Finance: Getting Ready to Manage Your Money in Retirement

For anyone getting close to retirement the anticipation can be incredible. This is the time your focus shifts to enjoying life to its fullest, rather than how we are going to make enough to pay all the bills. If you organize your finances, retirement can be wonderful. If you’re lucky enough to have a work pension and enough money saved in your RRSP this is the time to start making some real plans about your retirement. But starting the process to manage your nest egg can be tough. Here’s how to get started.Calculate Your Income At this stage you should have a good idea of what you’re retirement income will look like. Based on what you will be getting each month, start planning a retirement that you can afford. If you’re feeling stretched, think of ways you can cut back to enjoy all the things you want to do. Consider downsizing your home or moving to a less expensive town. Also consider getting rid of one car if you’re a two-car couple.Talk to Your Older (Wiser) Friends One of you best resources are your slightly older friends, the ones who are going through right now what you will be experience in five to ten years’ time. Ask them about what you should do with your finances, whether there are any mistakes you can easily avoid? This helps you plan better for the unexpected. Make sure you talk to people who are living a lifestyle you admire and can afford. Don’t talk to seniors with more wealth than you, as you will be setting yourself up for a financial let down.Move Money to Safety The time to start spending your retirement savings is here. Make sure you have at least five years of expenses saved in the safest of investments. Remember retirement will hopefully last for many decades so leaving some money in higher risk investments is okay, as long as you don’t plan to use it for at least 20 years. The key at this age is having the best asset mix — enough money in safe investments to spend now, and the rest in slightly riskier investments that you don’t need until later.Decide When to Retire Not everyone retires at age 65. Some wait to retire later, others take early retirement. By taking a look at your work pension, see what your monthly income would be if you decided to leave work early. How much more would you get if you waited until 65 or even 70 to retire. It’s important to know that Old Age Security (OAS) and Canada Pension Plan (unless you take that early) don’t start until you turn 65, so make sure you are calculating your income carefully.Be Tax Efficient Government benefits like OAS start to get clawed back after a certain income threshold. For 2018 it’s $75,910. Once your income starts to go over that your benefits start to decline and is completely gone when your income is more than $123,019. Make sure you’re setting up a withdrawal plan that will keep as much OAS in your pocket as possible. If you’re still saving, use your Tax Free Saving Account. Also, you can voluntarily defer OAS for up to five years. This will result in higher benefits when you do start to receive it.Finally, this could be the most relaxing time in your life. Now you can start to enjoy your savings. Feel proud of getting to this point and start planning for the most enjoyable retirement possible.Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney