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What To Do Right Before Retiring In Canada

Retirement is a significant milestone in anyone’s life. It’s a time to relax, enjoy your hard-earned savings, and explore new hobbies. But before you can kick back and enjoy your golden years, there are a few crucial steps you need to take. If you’re planning on retiring in Canada, here’s a handy guide on what to do right before you retire.

1. Review Your Defined Benefit Pension Plan

Indeed, the defined benefit pension plan, often regarded as a golden ticket to a comfortable retirement, is a fascinating subject worth delving deeper into. It’s a bedrock of financial security that has become increasingly rare in today’s volatile economic climate.

The beauty of it lies in its simplicity: a predictable, guaranteed pension payment for life based on your earnings and years of service.

Now, let’s talk numbers. One of the most critical aspects of your defined benefit pension plan is understanding how your expected monthly income is calculated. It’s not just about the years you’ve clocked in at the office. The formula typically involves your final average salary, a benefit factor (which can be a percentage or a fixed amount), and your length of service. For example, 30 years of service multiplied by 2% would be 60%. In the second step, this coefficient is multiplied by the average salary earned during the best five years. This implies that an average salary of $80,000 multiplied by 60% results in a lifetime pension benefit of $48,000 annually! That’s no small change, and understanding this calculation is crucial.

But what about those tantalizing lump sum payouts? It’s like winning the lottery, right? Well, not always. While the thought of getting a large sum of money at once may sound appealing, it’s essential to weigh this decision carefully. A lump sum could push you into a higher tax bracket for the year, and without careful planning, the money could run out sooner than expected. Remember, an annuity from a defined benefit plan provides a steady income stream that lasts as long as you do.

It is also essential to pay attention to the fine print of your plan – especially when it comes to inflation protection. Some plans offer a cost-of-living adjustment (COLA) which increases the pension payout to keep up with inflation. This feature can be a lifesaver, protecting your purchasing power from being eroded by rising prices over time.

Action Items:

  • Understand the terms of your plan
  • Calculate your expected monthly income
  • Consider any potential lump sum payouts

Remember, your defined benefit pension plan is a significant part of your retirement income. Make sure you understand how it works and what you can expect to receive.

Johnson Controls Canada Pension Plan Wind-up

2. Evaluate Your Savings and Investments

Next, take some time to thoroughly evaluate your savings and investments. These will supplement your pension and help you maintain your lifestyle during retirement.

Start by closely examining your RRSPs and TFSAs, as these accounts can have a significant impact on your financial stability.

Next, carefully review your investment portfolio to determine if any adjustments need to be made. It’s imperative to have a well-diversified portfolio in order to minimize risk and maximize potential returns. If you find yourself unsure or uncertain about the current state of your investments, it is wise to seek the guidance of a professional financial advisor who can provide valuable insights and expert advice tailored specifically to your unique situation.

Action Items:

  • Check your RRSPs and TFSAs
  • Review your investment portfolio
  • Consider any real estate or other assets

It’s important to have a diversified portfolio to minimize risk and maximize returns. If you’re unsure about your investments, consider consulting with a financial advisor.

waving Canada flag

3. Plan Your Healthcare

It’s a common misconception that healthcare in Canada is entirely free. Canada has a great healthcare system, and we’re fortunate to live in a country that covers a lot of the essentials, but it isn’t a catch-all solution.

Each province and territory in Canada has its own health insurance plan, and while they all cover the basics – think doctor’s visits, emergency medical treatment, and surgery – the specifics can vary quite a bit. This regional variation can be confusing and can lead to unexpected costs if you’re not thoroughly familiar with the ins and outs of your particular province’s plan.

For example, prescription medications, dental care, vision care, and certain types of therapy are not universally covered. This means that Canadians must either pay these costs out of pocket or purchase private insurance. It’s also worth noting that while emergency medical treatment is covered, things like ambulance services often aren’t – another potential surprise for those not versed in the nuances of their provincial healthcare plan.

The costs of prescription drugs, physiotherapy, dental care, and vision care can add up quickly in retirement and they can pose a significant financial burden if not anticipated and planned for.

As we age past 65, the likelihood of needing long-term care or home care services increases and coverage is often not comprehensive. For instance, the cost of a private room in a long-term care facility or specialized services like physiotherapy or occupational therapy at home may fall entirely on your shoulders.

So what does this mean for you before retirement? It’s prudent to have an extra cushion for healthcare costs. Consider insurance solutions like private health insurance or long-term care insurance. Planning ahead for these potential expenses can offer peace of mind and financial security in retirement. After all, your golden years should be enjoyed, not spent worrying about unexpected healthcare costs.

Action Items:

  • Review your provincial health coverage
  • Consider purchasing additional health insurance
  • Plan for potential long-term care needs

Remember, it’s better to be prepared and not need it than to need it and not be prepared.

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4. Consider Your Lifestyle

Retirement is a time to enjoy life! It’s the time to finally indulge in activities that you’ve always loved but never had the time for, to explore the world without the constant pressure of emails and deadlines, and perhaps even give back to society in meaningful ways. It’s a beautiful chapter, one that should be planned thoughtfully to ensure that it’s not just fulfilling but also exciting.

Travel, for instance, is often at the top of the list for many retirees. It’s no longer about rushed weekend getaways or the standard tourist trail. It’s about immersing yourself in different cultures, tasting exotic cuisines, learning a new language, or simply soaking in the beauty of a foreign landscape. It’s about setting foot on every continent, sailing across oceans, or even going on a RV adventure across the country. The world is your playground, and retirement is your ticket to explore it at leisure.

But travel need not be the only thing on your retirement agenda. This is also the perfect time to dive into hobbies and activities that bring you joy. From gardening to painting, from golfing to fishing, from cooking to photography – the possibilities are endless. You could even turn these hobbies into social activities by joining clubs or groups where you can meet other enthusiasts. You could take up a new hobby that challenges you intellectually, like chess or pottery. Or you could revisit childhood passions that got lost in the hustle and bustle of adulthood.

Volunteering or part-time work in retirement isn’t just about staying busy; it’s about staying engaged and feeling valued. You’ve accumulated a lifetime of skills and experiences – why not use them to make a difference? Whether it’s mentoring young professionals in your field, teaching English to immigrants, helping out at a local shelter, or working part-time at your favorite bookstore – there’s a sense of satisfaction that comes from contributing to society post-retirement.

Action Items:

  1. Travel plans
  2. Hobbies and activities
  3. Volunteering or part-time work

Whatever your plans, make sure you budget for them. You don’t want to run out of money halfway through your retirement.

5. Consult With a Certified Financial Planner

Finally, consider consulting with a certified financial planner who can help you navigate the complexities of retirement planning and ensure you’re on the right track.

Financial planners possess the knowledge and skills to guide you through the intricate process of retirement planning, thus ensuring that you remain on the right path.

They can help you with:

  • Your current financial plan
  • Reviewing your pension statement
  • Deliberating on your goals for retirement
  • Managing your investments
  • Estate planning
  • And so much more!

This expert advice could make the difference between a comfortable and stress-free retirement and one filled with financial worries. By aligning with a financial advisor, you’re not just planning for retirement, but crafting a secure future where you can fulfill your dreams without financial constraints.

So, don’t delay. Step into the world of proactive retirement planning and embrace a future that’s as bright as your aspirations!

Action Items:

  • Review your financial plan
  • Discuss your retirement goals
  • Get advice on managing your investments

Take The Next Steps

Sure, retirement planning may seem daunting, but it doesn’t have to be. You know what they say – the journey of a thousand miles begins with a single step. The first stride towards a comfortable retirement is, indeed, setting attainable goals. It’s a perfect blend of aspiration and feasibility. Are you looking forward to quiet evenings with a book, or maybe you plan to travel around the world? Or perhaps volunteering at the local community center is more up your alley? Depending on your preferences, your financial needs could vary significantly, and these should be factored into your retirement goals.

Once these goals are in place, it gives you a clear roadmap to navigate your financial journey.

Book a call today with the team at PensionSolutionsCanada.com

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