Retirement Planning

How to Make the Most out of an Inheritance

Inheriting a significant estate can be a bittersweet experience. Typically, the passage of wealth comes with the passing of a loved one.

Consider this…

More than half of your income may be consumed by taxes. And if that weren’t enough, you then pay tax again on the money you invest.

Welcome to taxation in Canada.

Protecting the financial well being of your family can also help you achieve the retirement lifestyle you deserve

We generally think of RRSPs and Pensions when we think about retirement.  Many of us will rely on these types of plans along with government sponsored pensions, such as the Canada Pension Plan and Old Age Security, as our main sources of retirement income.

The Problem: Taxation

The biggest retirement income challenge with RRSPs, Pensions, Government Pensions and LIRAs (pensions transferred from a former employer) is that all of the income withdrawn from these types of registered plans has yet to be taxed.  As such, income received in a retiree’s hands is fully taxable.

When it comes to retirement, our expectations for our target retirement age are continuously reflecting the reality that:

A – We will live longer…so we’ll need more money to fund our retirement

B – We want to travel more…so we’ll need more money to fund our retirement

C – Our adult children will continue to depend on us financially…so we’ll need more money to fund our retirement

    Which type of goal planner are you:

A) The “do-nothing type”, because the alternative is too scary, i.e. reality

                      OR

B) The “over-analyzer”, to ensure you “get it right”, right down the last minute detail.

Either way, it’s crucial to understand the difference between a simple Wish and a true Goal.

Now that most Canadians and their advisers have gotten the message across about the rising power of tax-free savings accounts (TFSAs), some are beginning to question whether RRSPs are even relevant anymore.

However, there is no ‘one size fits all’ retirement plan.  Plans should vary depending on a number of factors including, your age, lifestyle, debts, etc.

The #1 Roadblock preventing many people from ever creating a successful retirement strategy is visualizing life without having to work.

Most struggle to visualize life after no longer needing to get up for work in order to feed the family, pay the mortgage, etc.

The result?  Frustration.

And, the anxiety that goes hand in hand with not knowing what lies ahead.

Planning for your ideal retirement requires an understanding of the five key risks that can threaten your retirement income:

1 - Longevity: the risk of outliving your savings.

2 - Inflation: the potential for rising consumer prices to erode your purchasing power.

3 - Asset Allocation: the problems that could result from choosing the wrong investment mix, i.e. improper allocation between equities, bonds and short-term securities for your retirement.

Envisioning your retirement takes careful thought and planning.

Be sure to consider the following for your retirement vision:

- Where do you plan to live?

- How will you stay connected to people that are important to you?

- How do you want to spend each day, from morning through night?