Twenty-Five Years of Financial Insights (Part 12: Drawing Income From Your Portfolio)

laptop-charts

As we approach the finish line on our 2016-2017 series of articles inspired by 25 years of financial insights, I am reminded of another milestone in most people’s lives: The year they decide to retire. At that pivotal time, your daily routine isn’t the only thing that undergoes a major change. After a lifetime of investing toward retirement, it’s now time to start withdrawing for it. Even if you’re well-funded for the event, that’s a mighty big shift, in mind and matter alike.

Before, you spent decades focusing on portfolio management details such as how much risk and expected return you wanted to pursue over time, and how best to manage market risks through global diversification. These remain important considerations in retirement as well. But new questions begin to clamor for your attention. Questions like:

  1. Should I start my Canada Pension Plan (CPP) at age 60 or wait? (Ditto for my spouse.)
  2. When’s the best time to convert my Registered Retirement Savings Plan (RRSP) to a Registered Retirement Income Fund (RRIF)?
  3. How should we manage our spending – for household expenses and big-ticket items alike?
  4. What should we do to minimize taxes and safeguard ourselves against inflation, market downturns or other unexpected events?

Fortunately, while the financial landscape and the questions it generates may at first seem unfamiliar in retirement, you can navigate much of the new terrain using many of the same financial planning strategies that apply throughout your life.

The most important among those familiar features is sustaining your well-developed financial plan. Or creating one, if you’ve not yet done so (advisedly, with a professional planner to assist). Here is my list of “debits” and “credits” to consider before you touch your first dollar of retirement income.

Retirement “Debits”

  • How much will you budget for routine expenses – food, clothing, shelter, etc.?
  • How much will you budget for travel and leisure?
  • What other big-ticket items are expected – cars, home renovations, philanthropy, gifting, etc.?
  • Do you have family dependents or other commitments to fund?
  • What will your taxes be?

Retirement “Credits”

  • Will your tax rates decrease as you age?
  • What types of financial accounts do you have at your disposal?
    One of my biggest recommendations to most clients is to fund as many varied accounts as possible for added flexibility in retirement, and to build up a nonregistered portfolio at least a decade or more out from retirement (earlier if possible). This gives you the ability to withdraw tax-free or tax-minimized lump sums or monthly income in retirement.
  • What pensions do you have? Are they indexed to inflation? Do they allow flexibility, such as starting early or delaying withdrawals?
  • Will you or your spouse work part-time for supplemental income, and how might that affect the rest of your retirement planning?
  • Do you plan to downsize your home and, if so, when? How much money will that likely free up for other purposes? (As I covered here, it’s important to be realistic on that!)

Retirement Realities

There’s one last consideration I advise families to factor into their financial planning for retirement: Based on your family history and your own health, what is your approximate life expectancy?

You usually want to financially plan for what ironically qualifies as a “worst-case scenario” of living beyond your expected time here on earth. You also want to be mindful that, if there are two of you, you’ve got an even greater chance at least one of you will beat the proverbial odds. That said, as I covered in “Beatrice’s Lesson 9,” life isn’t about living like a pauper if your circumstances don’t demand it. To all things, balance.

Before I wrap, I’d like to circle back to the possibilities afforded you by having a number of funded accounts to choose from as you swing into retirement. These might include your RRSP or RRIF, open accounts, Tax-Free Savings Accounts (TFSAs), pensions, CPP, and Old Age Security (OAS).

What comes first, how much and how often? Before I “retire” my series of 25-year reflections, I’ll be covering that too.

Related articles

All-In on U.S. Stocks – Wise Move or Risky Strategy?

In the latest episode of “Think Smart with TMFG,” Senior Financial Advisors Rob McClelland and Mike Connon from Assante Capital Management delve deep into a daring investment strategy: putting 100% of your assets into U.S. stocks. Highlighting an int…

Read More →

2023’s Most Valuable Companies

In this episode of Think Smart with TMFG, host Rob McClelland and Mike Connon, Senior Financial Advisors of Assante Capital Management Ltd., delve into the world’s most valuable companies in 2023. They offer insights into the various sectors these co…

Read More →
Financial Planning  Tightwads and Spendthrifts Which Way Works Better? Podcasts

Financial Planning Tightwads and Spendthrifts Which Way Works Better?

Today Financial Advisors Rob McClelland and Mike Connon discuss financial planning and spending in relationships. This insightful episode of Think Smart with TMFG, delves into the financial dynamics in relationships, pitting ‘tightwads’ against ‘spen…

Read More →

Financial Planning Advice from Canada's Top Financial Advisors

Sign Up To Receive Email Updates On The Financial Industry And Complimentary Workshops.

By providing your e-mail address you provide The McClelland Financial Group of Assante Capital Management Ltd. with your express consent to send you electronic communications. If you choose to discontinue receiving e-mails, you may withdraw consent by contacting [email protected].

FREE RESOURCE

Get actionable financial insights from the Top financial planners in Toronto.

Toronto's Top Financial Advisors
Copyright Assante Wealth Management. © 2022

Disclaimer | Assante advisory services are offered through Assante Capital Management Ltd. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. The services described may not be applicable or available with respect to all clients. Services and products may be provided by an Assante advisor or through affiliated or non-affiliated third parties. Some services and products may not be available through all Assante advisors. Services may change without notice. Insurance products and services are provided through Assante Estate and Insurance Services Inc.

We have a team of advisors each specializing in varying portfolio sizes. Please let us know the approx. amount of your investable assets to help us to direct you to the advisor that is best suited to you.