Tchavdar Elenkov, BA Econ, CFPInsurance and Financial Advisor

How much do you have – and how much do you need?

Agenda

Retirement Goals Choosing a retirement lifestyle Consider all your sources of income Consider all your expenses Determining how much you need Live the retirement you want

Retirement Goals

What are your goals for retirement?

Having enough to live and enjoy life

Leaving a legacy

R E T I R E M E N T G O A L S

R E T I R E M E N T G O A L S

Meet Ray and Sarah

Early 40’s Earning a good

income Saving for kids

education Hope to pay off

house in 5 years

R E T I R E M E N T G O A L S

Meet Ray and Sarah (cont.)

20 years until retirement

Contributing to RRSPs for 15 years

Want to enjoy retirement to the fullest

Choosing a retirement lifestyle

Did you know?

C H O O S I N G A R E T I R E M E N T L I F E S T Y L E

How you want to live = how much you will need

If you don’t have a plan no amount of money may be enough!

Choosing a retirement lifestyle

C H O O S I N G A R E T I R E M E N T L I F E S T Y L E

Most important factor in determining how much money you’ll need

Do you want to… Work part time? Pursue a hobby? Volunteer? Travel frequently?

What’s your retirement lifestyle?

C H O O S I N G A R E T I R E M E N T L I F E S T Y L E

Moderately 60–70% pre-retirement income

Comfortably 70–85% pre-retirement income

Well 85–100% pre-retirement income

Consider all your sources of income

How much will the government help?

S O U R C E S O F I N C O M E

Various different government sources of income

Amount received is based on your income

Who‘s eligible for Canada Pension Plan (CPP) benefits?

S O U R C E S O F I N C O M E

For those who: Have been in

paid employment

Have made at least one payment into the CPP plan

How CPP benefits work

S O U R C E S O F I N C O M E

Based on how much and how long you contributed

Designed to replace about 25% of the earnings paid into the plan

How much can you expect to receive?

S O U R C E S O F I N C O M E

You must apply to receive CPP benefits

Maximum CPP income at age 65 is $814.17 per month, or $9,770.04 per year

Who‘s eligible for Old age Security (OAS) benefits?

S O U R C E S O F I N C O M E

For those who: Are 65 or older,

whether you have held paid employment

Meet resident requirements

How OAS benefits work

S O U R C E S O F I N C O M E

Payments are: Taxable

Subject to clawbacks

How much can you expect to receive?

S O U R C E S O F I N C O M E

You must apply to receive OAS benefits

Maximum OAS benefit is $471.76 per month

Who‘s eligible for the Guaranteed Income Supplement (GIS)?

S O U R C E S O F I N C O M E

For those who: Reside in Canada Receive a basic,

full, or partial OAS pension and who have little or no other income

How GIS benefits work

S O U R C E S O F I N C O M E

Payments are: Based on your annual income Subject to reapplication each year Not subject to income tax Dependant on your receiving the OAS

pension

How much can you expect to receive?

S O U R C E S O F I N C O M E

Maximum GIS benefit is $560.69 per month for a single person and $365.21 for the spouse of a pensioner

Who‘s eligible for Spouse’s Allowance?

S O U R C E S O F I N C O M E

For those who: Are low-income earners between 60-64 if

still married Who have a spouse or common-law

partner who is entitled to receive OAS and GIS benefits

Who‘s eligible for Widow's Spouse’s Allowance?

S O U R C E S O F I N C O M E

For those who: Are low-income

earners between 60-64 years

Whose spouse or common-law partner is deceased

How Allowance benefits work

S O U R C E S O F I N C O M E

Payments are: Replaced by the

OAS after age 64

Consider all your expenses

S O U R C E S O F E X P E N S E S

The effects of inflation on income

“The most insidious force that can eat away at your savings is inflation”

Historically inflation has averaged 3% per year, so plan to have your income increase by about 3% per year

How inflation will effect Ray & Sarah

S O U R C E S O F E X P E N S E S

Other things that could take a bite out of your savings

S O U R C E S O F E X P E N S E S

Lack of company health benefits Retirement homes No more company expense account No more company stock options and

RRSP contribution Retirement leisure activities

Determining how much you need

H O W M U C H Y O U N E E D

Method 1 - Income Replacement Ratio Method

Percentage of working income you’ll need to maintain the same standard of living (60-100%)

H O W M U C H Y O U N E E D

Let’s look at an example

Total annual income $100,000 Pay $30,000 in taxes $5,000 put into RRSPs 70% income replacement ratio

Require $45,500 after tax

Method 2 - Tracking Cash Flow

More detailed examination of how much you spend and where you spend it

Extremely useful the closer you get to retirement

Categorize your expenses (home, financial, medical, etc.) so you understand where you spend your money

Able to more accurately adjust for expenses

H O W M U C H Y O U N E E D

Live the retirement you want

Things you can do now to ensure a happy retirement

L I V E T H E R E T I R E M E N T Y O U W A N T

Planning Take advantage

of RRSPs Consider other

sources Talk to your

advisor