From the careers we choose to the homes we buy, what's right for someone else, isn't necessarily right for you.
The same is true for our finances. We hear about the benefits of TFSAs and RRSPs or about when to begin taking our CPP, however it's important to consider the whole picture, as it relates to your unique situation.
Choosing to start CPP at age 60 might be best for someone with known health challenges, while those who work through their 60s and have longevity in their genes might be better off making a different choice.
"Talking with our friends or families about these scenarios is a good thing – it helps people learn about various options they may not have known about," explains Dave Lee, Senior Wealth Advisor with Scotia Wealth Management in White Rock. "However, a decision that works for your neighbour or brother-in-law may not be in your best interests if their circumstances don’t perfectly match yours. Their choice might not even be ideal for them."
Dave highlights 8 choices that should be tailored to you:
- Canada Pension Plan or Old Age Security – Other pensions or investments, whether you intend to work part-time in retirement, your health or your family's longevity – all can factor into the optimal time to start OAS and CPP. While starting CPP as early as age 60 lets you access funds earlier, you'll receive a much lower monthly amount than if you wait until 65 or 70.
- Maximize income and minimize taxes – Optimizing income and taxes requires numerous considerations and often requires a personalized strategy that gets implemented over the span of many years. How you manage different assets or investments can help reduce your tax bill ... or generate a larger one. For example, if you sell an investment or vacation property, the capital gains could raise your income significantly that year and it might be in your best interest to take a smaller withdrawal from your RRIF that year.
- How much you can safely spend – In retirement this is not always the same as your current income stream. Often we’ll factor in a super-sized travel budget for five to ten years that would be unsustainable if continued for thirty years. But your plan also needs to account for the potential that you might have expensive health care needs later on.
- Gifts to children or charity – Today's housing costs have many parents wanting to gift part of their children's inheritance early for a home downpayment; others want to see the impact of a charitable gift in their lifetime. How much can you give now while maintaining your desired long-term income and lifestyle?
- Deciding what account type to draw from – Your age, investment income, pensions, portfolio size, tax brackets and OAS claw back threshold all need to be considered.
- Second or third marriage considerations – Past experiences such as having previously undergone a division of marital assets, as well as having children from previous relationships affects the way people look at their finances and adds additional factors to consider.
- Caring for a family member with disabilities – The degree to which a child or grandchild may need specialized care and attention after you have passed may impact the thinking and planning that needs to be done to ensure the best long term outcome.
- Whether trusts are worthwhile – Depending on your wealth and family scenario you might consider any of a number of different types of trusts for your assets. However, it's important to weigh the benefits against the added costs and complexities including the initial setup, and ongoing additional tax filings and administration.
For guidance on how to ensure your financial decisions are tailored to your unique needs, please reach out by phone or email. I’d be happy to have a conversation that helps you gain clarity and move forward.
Dave Lee CIM, CFP, FCSI is a Senior Wealth Advisor with Scotia Wealth Management in White Rock. He can be reached at dave.lee@scotiawealth.com or 604-535-4743.
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