Golden plan­ning

Know your re­tire­ment in­come sources

The Guardian (Charlottetown) - - BUSINESS - Dick Young

Dick Young says plan for golden years.

Your monthly re­tire­ment in­come will be an ac­cu­mu­la­tion of ben­e­fits and pay­ments from var­i­ous sources - and to get the most out of them, while pay­ing the least amount of tax, you need to know what they are.

Source 1: Pub­lic In­come Pro­grams and Pen­sions - in other words, what the govern­ment will pay you in re­tire­ment

• Old Age Se­cu­rity (OAS) pro­vides a ba­sic monthly pen­sion ben­e­fit at age 65, which can also be de­ferred un­til age 70 to in­crease the pay­ments. Ben­e­fits are tax­able, ad­justed for in­fla­tion, and “clawed back” in in­creas­ing amounts as your in­di­vid­ual net in­come climbs above a thresh­old amount. In­di­vid­u­als with lower in­comes may also qual­ify for the Guar­an­teed In­come Sup­ple­ment (GIS).

• The Canada Pen­sion Plan/Québec Pen­sion Plan (CPP/QPP) pays a monthly pen­sion to peo­ple who have been em­ployed and con­trib­uted to CPP/QPP. Ben­e­fits are ap­prox­i­mately 25% of your av­er­age an­nual earn­ings dur­ing your work­ing life up to cer­tain lim­its. Ben­e­fits are in­dexed to in­fla­tion, are tax­able, and can start at a re­duced amount as early as age 60, or as late as age 70 at an in­creased amount.

Source 2: Em­ployer-spon­sored Pen­sion Plans - in other words, what your em­ployer pro­vides

• De­fined Ben­e­fit (DB) pen­sion plans pro­vide a spe­cific pen­sion amount paid to you for your life­time af­ter you re­tire. The amount of a DB pen­sion ben­e­fit is set ac­cord­ing to your age, length of ser­vice, and salary. It may or may not be in­dexed for in­fla­tion.

• De­fined Con­tri­bu­tion (DC) pen­sion plans are also known as money pur­chase plans and do not guar­an­tee the amount of your fu­ture ben­e­fits. DC re­tire­ment in­come de­pends on ac­cu­mu­lated con­tri­bu­tions and the in­vest­ment re­turns earned by th­ese con­tri­bu­tions.

Source 3: In­di­vid­ual Re­tire­ment Plans - in other words, what you will pro­vide

When you re­tire, in­vest­ments held in your Reg­is­tered Re­tire­ment Sav­ings Plan (RRSP) can be con­verted to in­come in three ways:

• A Reg­is­tered Re­tire­ment In­come Fund (RRIF) is like a RRSP in re­verse. In­stead of con­tribut­ing to it, you with­draw from it. A RRIF of­fers the flex­i­bil­ity of a wide range of in­vest­ment choices as well as your choice of the amount you wish to with­draw each month (sub­ject to an an­nual min­i­mum with­drawal based on the value of the in­vest­ments in your RRIF and age.)

• An An­nu­ity of­fers the sim­plic­ity of a guar­an­teed life­time in­come but can’t be in­creased to keep up with in­fla­tion or es­ca­lat­ing liv­ing costs.

• Cash - con­vert in­vest­ments in your RRSP to cash and you will be sub­ject to tax on the en­tire amount re­deemed. Not the most at­trac­tive op­tion in most cases.

To be sure you will have enough in­come to fund your re­tire­ment dreams, talk to your pro­fes­sional ad­vi­sor. This col­umn, writ­ten and pub­lished by In­vestors Group Fi­nan­cial Ser­vices Inc. (in Québec - a Fi­nan­cial Ser­vices Firm), and In­vestors Group Se­cu­ri­ties Inc. (in Québec,

a firm in Fi­nan­cial Plan­ning) presents gen­eral in­for­ma­tion only and is not a so­lic­i­ta­tion to buy or sell any in­vest­ments. Con­tact your own ad­vi­sor for spe­cific ad­vice about your cir­cum­stances. For more in­for­ma­tion on this topic please con­tact

your In­vestors Group Con­sul­tant.

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