tchavdar elenkov, ba econ, cfp insurance and financial advisor how much do you have – and how much...
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Tchavdar Elenkov, BA Econ, CFPInsurance and Financial Advisor
How much do you have – and how much do you need?
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Agenda
Retirement Goals Choosing a retirement lifestyle Consider all your sources of income Consider all your expenses Determining how much you need Live the retirement you want
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Retirement Goals
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What are your goals for retirement?
Having enough to live and enjoy life
Leaving a legacy
R E T I R E M E N T G O A L S
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R E T I R E M E N T G O A L S
Meet Ray and Sarah
Early 40’s Earning a good
income Saving for kids
education Hope to pay off
house in 5 years
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R E T I R E M E N T G O A L S
Meet Ray and Sarah (cont.)
20 years until retirement
Contributing to RRSPs for 15 years
Want to enjoy retirement to the fullest
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Choosing a retirement lifestyle
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Did you know?
C H O O S I N G A R E T I R E M E N T L I F E S T Y L E
How you want to live = how much you will need
If you don’t have a plan no amount of money may be enough!
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Choosing a retirement lifestyle
C H O O S I N G A R E T I R E M E N T L I F E S T Y L E
Most important factor in determining how much money you’ll need
Do you want to… Work part time? Pursue a hobby? Volunteer? Travel frequently?
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What’s your retirement lifestyle?
C H O O S I N G A R E T I R E M E N T L I F E S T Y L E
Moderately 60–70% pre-retirement income
Comfortably 70–85% pre-retirement income
Well 85–100% pre-retirement income
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Consider all your sources of income
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How much will the government help?
S O U R C E S O F I N C O M E
Various different government sources of income
Amount received is based on your income
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Who‘s eligible for Canada Pension Plan (CPP) benefits?
S O U R C E S O F I N C O M E
For those who: Have been in
paid employment
Have made at least one payment into the CPP plan
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How CPP benefits work
S O U R C E S O F I N C O M E
Based on how much and how long you contributed
Designed to replace about 25% of the earnings paid into the plan
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How much can you expect to receive?
S O U R C E S O F I N C O M E
You must apply to receive CPP benefits
Maximum CPP income at age 65 is $814.17 per month, or $9,770.04 per year
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Who‘s eligible for Old age Security (OAS) benefits?
S O U R C E S O F I N C O M E
For those who: Are 65 or older,
whether you have held paid employment
Meet resident requirements
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How OAS benefits work
S O U R C E S O F I N C O M E
Payments are: Taxable
Subject to clawbacks
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How much can you expect to receive?
S O U R C E S O F I N C O M E
You must apply to receive OAS benefits
Maximum OAS benefit is $471.76 per month
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Who‘s eligible for the Guaranteed Income Supplement (GIS)?
S O U R C E S O F I N C O M E
For those who: Reside in Canada Receive a basic,
full, or partial OAS pension and who have little or no other income
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How GIS benefits work
S O U R C E S O F I N C O M E
Payments are: Based on your annual income Subject to reapplication each year Not subject to income tax Dependant on your receiving the OAS
pension
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How much can you expect to receive?
S O U R C E S O F I N C O M E
Maximum GIS benefit is $560.69 per month for a single person and $365.21 for the spouse of a pensioner
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Who‘s eligible for Spouse’s Allowance?
S O U R C E S O F I N C O M E
For those who: Are low-income earners between 60-64 if
still married Who have a spouse or common-law
partner who is entitled to receive OAS and GIS benefits
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Who‘s eligible for Widow's Spouse’s Allowance?
S O U R C E S O F I N C O M E
For those who: Are low-income
earners between 60-64 years
Whose spouse or common-law partner is deceased
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How Allowance benefits work
S O U R C E S O F I N C O M E
Payments are: Replaced by the
OAS after age 64
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Consider all your expenses
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S O U R C E S O F E X P E N S E S
The effects of inflation on income
“The most insidious force that can eat away at your savings is inflation”
Historically inflation has averaged 3% per year, so plan to have your income increase by about 3% per year
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How inflation will effect Ray & Sarah
S O U R C E S O F E X P E N S E S
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Other things that could take a bite out of your savings
S O U R C E S O F E X P E N S E S
Lack of company health benefits Retirement homes No more company expense account No more company stock options and
RRSP contribution Retirement leisure activities
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Determining how much you need
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H O W M U C H Y O U N E E D
Method 1 - Income Replacement Ratio Method
Percentage of working income you’ll need to maintain the same standard of living (60-100%)
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H O W M U C H Y O U N E E D
Let’s look at an example
Total annual income $100,000 Pay $30,000 in taxes $5,000 put into RRSPs 70% income replacement ratio
Require $45,500 after tax
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Method 2 - Tracking Cash Flow
More detailed examination of how much you spend and where you spend it
Extremely useful the closer you get to retirement
Categorize your expenses (home, financial, medical, etc.) so you understand where you spend your money
Able to more accurately adjust for expenses
H O W M U C H Y O U N E E D
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Live the retirement you want
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Things you can do now to ensure a happy retirement
L I V E T H E R E T I R E M E N T Y O U W A N T
Planning Take advantage
of RRSPs Consider other
sources Talk to your
advisor
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