Aug 5, 2016
Pattie Lovett Reid: A checklist for those who are retiring soon
There is a lot of talk about saving for retirement and planning for retirement – but very little on what to do if you are on the cusp of retirement.
This is a big deal. There are more Canadians aged 65 and older than under 14, and approximately 1,000 Canadians turn 65 every day. Statistics Canada previously reported that about 250,000 Canadians are retiring every year, and that number is projected to grow to about 400,000 within a few years.
If you are on the cusp of retirement, you might be interested in a website just launched by the Canadian Life and Health Insurance Association (CLHIA) called “Retiring Soon.”
I reached out to Leslie Byrns, vice president of distribution and pensions with CLHIA, to find out what near-retirees should put on their checklist.
Q: What do near-retirees need to be thinking about as they approach retirement in six to 12 months?
A: As people approach retirement, there are steps they need to take to gather information and take action s so that they can transition into retirement as smoothly as possible. A lot of those revolve around financial matters. For instance, what kind of benefits will they be receiving from their workplace? How and when should they apply for CPP or QPP benefits? What type of income are they going to take from their RRSP and other assets? But there are other areas to consider as well. How do they want to spend their retirement? Will they travel? Will they continue to stay in their home? Will they volunteer? And what about wills and living wills? Have those been updated? Have they organized their family and personal documents so that someone else could step in if they died or became incapacitated?
Q: What do they need to know to get the most from their workplace as they transition towards retirement?
A: What kind of retirement plan do they have through their workplace, and what decisions will they have to make about it? If it's a Defined Benefit pension plan, they will receive a guaranteed income for life, but there may be some optional features they need to decide about, such as indexing it to inflation. If they have a Defined Contribution pension plan or Group Retirement Savings Plan, they will have accumulated assets and will have to decide how to turn those into retirement income, e.g. a Registered Retirement Income Fund or an annuity or some combination of both. In all cases, there will be paperwork to do and decisions to make. Find out if any health insurance benefits will continue in retirement and what limits apply to them. Also, employers often provide planning seminars or one-on-one sessions for those approaching retirement. Take advantage of them if they're available.
Q: What key points should be in the checklist of near-retirees?
A: First, have a good understanding of what your sources of income will be in retirement (government benefits, workplace benefits, income from RRSPs and other assets, part-time income, etc.) and take the necessary steps to start that income. That means applying for CPP/QPP, working with your employer to apply for and initiate your pension benefits, talking to a financial advisor about turning your RRSP and other assets into income. Second, understand what your expenses will be in retirement. Consider your needs and wants, and how your spending habits may change throughout your retirement. Third, consider the non-financial aspects of retirement. How do you want to spend your time? Are there steps you could take to get more involved in hobbies, activities, volunteering, educational courses, etc.? Fourth, have you got your "house in order"? Have you reviewed your will and living will? Are all your documents organized in a way that someone else could step into your shoes if need be?
Q: What tools are available for near-retirees to help them prepare?
A: The "Retiring Soon?" site has collected key resources to assist with many of these questions. There are links to government resources to help with applying for CPP/QPP, and understanding provincial health benefits and other resources for seniors according to each province and territory. There are links to retirement income and budget calculators. There is information on the rules on converting registered assets to income, and the role that annuities could play. And, quite aside from the information on the site, financial advisors can play a big role in helping near-retirees. They can work with them to understand their particular situation and propose appropriate solutions. We expect that the questions and information available on the site will be useful to both advisors and consumers in making the necessary decisions for a smooth transition to retirement.
As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV
