I am 63 years old and single and live in Ontario. My house is worth $ 1,200,000 and my investments are worth $ 1,200,000 too. I have a small indexed pension of $ 17,000 and am expecting a full CPP. What do you think?
ON. Many years ago, part of my education in the insurance business was finding a person’s hot button and pressing it! Is there any chance the planner discarded ideas in a similar fashion to captivate you? There’s nothing wrong with that, because before a planner can help you, you need to be clear about something that needs to be resolved. (That said, I also think there was a big piece missing from your conversation that I’ll share with you later.)
Let’s have some fun going over the general advice for people in your situation. If you keep in mind that all of the points below are good advice, we’ll see how each can be used as a hook.
Delay of the CPP to 70 years
I am sure all of your friends are telling you to take Canada retirement plan (CPP) benefits ASAP. If a professional suggests postponing your CPP to age 70, increasing your benefit by 8.4% each year after age 65, and giving you a higher indexed pension for life, it should get your attention.
However, the reasons for the delay get even better: the initial CPP benefit amount is based on YMPE (Annual Maximum Pensionable Earnings) rather than CPI (general inflation rate). Last year the YMPE increased by about 5%That is, if you don’t earn CPP, your initial benefit will be based on an amount 5% more than the previous year’s amount. If you already collect CPP, you only increased 1% to reflect the change in the CPI.
Sell your high-cost mutual funds for low-cost ETFs
If paying fees really bothers you, a cheaper alternative is a good catch. There’s now a company out there trying to hit people’s hot button and build their business by announcing that you can retire 30% richer by lowering fees. Maybe, maybe not. Investment returns and planning services also play a role in money accumulation.
Identify which account to draw from first: RRIF, Unregistered, or TFSA
When you have accounts that are tax-free, partially tax-free, and 100% taxable, the question of where to draw first, like a very complicated conundrum. If someone comes and says they can make this easier, it can be a huge relief for you.
However, I’ve modeled this many times and often there is little difference which account you’re pulling from. Often the best approach is to be as tax efficient as possible each calendar year.