When it’s time to retire and you’re no longer earning a salary, it’s time to think about distributing your savings. How should we go about it to avoid errors and thereby promote the proper use of our lifetime savings? Martin Lalonde, portfolio manager and president of Rivmont Investments, offers some leads to follow.
Posted at 9:00 am
Budget
“It’s essential to make a list of current expenses to establish the amount of payments needed, Mr. Lalonde suggests from the start. People take it easy and say they need 60% or 70% of what they’re spending before retirement. We need to go beyond that. Especially if you always have something like this with you. When saying: “I promise to do something like that in retirement”. Unfortunately, most people don’t budget for it. »
Disburse to correct account
“It’s important to know whether it’s better to withdraw money from registered (RRSP), non-registered (TFSA) or cash accounts,” recalls Martin Lalonde. For example, in the given scenario, a person who wants to fully utilize his QPP pension starts by taking distributions from his RRSPs. But there is no universal recipe. Every case is unique. You have to get the right items from the right baskets at the right time. Hence the importance of doing business with a tax specialist, accountant or financial planner. »
Photo by Robert Skinner, Law Press Archives
Someone who doesn’t do their homework and educate themselves on the best way to distribute their assets may regret it.
Martin Lalonde, Portfolio Manager and President of Revmont Investments
Ongoing process and level of risk
According to Martin Lalonde, distribution is, for many, the end of many savings efforts. “The work is not done yet,” he said. There are still important decisions to be made. It is a continuous process. Especially if you don’t get pension fund benefit. For example, reducing the level of risk in your investments during retirement is not always beneficial. If someone accumulates savings for 30 to 60 years (so 30 years) and has a life expectancy of 85 years, that means the distribution period is almost as long as the accumulation period. A period of 25 to 30 years spans several economic cycles. If we reduce our risk level too much in retirement, income may fall. You need to keep growing your nest egg. »
Know your RRQ profile
“This is an important calculation to determine whether it is beneficial to delay until age 65 before withdrawing money from the Quebec pension plan. This allows you to benefit from a bonus in your pension. An expert (tax expert, accountant or financial planner) can help you see things more clearly and maximize retirement income. And you don’t have to be rich for that. »
Real Estate, Insurance and Life Annuity
“If a saver has the means, he can take up his payment and get an income building. This is interesting for people who want to sell their big house and move to a smaller one; They can occupy the tenancy where they are the owners. This allows you to be proactive while managing your own building. Also, it is possible to subscribe to some insurances, as the insurance requirements continue. Finally, as interest rates are high, life annuities can become attractive. When rates rise, it costs less to buy an annuity. »
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