How much do you have and how much

How much do you have – and how much do you need? Tchavdar Elenkov, BA Econ, CFP Insurance and Financial Advisor

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

Retirement Goals

RETIREMENT GOALS What are your goals for retirement? § Having enough to live and enjoy life § Leaving a legacy

RETIREMENT GOALS Meet Ray and Sarah § Early 40’s § Earning a good § § income Saving for kids education Hope to pay off house in 5 years

RETIREMENT GOALS Meet Ray and Sarah (cont. ) § 20 years until retirement § Contributing to RRSPs for 15 years § Want to enjoy retirement to the fullest

Choosing a retirement lifestyle

CHOOSING A RETIREMENT LIFESTYLE Did you know? § How you want to live = how much you will need § If you don’t have a plan no amount of money may be enough!

CHOOSING A RETIREMENT LIFESTYLE Choosing a retirement lifestyle § Most important factor in determining how much money you’ll need § Do you want to… § § Work part time? Pursue a hobby? Volunteer? Travel frequently?

CHOOSING A RETIREMENT LIFESTYLE What’s your retirement lifestyle? § Moderately 60– 70% preretirement income § Comfortably 70– 85% preretirement income § Well 85– 100% preretirement income

Consider all your sources of income

SOURCES OF INCOME How much will the government help? § Various different government sources of income § Amount received is based on your income

SOURCES OF INCOME Who‘s eligible for Canada Pension Plan (CPP) benefits? For those who: § Have been in paid employment § Have made at least one payment into the CPP plan

SOURCES OF INCOME How CPP benefits work § Based on how § much and how long you contributed Designed to replace about 25% of the earnings paid into the plan

SOURCES OF INCOME How much can you expect to receive? § You must apply § to receive CPP benefits Maximum CPP income at age 65 is $814. 17 per month, or $9, 770. 04 per year

SOURCES OF INCOME Who‘s eligible for Old age Security (OAS) benefits? For those who: § Are 65 or older, whether you have held paid employment § Meet resident requirements

SOURCES OF INCOME How OAS benefits work Payments are: § Taxable § Subject to clawbacks

SOURCES OF INCOME How much can you expect to receive? § You must apply to receive OAS benefits § Maximum OAS benefit is $471. 76 per month

SOURCES OF INCOME Who‘s eligible for the Guaranteed Income Supplement (GIS)? For those who: § Reside in Canada § Receive a basic, full, or partial OAS pension and who have little or no other income

SOURCES OF INCOME How GIS benefits work Payments are: § Based on your annual income § Subject to reapplication each year § Not subject to income tax § Dependant on your receiving the OAS pension

SOURCES OF INCOME How much can you expect to receive? § Maximum GIS benefit is $560. 69 per month for a single person and $365. 21 for the spouse of a pensioner

SOURCES OF INCOME Who‘s eligible for Spouse’s Allowance? 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

SOURCES OF INCOME Who‘s eligible for Widow's Spouse’s Allowance? For those who: § Are low-income earners between 60 -64 years § Whose spouse or common-law partner is deceased

SOURCES OF INCOME How Allowance benefits work Payments are: § Replaced by the OAS after age 64

Consider all your expenses

SOURCES OF EXPENSES 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

SOURCES OF EXPENSES How inflation will effect Ray & Sarah

SOURCES OF EXPENSES Other things that could take a bite out of your savings § § § Lack of company health benefits Retirement homes No more company expense account No more company stock options and RRSP contribution Retirement leisure activities

Determining how much you need

HOW MUCH YOU NEED Method 1 - Income Replacement Ratio Method § Percentage of working income you’ll need to maintain the same standard of living (60 -100%)

HOW MUCH YOU NEED 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

HOW MUCH YOU NEED 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

Live the retirement you want

LIVE THE RETIREMENT YOU WANT Things you can do now to ensure a happy retirement § Planning § Take advantage § § of RRSPs Consider other sources Talk to your advisor