Retirement Ready? Top Tips to Ensure a Smooth Transition

If you're getting close to retirement or you have just recently retired there are many financial details that need to be addressed. We have created a checklist that includes many considerations when you're approaching retirement.

Government benefits

·???????? To avoid delays, I'm sure your applications for Canada Pension Plan (CPP) benefits and Old Age Security (OAS) are filed at least a few months before you intend to start receiving benefits.

·???????? For an estimate of your CPP retirement benefit, contact Service Canada or access MyService Canada account.

·???????? Consider whether you're better off taking CPP as early as age 60 or deferring until as late as age 70 for a higher benefit.

·???????? Consider applying for CPP sharing with a lower-income spouse to reduce the family tax burden. CPP sharing is only available when your spouse is also eligible to collect CPP.

·???????? If you stayed at home caring for children during your working years, you may be eligible for the child-rearing drop-out provision, which may increase your CPP benefit.

·???????? At age 65, you may be eligible for OAS if you lived in Canada for at least 10 years. You could receive a higher amount of OAS by deferring after age 65 up to age 70.

·???????? If you've lived or worked in another country, you may be eligible for Social Security benefits from that country, from Canada or from both countries. To contact International Operations at Service Canada at 1 800-454-8731 For more information.

Employer pension and benefits

·???????? Determine what options you have regarding your employer pension. You may be able to receive the pension as an annuity or transfer the community value to a locked in plan.

·???????? Determine what post-retirement health benefits such as drug and dental are available if any through your employer. Keep in mind that the decision you make regarding your pension option may affect the level of post-retirement health benefits you receive.

·???????? Consider splitting up to 50% of your employer pension income with your spouse to balance your taxable incomes, which may reduce your tax bill. This may also allow each of you to take advantage of the $2,000 federal pension tax credit.

RRSPs, RRIFs, locked-in plans and TFSAs

·???????? You must convert your RSP and locked-in RSP/LIRA to an income vehicle such as a RRIF, LIF or LRIF before the end of the year in which you turn age 71.

·???????? At age 65, withdrawals from a RRIF, LIF or LRIF may entitle you to the $2000 federal pension tax credit. This tax credit is worth about $300.00 in annual federal tax savings.

·???????? If you have a RIF, LIF, LRIF, consider basing the minimum withdrawals on the younger spouse’s age to minimize tax on withdrawals and maximize tax deferral.

·???????? If you or your spouse is at least age 65, pension income splitting may help reduce your family tax bill. The higher-income earner may want to split up to 50% of their income from a RRIF, LIF or LRIF to equalize your incomes.

·???????? If you're turning age 71 this year and have earned income, consider making your next year's RSP contribution over contributing in December of this year. You have tax you can save is usually greater than the amount of penalty you'd pay for one month. The final RSP contribution is sometimes called the ‘forgotten RSP contribution.'

·???????? If you have a foreign retirement plan, and you intend to retire in Canada, you may be able to collapse the foreign pension plan into your RSP/RRIF without affecting your RRSP contribution room limit.

Estate planning

·???????? Ensure that your Will and power attorney are up to date.

·???????? If you or your spouse is at least age 65, consider speaking with a qualified legal advisor about whether setting up an alter ego or joint partner trust makes sense for your family.

·???????? Consider getting an insurance needs analysis done by a life licensed advisor for estate preservation to ensure your beneficiaries will have adequate income and assets to meet their needs after your death.

·???????? If you're a US person or you own U.S. assets, you may have a US state tax liability on death. Seek out strategies to minimize U.S. state tax exposure.

·???????? Take appropriate steps to minimize probate fees depending on your province. Some common strategies include making lifetime gifts and putting assets in living trusts.

General points

·???????? Update your financial plan to determine if you have enough assets and income to meet your expected expenses in retirement.

·???????? Consider consolidating your retirement and investment assets to reduce fees, simplify the administration of your investments and simplify your estate settlement.

·???????? If you're retired, you may be eligible for discounts related to your home or auto insurance premiums commercial contact your insurance company. The retiree discount may apply even if you're under age 65.

·???????? If you're concerned about rising healthcare costs, consider private health insurance to ensure you have adequate prescription drug and dental coverage in retirement. You may also want to speak to a qualified insurance representative benefits of critical illness insurance and long-term care insurance.

·???????? If you own your own business or plan on selling the business in the next few years, speak to your tax advisor about restructuring the ownership of the business to minimize tax on the future sale.

Conclusion

This checklist outlines many considerations as you enter the retirement phase of your life. Speak to your advisor for more information about any of the points highlighted in this checklist.

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