Last week, we introduced the three main considerations when creating a holistic retirement plan – lifestyle plan, after tax income sources and income tax and portfolio plan. In our last post, we focused on lifestyle plan – determining your goals and main priorities for retirement. Once this has been established, we calculate how much money you will actually have during retirement, versus how much you will need to meet your goals and lifestyle plan.
The next step is collecting the information we require to help you calculate your after tax income sources.
Fixed Income Sources
Prior to meeting, we ask that you list and evaluate your fixed retirement income sources. In Canada, this would generally include your:
- Canada Pension Plan income and your spouse’s CPP income
- Old Age Security (OAS) for you and your spouse
- Work pensions
- Annuities you plan to collect
- Additional income from working part-time during your retirement
- Income from any rental properties you may have
- One-time lump sum income sources such as life insurance proceeds, inheritances, the sale of any properties such as you home, cottage or vacation and investment properties
Retirement Expenses and Tax Owing
First, list and calculate your retirement expenses. This will include:
- Living expenses such as accommodations (rent or mortgage payments)
- Food and entertainment
Next, we can determine if you qualify for any tax credits or deductions, what you will be paying tax on and how much you will be paying.
At this point, you will have a few other important considerations:
- Going forward, will you require more insurance than you and your spouse have currently?
- How much money will you put into an emergency fund?
Once we calculate and analyze your total assets, tax owing and your projected after tax investment income, we can establish when you will be able to afford to retire, and will be prepared to move on to the final step of your holistic retirement plan – your income tax and portfolio plan.