Valley First

Maximize Your Retirement Savings

Retirement dreams: Simple tips to help retirees maximize their savings
November 27, 2013

Penticton, B.C.—“Save early and save often” has long been the mantra of financial advisors everywhere. Despite this, only 26 per cent of Canadians recently surveyed believed they are saving enough to meet their future retirement needs.

As Financial Literacy Month wraps up for another year, Darren Bitzer, an investment specialist at Valley First offers simple tips on how people can maximize their savings as they head towards retirement.

“Whenever I meet with clients, the starting point for any financial planning or investment conversation is income tax and inflation,” says Bitzer. “Understanding how these factors work together is an important part of any retirement plan.”

Understanding income, taxes and inflation

To make better investment choices, Canadians need to understand how different sources of income are taxed, says Bitzer.

“Interest income is fully taxable, while dividend and capital gains are taxed at a much lower rate. That difference can have a significant impact on your income and other benefits,” says Bitzer. “With inflation overall reported as two per cent but primary items such as housing, food, fuel and home energy costs increasing by four percent a year for the past decade, people need to focus on the cost of living in retirement and ensure their investments are outpacing inflation.”

Consider alternative options

With the introduction of tax-free savings accounts and increased ease of income splitting in retirement, another strategy to maximize retirement income us to consider converting RRSPs to registered retirement income funds (RRIFs) earlier than the required age of 71.

“It may be better to withdraw from your RRSPs or RRIFs while you have some control over the tax implications,” says Bitzer. “Simple strategies like this can help you defer taking your Canadian Pension Plan early, thereby reducing the early withdrawal penalty and potentially reduce the taxable impact of your RRIF on future income.”

Be prepared earlier than expected

A recent poll found the majority of Canadians aged 50-plus reported they had less than a one year notice before their retirement date. As your retirement date may not be something you can control, Bitzer stresses the importance of early planning even more.

“Obviously, the earlier you begin to plan the better,” says Bitzer. “Not only will you be better position to outpace inflation, but you’ll have a better sense of the income you’ll need to sustain your retirement lifestyle.”

Making the move

“We often see people move, or downsize to smaller communities when they retire,” says Bitzer. “However, you need to make sure wherever you choose to live you’re considering the financial implications. Some provinces require residents to pay health premiums while others don’t and throughout all provinces, there’s a wide range of provincial tax rates, depending on income levels, so these lifestyle factors certainly need to be considered.

“Retirees and seniors are often the most vulnerable financially, having limited time to recover from financial mistakes and breaking old biases to see the realities of today’s environment,” says Bitzer. “Ideally, the planning process should start early with a trusted advisor to help people make more informed decisions and help them navigate towards their goals.”

About Valley First

Valley First is a division of First West Credit Union, B.C.'s third-largest credit union, which has 40 branches and 28 insurance offices throughout the Lower Mainland, Fraser Valley, Kitimat and Okanagan, Similkameen and Thompson valleys. Led by Launi Skinner, First West has $7.1 billion in assets under administration, more than 171,000 members and close to 1,300 employees.

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