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3. Making up the difference
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Income matching in retirement
Expenses Income
ShelterFood
TransportationFinancial
Obligations
TravelEntertainment
Gifts/Kids
Pension PlanCPP / OAS
Life Annuity
RRSP / RRIFTFSA / Savings
PT WorkRental Income
Essentials(fixed)
Non-Essential(variable)
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Is there a gap?
Spending
Essentials
$2,000
Extras$700
Guaranteed
$1,263
Flexible$400
$2,700
Income
$1,663
Gap
$1,037
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How to close the Gap?
Part time work
Extra savings
Extras
Essentials
2 ways
Earnings Spending
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How much does it cost?
Today:
$10,000 savings = $50/month
In our example, the gap was $1,000 / month
Ø$200,000 is needed
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Money saving tips
Daily pocket money
Set a budget or track your spending
Essentials
Non-essentials
Cable
Daily coffee / lunch
GroceriesMeal planCoupons (Flip)Grocery store
Home made meals
Know what you spend and whereWHAT WHERE
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3 Step plan to figuring out how much you need
1. How much will your spending be?
2. Sources of retirement income3. Making up the difference.
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We’d like your feedback, please
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We value your feedback. If there is anything else you would like to tell us,
please send comments with the name and date of your webinar to: