Retirement Planning
As you get closer to your retirement goal, your vision will become clearer and more focused. Along the way, your retirement goal becomes your investment benchmark, guiding your investment decisions based on where you are in relation to your goal.
Calculate Your Retirement Costs
One of the more popular rules suggests that retirees will need just 70% to 80% of their pre-retirement income to maintain their standard of living. The major flaw with this rule is it doesn’t account for the true cost of aging. In calculating the cost of retirement, the equation has become more difficult due to the new reality of expanding lifespans which can also mean higher healthcare or assisted living costs. The cost of your retirement needs to factor realistic spending assumptions based on your goals and desired lifestyle with contingencies for healthcare costs and unexpected expenses.
Once you know the cost of your retirement you can more accurately calculate how much you will need at retirement, which can become your accumulation goal.
Tax-Diversification
For decades we have been told that the best way to accumulate capital for retirement is through tax deferred savings vehicles, such as an RRSP. Although it still makes sense for accumulating capital, it doesn’t take into account the tax consequences of income withdrawals and its impact on the total spendable income available in retirement. Retirement planning used to be almost entirely about capital accumulation; however, with the possibility of living 30 years or more in retirement, the emphasis is now on managing your income during retirement. If your only income source is an RRSP, your income will be taxed as ordinary income. With diversified income sources you may be able to minimize your taxes in retirement which will help make your income last longer.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2016 Advisor Websites.
