"Make the most of your RRSP room"/ "The odyssey of retirement planning"

Oct. 12, 2015 "Make the most of your RRSP room": I cut out this article by Audey Dakin in the Metro on Feb. 5, 2013:

When retirement time rolls around, your RRSP may be a significant source of your income.

You can make it even more significant by understanding — and taking full advantage of — its carry-forward potential.

Available RRSP contribution room may be carried forward to future years if the deduction is not claimed on the current year’s tax return. Add a few simple strategies and you can fill that carry-forward room in ways that will pay off for you now and later:

Make a contribution now, take part of the deduction now

Use a portion your contribution for this tax year to reduce your taxable income to the next marginal tax bracket.

Make a contribution now, take the deduction later

Make your maximum contribution to RRSP-eligible investments in the current tax year, but save the deduction for a later year when you know you’ll be in a higher tax bracket.

Take an RRSP loan to fill your carry-forward room

This strategy works when the interest rate is low enough and you repay the loan as quickly as possible, preferably in one year or two at the most. You can use your tax refund to repay part of the loan.

Know your age-related options

If you’re turning 71 this year and don’t have a spouse who is younger than 71, this is your last opportunity to make a contribution to your RRSP, although any undeducted contributions can be carried forward until the year of death.

If you’re 72, have carry-forward room, and a spouse 71 or younger, you can make a contribution to a spousal RRSP with your spouse as the annuitant.

Shelter the non-eligible portion of a severance/retiring allowance

You can do this by using some or all of the allowance to fill RRSP contribution carry-forward room.

Shelter a commuted pension paid out in cash

If you commute your pension and have received an excess — and taxable — amount in cash, you can use your RRSP carry-forward room to shelter at least a portion of the excess.

Decrease withholding tax

When an employer makes direct contributions to your RRSP, the employer need not apply withholding tax if the employee provides evidence they have sufficient contribution room. The employee’s most recent Notice of Assessment from the Canadian Revenue Agency CRA is considered sufficient evidence of contribution room.

Make the most of your RRSP and pay yourself forward in the most advantageous ways by talking over your life goals with your professional adviser.

http://www.lfpress.com/2013/01/20/managing-your-money-make-the-most-of-your-rrsp-room

Feb. 14, 2016 "The odyssey of retirement planning": I cut out this article by Michael Nairne in the National Post on Sept. 15, 2012.  It has this bright and colorful picture of like a board game:

Retirement! For many, the very word conjures up images of freedom — an escape from the demands and drudgery of work; a chance to travel and pursue much neglected avocations; and the time to really enjoy the company of family and friends.

Retirement is supposed to be an exciting new stage of adventure and self-determination. Unfortunately, the reality is both different and much more complex.

In two groundbreaking studies, Ameriprise Financial, a major U.S. financial planning  firm, found that retirement is not an end state but more of a series of separate and foreseeable stages through which people move.

 Understanding and planning for the challenges posed by this odyssey can improve the odds of having a successful journey. Here are the six stages:

Imagination

This stage occurs anywhere 6 to 15 years before the planned date of retirement. People begin to envision being retired even while they are busy with other priorities such a launching their children and paying down their mortgages.

Generally speaking, their outlook is optimistic and enthusiastic, even adventurous, as a picture of retirement begins to form in their minds.

Hesitation

In Ameriprise’s original study in 2005, this stage didn’t exist. However, their 2010 study found that a new stage of worry and hesitation emerges 3 to 5 years before retirement, a consequence of the market meltdown during the global credit crisis.

With retirement approaching, people begin to worry about their preparedness and many begin more detailed planning, often with a financial advisor. The question “will we have enough” becomes paramount.

Anticipation

Starting 2 years before retirement, anticipation begins to build. Having worked through the financial aspects of retirement, many feel they are ready even as they put some final savings away. People are most optimistic and hopeful at this stage as independence is right around the corner.

Realization

Immediately after retiring, most people feel liberated. With the work grind behind them, they can now focus on long-anticipated activities.

However, during this first year after retirement, the realization sinks in that, in forsaking employment, they have given up not only a paycheck but the daily structure and social interaction work involves. Many find that they aren’t as happy as they had envisioned; some feel let down.

Reorientation

During this phase, which occurs 2 to 15 years after retirement, individuals adapt to their new reality. How fast people adjust depends on a number of factors. In general, thoughtful planning and preparation for retirement makes for a much happier reorientation phase.

 For example, individuals who made specific plans to pursue meaningful hobbies tend to be happier than those who did not.

 For others, working part-time increases their happiness; others enjoy volunteering, traveling and spending more time with family. 

Overall, new routines and goals emerge at this stage and ultimately, more people are happier than in the previous stage. As a group, they particularly enjoy having control over their time.

Reconciliation

In this final phase starting 16 years after retirement, most people have accepted what retirement has brought them. However, many find that health issues have escalated and many are planning a move to a new home as physical issues mount. Although times of sadness become more prevalent as friends slip away, the vast majority of retirees in this stage are happy.

The dream of a liberating retirement is a classic example of what psychologists call “impact bias” — the tendency to overestimate the emotional impact of a future event. 

For hyper-busy and stressed professionals and executives, it is easy to overestimate the value of finally “kicking back and doing nothing.” In fact, a number of retirement studies show an inverse relationship between career status and retirement satisfaction — the more you thrive on work the less you might enjoy retirement.

Instead of focusing on the dream, individuals should take time to develop a detailed plan that encompasses both the financial elements of retirement as well as specific goals and activities that will fully engage them in daily living. 

Otherwise, they are likely to find that having enough money isn’t the only prerequisite for a satisfying retirement.

Michael Nairne CFP, RFP, CFA is the president of Tacita Capital Inc., a private family office and investment-counselling firm in Toronto. Visit tacitacapital.com.

The odyssey of retirement planning

				The odyssey of retirement planning Retirement isn't an end state but more of a series of stages. Understanding and planning for the challenges posed by each stage can help you find retirement success
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