I am 63 years old and I live in Ontario. My house is worth $ 1,200,000 and my investments are also worth $ 1,200,000. I have a small indexed pension of $ 17,000 and expect full CPP. What do you think?
A. Many years ago part of my training in the insurance industry was finding a person’s hot button and pushing it! Is there a chance that the planner has thrown out ideas in the same way to get you hooked? There is nothing wrong with that, because before a planner can help you, you need to be aware that there is something to be resolved. (That said, I also think there was a big chunk missing in your conversation, which I’ll share with you later.)
Let’s have fun browsing through the common tips for people in your situation. Keeping in mind that all of the points listed below represent good advice, we’ll see how each could be used as a hook.
Delay CPP until age 70
I’m sure all your friends are telling you to take Canada pension plan (RPC) as soon as possible. So when a professional offers to defer your CPP to age 70, increase your benefits by 8.4% each year after age 65, and offer you a larger indexed lifetime pension, that should grab your attention.
The reasons for the deferral are even better, however: the initial CPP benefit amount is based on the YMPE (maximum annual pensionable earnings), not the CPI (the general inflation rate). Last year the YMPE increased by about 5%which means that if you do not collect the CPP, your initial benefit will be based on an amount 5% higher than last year’s amount. If you are already collecting CPP you only get 1% increase to reflect the evolution of the CPI.
Sell your high-cost mutual funds for low-cost ETFs
If paying a fee really bothers you, a less expensive alternative would be a good eye-catcher. Now there’s a company that’s trying to push people on the hot button and grow their business by announcing that you can retire 30% richer just by cutting fees. Maybe, maybe not. Returns on investment and planning services also play a role in accumulating money.
Identify which account to draw on first: RRIF, non-registered or TFSA
When you have tax-exempt, partially tax-exempt, and 100% taxable accounts, the question of where to draw first and can seem like a very complicated puzzle. If someone tells you that they can simplify this, it can be a big relief for you.
However, I have modeled this a few times and there is often very little difference in which count you are pulling from; often the best approach is to be as tax efficient as possible in each calendar year.