getting ready to retire
Are you nearing retirement?
We're here to help!
Find out more about the various resources we’re offering our members in preparation for their retirement years. Below are useful tools you can utilize to help plan for a more secure future.
THREE PILLARS OF RETIREMENT INCOME
The Financial Consumer Agency of Canada defines Canada’s retirement income system as consisting of three separate but connected tiers or “pillars” that are intended to enable seniors to maintain a reasonable standard of living in retirement.
Pillar 1: Canada’s public pension system consists of Old Age Security (OAS) payments and the Guaranteed Income Supplement (GIS).
Pillar 2: Canada Pension Plan (CPP) consists of the contributory Canada Pension Plan and the Quebec Pension Plan in Quebec.
Pillar 3: Private retirement savings including registered pension plans (RPPs), and registered retirement savings plans (RRSPs) and other personal savings.
Creating a budget answers the question, “What are my sources of income and where is my income being spent?” Equally important is to regularly review your budget to ensure that there are no material changes to your income or expenses. Going into retirement, a budget becomes extremely important given that your income will normally be significantly lower than what it was when you were working.
Initially, you need to gather your financial records, including:
Registered plan information such as RSPs, TFSAs and pensions programs
Expected Old Age Security (OAS) payments (commencing no earlier than age 65)
Canada Pension Plan (CPP) payments
Post retirement employment
Any miscellaneous sources of regular income
Gathering your financial records will help you more clearly understand your starting position.
Calculating Your Net Worth
To create a benchmark for wealth, retirement, or financial fitness, you should start by determining your net worth. As with your budget, it is important to review your net worth statement to ensure you remain on track with your initiatives to increase assets, or reduce liabilities.
Diversification of Investments
Investing your money before and during retirement is not easy. Most people do not have the time, resources or interest to manage a portfolio of investments and they rely on companies like Open Access to do it for them. The underlying rule, and we are taught this from an early age, is “Don't put all your eggs in one basket”.
You have to prepare a budget and determine the income required to meet your needs, based on that budget. Once you have established your budget, the next question is “What is my time horizon?”. Until now, you have probably saved and invested in a diversified program consisting of equity and fixed income investments. When you are young and have, for instance, 25 to 30 years to ride the ups and downs in the market, it probably makes sense to hold more equity than fixed income. Once you get closer to retirement, you may want to be more conservative and have perhaps a greater weight in fixed income than in equities. You obviously want to protect as much as possible the assets you have accumulated while still having an opportunity for growth. How is this done?
The answer is to continue to have a measure of diversification. Each of us is different, with different needs, and there is no one solution to accomplish this task. At Open Access, through our Investor Profile, we are able to match an individual’s needs with a portfolio of suitable investments and risk exposure. It is important, especially if there is any substantial change in a person’s financial situation, that we have a current Investor Profile on file. It may be appropriate to adjust a person’s investment mix accordingly. Remember that the assets you choose to invest in will vary, depending mainly on your risk tolerance and investment time horizon.