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Retirement Missteps: Costly Errors and How to Avoid Them

Not modifying lifestyle and expenses

Failing to adjust your expenses to reflect your new reality can wreak havoc on your retirement. After many years of working it can be hard to adjust expenses to your new income. This might involve things like less dining out, reducing the amount of vehicles you own, downsizing the home you live in as well as many other possible changes. More than ever you will benefit with a new realistic budget to keep you on track. A Financial Advisor specializing in retirement income planning is best suited to assist you with this.

Failing to adjust your investment portfolio to meet your new needs

Up until retirement your investment were targeting growth to get you to retirement. Now that you are retired the investments need to reflect your new requirement of predictable income to last throughout your whole retirement. An experienced Financial Planner can provide you with retirement income confidence while protecting your nest egg.

Applying for CPP/OAs too early or too late

Just because you can select to receive CPP or OAS at age 65 does not mean that age is right for you. If your income has really dropped off the last few years you might be better to start CPP as early as age 60. Alternatively, if you are still working you might be very well served to delay that decision up to age 70. The benefits of this strategy includes a significantly higher monthly income and you would avoid the OAS claw back if it applied in your situation. A Registered Retirement Consultant that specializes in these situations would be a perfect fit. Once these decisions are made they remain for your lifetime so it is critical to get it right for your specific situation. Delaying OAS from 65 to 70 results in a 36% increase. Delaying CPP from 65 to 70 results in a 42% increase. And both of these pensions are indexed for life. 

Spending too much early / depleting your RRIF too soon

Retirees sometimes think the amount of their retirement savings looks pretty large, but they underestimate that money will need to last a very long time. While the urge to spend can be incredible, running short in later years could prove to be a disaster. A properly structured conservative portfolio designed to secure your wealth and protect your income for the rest of your life is the key to a successful retirement.

Remember that withdrawing too much from your RRIF means the money will likely run out before you die. The longer you live the worse this mistake will feel. Having multiple retirement accounts may sound like a good idea but they are taxed differently which leads to tax inefficiency. This is where a Retirement Income Specialist can help.

Supporting adult dependent children

Family can be difficult to refuse, but these are your retirement savings that have to last your lifetime. Your income throughout your whole retirement is based on their value. When they are gone they cannot be replaced. So if you redeem these assets you will pay tax (usually) at a higher rate than you would pay otherwise and you would reduce your income every year for the rest of your life. Should anything be left when you pass away the proceeds would go your beneficiary. So by giving the money to your kids in retirement you will reduce their inheritance too. Your children will likely be better equipped to recover from financial difficulties than you will be. So before making any commitments you should run this by a Certified Financial Planner.

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