Let’s talk about retirement planning if you live in or near Hamilton, Ontario. Depending on the financial expert you ask, you’ll get many different viewpoints and advice on what age you should retire at, and the strategy you should take when crafting your retirement plan.
In the end, retirement planning is simply about making sure that you secure the finances you need to meet your life goals and future expenses when you retire.
Retirement isn’t how it used to be when our parents retired. The workforce has changed, lifestyles have changed, and many other factors need to be taken into account for Canadians retiring soon:
- Companies and retirement plans have changed. It used to be that the company you worked for would be the one place you worked for your entire career. Pension funds were robust and well-funded. Today, workers move between companies and bring their pensions with them. Contract labour is on the rise, some without pension options. Companies go bankrupt or have massive layoffs, making them untrustworthy to keep your pension with your company. Pension funds have changed.
- Hamilton companies are offering buyouts. Today, more companies are offering buyout offers to their senior employees to encourage an earlier retirement, and allow them to downsize or save on wage cost.
- Greater life expectancy of 83 years. Our average life expectancy continues to rise. You can now expect to be living longer into retirement, some studies showing you’ll be living till you’re at least 83 years old. This means your retirement period could last 20 to 25+ years and the expectation that you can get away with planning for a shorter retirement window is no longer realistic.
- Retirement aspirations and goals have changed. Canadian retirees are choosing not to downsize or move into retirement communities. Instead, they are preferring to stay in their homes and live active lifestyles. This leads to requiring a higher retirement income level to maintain that active lifestyle.
- Inflation and cost of living continues to climb. Inflation has a big impact on your retirement now more than ever. Your cost of living has gone up exponentially, which means you’ll need more retirement funds to keep paying for your everyday expenses.
Taxes on your Hamilton defined-benefit company pension withdrawal
One thing that hasn’t changed in a long time in Canada, are the taxes surrounding your pension payout. When you take your pension out as a lump sum, there is a hefty tax hair cut and a significant amount will be immediately taxed, typically hundreds of thousands of dollars.
This is primarily because of outdated Canadian legislation from 1990.
Why is this bad? If you are terminated by your employer and the company you’ve been working at for many years abandons you, you likely don’t want to leave your pension with that company and may want to take the cash to set up your own investment for your retirement. This outdated tax legislation penalizes you for doing that.
We’ve started a petition online to help change this. Sign it here.
How old should you be to start planning for retirement?
As soon as you start working in Hamilton, Ontario. Putting even a little bit aside each month can compound quickly over time and steadily build up your pool of retirement funds.
Check out our Retirement Calculators to see how much you should be putting away to reach your retirement goals, as well as see how fast your funds grow and what age you can retire comfortably at.
At what age should I retire at?
A common question that is asked is… “At what age should I retire given my present retirement fund and future, planned investments?”
Luckily for you, we’ve put together a Retirement Age Calculator to help you make that decision easier!
Our calculator will help you know your Projected Retirement Age, the Number of Contributions, and final value of your retirement fund at that specific age.
Types of Retirement/Pension Plans
- Company pension plans: Some companies offer a pension plan. Always make the maximum contributions, especially if your employer matches you dollar for dollar on your contribution amount. Know whether your plan is a Defined-Contribution Plan or Defined-Benefit Pension Plan, and understand the differences between the two.
- Registered Retirement Savings Plan (RRSP): With an RRSP, the government gives you a RRSP contribution limit every year. You’ll want to max out your RRSP contributions each year because it helps to lower your taxable income.
- Tax-Free Savings Account (TFSA): A TFSA is a financial account that you can use for investments and not have to worry about having those funds taxed when you withdraw them. Your savings to grow tax-free! However, there is a limit each year on how much money you are allowed to put into your TSFA.
- Investment accounts: These are taxable and include things like stocks, bonds, mutual funds, GICs, etc. If you’re putting your retirement funds into an investment account, just be sure you understand the risk level because market fluctuations can have a big impact on your funds.
Talk To A Financial Planner in Hamilton, Ontario
Planning for your retirement requires a lot of critical decisions.
Let us analyze your multiple income streams in retirement. We’ll make sure to minimize your income tax.
Retirement planning is about budget and taxes. You address your spending. We address tax minimization.
Get the help of an expert financial planner on your side. Get in touch with an Hamilton Financial Planner from Pension Solutions Canada or call us at 1-888-554-6661 to book a free consultation. Our services are at no cost to you.
Our Nearest Office:
155 King Street West