No matter what you want to do in retirement, when you retire makes a big difference. Did you know that retiring at 60 can actually double the amount of assets you’ll need versus retiring at 65 or older? And if you work a few extra years after you’re eligible to retire, retirement can actually be more affordable? How your assets and pensions are structured can affect the amount you’ll need to save. Taxes play a big part in any retirement plan, as does whether you’re single or part of a couple. That doesn’t mean you can’t retire when you want. But you need to understand the nuances involved. Talk to a BlueRock Wealth advisor to look at the variables in your life and start planning your retirement now.
Richard and Sarah wanted to retire at the same time, but weren’t sure they could.
Richard was now 59 and Sarah was 54. The five-year age difference between them made them worry about their government pensions. Because Richard is older, he would be eligible for Old Age Security and Canada Pension Plan at age 65. But Sarah would have to take her pensions early so she could retire with him. An early pay out would mean reduced monthly payments.
They had carefully saved $500,000 in RRSPs and $150,000 in non-registered investments. But was it enough to live the lifestyle they imagined for themselves?
The BlueRock Wealth Solution
We suggested that Richard and Sarah could retire at the same time – when he was 67 and she was 62. But it would take careful planning.
Richard would work part-time for two years after he reached 65 and earn $25,000/year. He would defer his Old Age Security and his Canada Pension Plan for two years. Deferring the payment would mean he’d get a higher payout from these government programs later. They’d also take advantage of income equalization while Richard was earning part-time and split much of Sarah’s higher income with him. That would reduce their taxes.
When Sarah reached 62, she would retire and take her pensions. Richard would then stop working. They’d live off their non-registered investments first, which aren’t taxable up to a certain percentage.
Richard and Sarah were relieved to learn that they did have enough to retire at the same time, with no real loss of income.
What to Ask Your BlueRock Wealth Advisor
When is the best time to collect my Canada Pension Plan and Old Age Security?
How much do I need to take from my RRSP?
How much will investment returns affect my retirement?
How much will my life expectancy affect the amount I need to save?