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Throughout my Padlet you will find many educational resources including websites, videos, and some informational images about retirement and financial security. This Padlet will inform you about how to prepare for retirement and when you should start taking action. It will also provided some options you have when it comes to planning your retirement.

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This website gives the reader a brief overview of what they need to take into account before they start planning their retirement and after they start planning their retirement. Some of the main things you must take into account are; determining your time horizon (how much time you have to meet your goals) and assessing your personal risk tolerance (how much risk are you willing to take?)

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Planning for Retirement? Start With These 5 Steps

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No matter your age, taking these five steps will help you build a solid retirement plan.

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This image shows how many other aspects of life relate to retirement planning and what those aspects are. It shows how all the pieces fit together to plan your retirement.

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This website explains and goes into depth about the pillars of retirement and the significance they each have in relation to your retirement. It goes over healthcare plans and what it means to choose the right plan for you when you retire. It also goes over things like; long-term care options, tax planning, and successful aging. These are all pillars of retirement and they all should be considered when planning your retirement.

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There are some main pillars to retirement planning. They are all large, complex, and quickly changing.

Main Pillars of Retirement Planning has Lots of Moving Parts!

Retirement planning can be one of the most stressful concerns for most Americans. Recent studies show that the average American has just over $100,000 in retirement savings while many rely solely on Social Security. It doesn't need to be that way. If you plan properly using these main pillars of retirement planning, you can establish reasonable goals and expectations for your retirement years.

The most common questions that persist in people's minds that are at or near retirement are:

What type of lifestyle can I expect to have?

Will I have enough monthly income to meet my monthly expenses?

Will my retirement nest egg last throughout my lifetime?

What about healthcare?

What about Long-Term Care?

How do I minimize my taxes?

Is there a way to minimize the end-of-life turmoil for my children?

Retirement Planning - Putting the Pieces Together

Answer these questions and you will have a comprehensive retirement plan! Look at all aspects of retirement expenses and all of your available income from Social Security, pensions, retirement funds, and any other assets you may have. Develop various retirement scenarios based on your life expectancy, your risk tolerance for investing, inflation factors.

Add in healthcare and long-term care (yes, they are different!), legacy and estate planning - those pillars of retirement planning are critical as well. Don't forget about what you will DO in retirement. Even if you have all the financial aspects figured out, you may find yourself bored if you don't have a comprehensive "Successful Aging" plan.

Often overlooked, is the most effective spend-down strategy of your invested asset pool. It makes a difference on what assets you spend first to minimize your tax liability. Analyze your spend-down strategy to make the most effective use of your retirement assets and minimize your taxes.

The Main Pillars of Retirement Planning

Successful Aging

What will you DO in retirement? The World Health Organization has done an in-depth study on a sedentary lifestyle and the impact on health. Don't fall into the trap of having all your financials in order and then fall short because you didn't plan for a mentally and physically healthy retirement lifestyle!

A good resource developed by Kastler Financial Planning may help you answer the questions about what you will DO in retirement and can be found at Successful Aging.

Income Planning

The first part of retirement planning includes an estimate of your monthly cash flow requirements necessary to meet the lifestyle you would like to have. You should analyze your current monthly spending plan and categorize your retirement needs including fixed expenses, discretionary spending, emergencies, travel, and healthcare requirements. Discuss with your spouse any debt pay-off scenarios and how that may impact your cash flow and long term nest egg.

Next, analyze your expected income available from the various sources available to you.

Social Security

For many people, Social Security is the major and sometimes the only component of their retirement plan. It may also be the only benefit you have that is a Lifetime Benefit. So getting it right is very important! Maximizing your Social Security benefit can make the difference between living fairly well or not.

Social Security planning areas include:

Claiming strategies to maximize your Social Security benefit

Spousal benefits

How benefits are taxed

How divorce or widowhood affect your benefit

How working or pension income affects your benefit

How to apply for your Social Security benefit

Pensions

If you are fortunate enough to have a pension, we can help you analyze the plethora of claiming options available to you. Such options have a life-long effect and are critical to your income planning for you and your spouse. Just one example is the Joint and Survivorship benefit may have multiple options and each option may have a 'revert-to' clause. Sort through all of the nuances and determine the best claiming option for you.

Tap Other Retirement Funds?

If your "guaranteed" income sources don't meet your monthly expenses, and you can't trim expenses any further, then you may want to analyze the impact of tapping into your other assets to bridge the income "gap." Some people call funding the income gap a "retirement paycheck." I don't like that term, but it's already out there in various circles.

Basically, bridging the income "gap" means withdrawing money from your invested assets to maintain the lifestyle that you want. The challenge is to make sure that by doing so, you don't jeopardize your long term goals, such as paying for long-term care.

Investment Planning

Investment planning can help alleviate the concern about outliving your money. Develop an understanding of your risk tolerance for investing. Apply those rules to a well thought out diversified portfolio.

If you are ambitious to learn about investing, check out Investment Styles and determine if you are Active or Passive investor.

Depending on your situation, develop a portfolio design (stocks, bonds, other assets) that fit your risk tolerance and investing style. Your invested assets throughout your retirement time horizon should generally last until you are age 95 unless there are compelling reasons to plan for a shorter time period, such as a known serious health issue. Make sure to include money for long-term care at the end of your retirement time horizon.

Seek out a finance professional to help you through this!

Healthcare

There is a myriad of claiming options for Medicare. Part A (hospitalization). Part B (medical). Part C (Medicare Advantage) and Part D (Prescriptions). There are also "gap" plans that can be added to traditional Medicare. Or instead of Medicare plus "gap", you can opt for a Medicare Advantage plan. Whew! That's a lot of possible combinations! The only way to sort through all that to get the best possible plan for YOU is to have a Medicare specialist provide you with various quotations. Then you can compare the services and costs.

Also, your neighbor's Medicare plan may not be best for you. Everyone is different and has different medical and prescription requirements. Often times, even spouses will have a different Medicar plan than the other, depending on their individual medical situation.

Keep in mind that Medicare is no longer linked to Social Security and has its own claiming strategy and timing. If you don't apply in a timely matter, a penalty may be added to your yearly premiums - forever!

Long-Term Care

Important note: Long-Term Care is not covered by Medicare.

With the soaring cost of nursing home care now averaging well over $90,000 per year in Michigan, Long-Term Care (LTC) is a critical component of retirement planning and your risk management plan. Determine if you can self-fund or if LTC insurance is a viable option for you. Some life insurance hybrid policies can also be a useful strategy.

It is true that Medicaid may be invoked for long-term care, but that is only after significant qualifications are met, such as only $2,000 in assets and one home. It is not a pleasant option.

Tax Planning

Nobody wants to pay more taxes than they have to. What's a really bad situation is when you end up with a surprise tax bill for lack of tax planning. Run some projections on what your tax bill will be when you first retire and compare that to a later tax bill, at 70 1/2 for example, when RMDs kick in. You want to know in advance how you can minimize those tax payments in later years!

Roth Conversions can be a useful tool to help reduce those later year taxes and add significant dollars to your overall asset pool through your retirement years. But when do you convert? How much should you convert? Those are all critical questions that you, your Planner, and your CPA need to tackle!

Estate and Legacy Planning

Estate Planning isn't just for the wealthy. Everyone needs a Will, Power of Attorney, Medical Power of Attorney and Beneficiary Designations. Not having these documents in place can cause great consternation at times of crisis. It's best to have your wishes nailed down in writing.

Not everyone needs a trust, but your Estate Planning Attorney can advise you the pros and cons. Generally, a trust is advisable if you have significant assets, want to specifically exclude certain individual(s), are a blended family with children from previous marriages, or simply want to avoid the public probate process.

If you focus on these main pillars of retirement planning, you should be in a good position to understand where you are at, and what you need to do to meet your retirement goals.

Is a "Bucket Strategy" Best for You?

If you are like most people, you have worked hard for the money you have and you want the best retirement that you can afford. It's also nice to sleep well at night knowing that you have a strategy to cover yourself. It's critical to navigate the complexity of retirement planning, run various retirement scenarios, and come up with a written Plan with recommendations and actions so you can have the best lifestyle possible.

Additionally, you may benefit from a "bucket strategy". Think of your retirement plan in terms of 3 buckets:

Income bucket to meet your monthly expenses

Cash reserve bucket to meet your emergencies (and to limit the risk of the invested portion of the portfolio)

Investment bucket that is the portion of your portfolio that is invested for long term goals, such as funding your long-term care

About Kastler Financial Planning

We are a fiduciary firm, providing fee-only, professional financial services with affordable and a transparent Fee Schedule. Our core purpose is to help improve your financial situation and to help you Get Retirement Ready. We do not sell financial products. We believe everyone should have access to financial advice without the pressure or bias of product sales or commissions.

For individuals, we offer fee-only Financial Planning services, Retirement Planning services, and fixed flat-fee Investment Management services. We have a special affinity toward Step Families and their unique financial planning needs.

For business owners, we offer Small Business Retirement Plan Consulting to help you and your employees leverage your company retirement plan. If you don't have a company retirement plan, we'll help you navigate the options to get one for you and your employees with our Guide to Selecting a Company Retirement Plan.

We perform these services either as hourly, a one-time fee-only project, as on-going financial planning, or Assets Under Management (AUM), depending on your needs. Whether you live in our backyard or across the country, we aim for a pleasant client experience through our Client Portal and computer screen-sharing technology.

Contact Us

If you have any question on how our services may apply to you, please contact us at the number below or submit an email through our Contact Us form.

© 2020 All Rights Reserved
Kastler Financial Planning | Ortonville, MI 48462
248-793-7314

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Main Pillars Retirement Planning | Kastler Financial Planning

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There are some main pillars to retirement planning. They are all large, complex, and quickly changing. Retirement planning can be one of the most stressful concerns for most Americans. Recent studies show that the average American has just over $100,000 in retirement savings while many rely solely on Social Security.

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This video explains why you should start planning your retirement earlier rather than later in life and discusses some of the common misconceptions about retirement planning such as "you need a lot of money to start making a lot of money". This video explains this simply isn't true and you can start retirement planning with no money and at an early age (not too early of course).

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You MUST Start Retirement Planning in Your 20's!

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This video goes over some important things to know about retirement investing, including the differences from your employment retirement plans and self directed plans and explains how each one is beneficial and how they are not. This will help give you some insight to which type of plan you may choose when you start to plan for your retirement.

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In this image you can see some statistics about Canadians and there retirement plan choices. As you can see over 1/3 of Canadians do not have any savings for retirement between the ages of 45 - 64.

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This video breaks down the reasons why Canadians are stressed about their future and their life after retirement. In this video, they go in depth about the 3 reasons why a lot of people feel stressed about retirement. These reasons are; 1) They never think about retirement planning, 2) They have no clear financial strategy, and 3) They focus on assets but not income.

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The Perfect Retirement Guide for Canadians | Retirement in Canada | Save For Retirement

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This website looks in depth about the different retirement savings plans you have at your disposal and looks at the different brokerage systems you have to chose from when you start saving and investing for retirement. This website also offers some thoughts about combining multiple plans together to form one big plan to enable you to live life after retirement quite comfortably.

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When novice investors start thinking about the future, one of the first questions they ask is: what is the best retirement plan in Canada? Unfortunately, there's no single plan in Canada that will fully fund your retirement years, but there are plenty of options available to you. When you combine all of these elements together, you end up with multiple streams of income, which will (hopefully) provide you with enough money to fund your lifestyle during your retirement years.

The thought of different retirement plans may seem intimidating, but as you'll quickly find out, things can be surprisingly easy to understand once you take the time to read about them. Here are some of the best retirement plans in Canada and how they fit with you.

Registered Retirement Savings Plan (RRSP)

Introduced in 1957, the Registered Retirement Savings Plan (RRSP) is the retirement plan that most Canadians know. What makes RRSPs appealing is that your contributions are deductible from your income. When you make a contribution, you're essentially lowering the income tax payable during the year, which often results in a tax refund after you've filed your taxes.

Another benefit: any income or capital gains you earn within your RRSP are not taxed. However, when you withdraw from your RRSP in your retirement years, it's seen as income and is taxed according to your marginal tax rate. Once you turn 71, your RRSP must be collapsed and converted into a registered retirement income fund (RRIF).

With RRSPs, there's no minimum age limit, but you only earn contribution room after you've had employment income and have filed a tax return. Your contribution room is 18% of your previous year's income, to a maximum of $27,230 (in 2020), plus any carry-forward contribution room that you may have. If you have a workplace pension, you would have a pension adjustment which would lower the amount of contribution room you have available.

Despite the word "savings" in the name, an RRSP account can actually hold different investment assets such as stocks, bonds, mutual funds, exchange-traded funds, and more. If you're a DIY investor, you can build your own portfolio with an online brokerage. With its low fees and easy-to-use DIY trading platform, we've rated Questrade as the best online brokerage in Canada.

However, if you don't feel comfortable with DIY investing, you can have your RRSP managed through one of Plus, you can take advantage of our exclusive promo offer: open and fund a new Wealthsimple Invest account with $1000 within 45 days, and the best robo advisors in Canada. It's a great way for investors to set up an investment portfolio without the work of doing it on their own or the cost of hiring a full-service advisor. Offering low fees, easy-to-use platform, and excellent customer service, Wealthsimple is our top choice for the best robo advisor in Canada. get a $75 cash bonus deposited into your account.

Another option: Tangerine offers new Clients an RRSP savings account with an amazing rate of 2.10%* interest for the first 5 months on their first Savings Account. Plus, you could earn $150*- a great way to get started saving. With no fees and stellar customer service that's available 24/7, it's why we've ranked Tangerine as the best online bank in Canada.

Tax-Free Savings Account (TFSA)

Similar to RRSPs, Tax-Free Savings Account (TFSA) is an investment vehicle that allows you to hold various investments such as stocks, bonds, exchange-traded funds, mutual funds, and so forth, but the TFSA has a few different rules. Like the RRSP, you can open a TFSA investing account with an online brokerage or robo advisor, which will allow you to maximize your returns. For more information, read our article to find out how to invest your TFSA.

However, if you need flexibility and fast access to cash, opening a TFSA savings account might make more sense. This will allow you to withdraw the money at any time and get immediate access to your funds. A great option is Tangerine: for new customers, their TFSA savings account gives you 2.10%* for the first 5 months on your first Savings Account. Plus, you could earn $150*. That's a phenomenal rate.

However, there are some key differences between the RRSP vs. TFSA. For starters, unlike the RRSP, you don't get a tax break on any of your contributions to a TFSA. However, any income, capital gains, or dividends are completely tax-free if and when you withdraw your money. In contrast, with an RRSP, you get the deduction upfront but pay taxes on your withdrawals.

Another key difference: the TFSA is an all-purpose account. Unlike RESP or RRSPs, you can withdraw the money inside your TFSA whenever you want and spent it on whatever you want. So you can use it to stash your cash to save up to travel or to buy a house. But really, since your savings compound tax-free inside your TFSA, it's best used for retirement savings.

You must be a Canadian resident and at least 18 years of age to open a TFSA. How much money you can deposit to your TFSA is based on your current annual TFSA contribution room, plus any unused contribution room you have from the previous years. Since TFSAs were introduced in 2009, your contribution room only goes back to that date. Assuming you were 18 in 2009, this means that Canadians who were at least 18 years of age in 2009 can have up to $69,500 total in a TFSA.

It's true that you can withdraw your money from your TFSA at any time. But how much you can contribute back into the TFSA depends on how much contribution room you have available. For example, let's say you have maxed out your TFSA contribution at $69,500, but then you withdraw $10,000 in April. You can't just put back $10,000 into your account in October unless you want to pay a penalty (known as a "TFSA over-contribution"). Instead, you will get the $10,000 in contribution room added onto your contribution room for the following year. So, on January 1, your contribution room would include $10,000 on top of the annual contribution room limit for that year. Keep in mind that you don't lose your contribution room. Any unused contributions get carried forward.

Many people wonder what's better: a TFSA or RRSP? There's no simple answer since it depends on so many different variables. The good thing is, you may have access to both, so you don't need to stick with just one. Whether you opt to channel your funds into a TFSA or RRSP (or both), you can have your money managed through robo-advisor like Wealthsimple (our top pick).

Canada Pension Plan (CPP)

The Canada Pension Plan is Canada's public retirement income system designed to provide monthly income for retirees. The plan is funded by Canadian employees as well as their employers. It operates in all of Canada with the exception of Quebec, where the Quebec Pension Plan takes its place. How much you get paid on a monthly basis when you retire varies depending on a variety of factors, but the average payouts in 2019 are as follows:

Retirement pension (at age 65) - $672.87

Disability benefit - $1,001.37

Survivor's pension - under age 65 - $443.37

Survivor's pension - 65 and older - $304.43

Children of disabled CPP contributors - $244.64

Children of deceased CPP contributors - $244.64

Death benefit (one-time payment) - $2,488.97

Combined survivor's and retirement pension (at age 65) - $893.10

Combined survivor's pension and disability benefit - $1,111.74

As Canada's population ages and more Canadians retire, some people are concerned that the CPP monthly payments will be clawed back in the future, but that's where the Canada Pension Plan Investment Board (CPPIB) comes into play.

The CPPIB is one of the world's biggest pension funds with more than $409 billion under their management. The CPPIB uses a long-term, sustainable, and well-diversified investment strategy which will be able to stand up against any financial crisis and provide stable retirement income for generations to come.

Since CPP contributions are usually done automatically through payroll deductions, many Canadians don't even realize that the CPPIB is actively managing the investment of the fund on their behalf.

While the CPP is designed to replace 25% of your lifetime income, it is not meant to be your sole pension. You would still need other sources of income for the lifestyle you want during your retirement years.

Old Age Security (OAS) is another Government of Canada pension program that is available to seniors 65 or older who have legal Canadian status and meet the residency requirement. To get your pension payout, you must apply to Employment and Social Development Canada (ESDC).

In addition to OAS, you may also qualify for additional benefits such as Guaranteed Income Supplement, Allowance, and Allowance for the Survivor.

The payouts you get through OAS are not as high as CPP, but you would get both assuming you meet all the requirements. How much you get paid per month by OAS depends on how long you lived in Canada after you turned 18, your marital status, and level of income when retired. In 2020, the payouts per month were as follows:

Regardless of your marital status - $613.53

If you are a single, widowed or divorced pensioner - $916.38

If your spouse/common-law partner receives the full OAS pension - $551.63

If your spouse/common-law partner does not receive an OAS pension - $916.38

If your spouse/common-law partner receives the Allowance - $551.63

Even if you don't qualify for a full pension, you may still be entitled to a partial pension if you're 65 or older, a Canadian citizen or permanent resident who is currently living in Canada and has lived in Canada for the past 10 years.

Best Ways to Invest for Retirement

As mentioned, your RRSP and TFSA are investment vehicles which you can use to invest in various assets. But how do you actually invest and come up with the best retirement plan in Canada? That's not an easy question to answer since all plans are different and how you should invest your money depends on a few various factors such as your timeline and risk tolerance.

If the idea of managing your own money does not appeal to you, there is an easy solution: robo advisors. When you work with a robo advisor, your plan is chosen for you after you answer a series of questions. The idea is that this short survey will help you determine your goals and you'll then be recommended a certain plan/portfolio. This is appealing to some people since their portfolios are automatically monitored and rebalanced by the robo-advisors. There's no work on their end, and they offer lower fees than a bank or brokerage.

There are many different robo advisors in Canada that provide excellent plans at a low cost, but our top pick is Now is a great time to sign up because Wealthsimple is offering Young and Thrifty readers an exclusive deal: Wealthsimple. get a $75 cash bonus when you open and fund a new Wealthsimple Invest account with $1000 within 45 days. However, if you want to compare robo advisors in Canada head-to-head, check out our handy chart below and read our Complete Guide to the Best Robo Advisors in Canada.

Get $75 when you open a Wealthsimple Invest account!

If DIY investing interests you, you can create your own retirement investment plan or replicate some of the plans that robo advisors have. All you really need to do is set up an account with an online brokerage (which is really easy to do) and then make the trades on your own. Although you do have to pay for some of your transactions, your overall management expense ratio would likely be lower than robo advisors. Our top pick for the best online brokerage in Canada is Questrade and you can read why in our full Questrade review.

Get $50 in free trades when you start investing with Questrade!

As you can see, it's impossible to answer, "Which is the best retirement plan in Canada?" because there is no one plan that gives you everything you need. These retirement plans were designed to complement each other to provide you with multiple streams of income during your retirement years. Aside from CPP and OAS, you should play it safe by taking a few saving strategies.

If you need quick access to cash, keep some savings stashed in a TFSA or RRSP savings account. This will give you the most flexibility since you can withdraw the money at any time and get immediate access to your funds. Our top choice is Tangerine because their TFSA and RRSP savings accounts pay new customers a whopping 2.10%* interest rate for the first 5 months.

If you're looking for growth, low fees, and a bit of hand-holding, open a TFSA or RRSP investing account with one of the best robo advisors in Canada. A robo advisor takes all the hassle out of investing but without the high price tag of a traditional fund manager. Once you've picked a portfolio and set up a pre-authorized payment plan, all you have to do is "set it and forget it." Our top pick is Wealthsimple and you can read our full Wealthsimple review to find out why we love it.

If you're a savvy investor who's comfortable with buying and trading on your own, opening an RRSP or TFSA investing account with an online brokerage is likely your best bet. The fees are rock bottom and you can design your own portfolio. Read our full Questrade review to find out why we've rated it the best online brokerage in Canada.

The bottom line? Plan ahead by spreading out your savings - and you'll be ready to rock in your golden years!
Disclaimer: Young & Thrifty has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and Young and Thrifty are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.

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Retirement Planning and Best Ways to Invest for Retirement - Young and Thrifty

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When novice investors start thinking about the future, one of the first questions they ask is: what is the best retirement plan in Canada? Unfortunately, there's no single plan in Canada that will fully fund your retirement years, but there are plenty of options available to you.

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This video goes over the 3 most common mistakes Canadians make when planning their retirement and it explains why they are mistakes and how you should avoid them. This video also explains why these mistakes occur and it is simply because most retirement plans take on a "cookie cutter" approach, meaning they are understood as universal to all situations and factors. This is far from the truth.

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Planning Your Retirement? Watch Out For These 3 Common Mistakes! | Retirement in Canada

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This next website goes over eight of the core strategies to ensure you are financially stable after retirement. It is stated that you may not have the opportunity to use all eight of these strategies, but it is advised that you try and use as many as you can when making a plan to create the financial security you want during retirement. These "vehicles" include but is not limited to; Tax free savings accounts, Canadian pension plans, and Old age security.

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I'd like to make one suggestion when it comes to a New Year's resolution for 2020: Make sure your retirement planning is in order. After all, your financial well-being should be a top priority. The U.S. Consumer Financial Protection Bureau defines financial well-being as "a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life." I like that.

I want to guide some thinking on this issue of financial well-being in retirement. Let's start with a review of the eight core strategies, or vehicles, for creating that financial security and enjoyment in life. You may not have the opportunity to use all these strategies, but aim to use a few of them if you can.

Old Age Security (OAS)

It was in 1927 that government assistance for seniors first came into existence, with the Old Age Pension Act. Seniors aged 70 or older became eligible for a maximum pension of $240 a year. The benefits were "means-tested" so that only those with incomes below $365 annually could benefit. In 1952, the Old Age Security Act was passed and, today, eligible seniors aged 65 or older receive benefits that currently amount to $613.53 monthly, but these benefits are clawed back starting at an income of $79,054 and disappear entirely at $128,137. In addition to OAS, low-income seniors may be entitled to the Guaranteed Income Supplement (GIS), introduced in 1967, and currently amounting to $916.38 a month. The GIS disappears at an income of $18,600 in 2020.

Canada Pension Plan (CPP)

In 1966, the CPP and Quebec Pension Plan (QPP) were introduced. Unlike the OAS, the CPP and QPP are based on your employment history and contributions to the plan by you and your employer. The maximum benefits under these pensions amount to $1,175.83 monthly. In addition to retirement pensions, the CPP and QPP provide disability, survivor, orphan and death benefits. All these benefits are indexed to the cost of living annually. Visit canada.ca and enter "CPP monthly amounts" in the search field to find the current payment amounts.

Registered pension plan (RPP)

Count yourself fortunate if your employer provides a pension plan. About 37 per cent of Canadians participate in an employer pension plan (about one half of these folks are public sector employees). Make sure you participate in your employer's plan so that you can take advantage of your employer's contributions to the plan and accumulate as much as you can. While some RPPs are "defined benefit" plans (where the level of benefits is defined in advance), an increasing number are "defined contribution" plans (where your benefits depend on the amount of contributions and growth inside the plan over time).

Registered retirement savings plan (RRSP)

The RRSP was introduced in 1957 and is the retirement plan that most Canadians know best. An RRSP is simply a vehicle, or basket, that can hold a wide variety of investments (stocks, bonds, exchange-traded funds, mutual funds, etc.) to help you accumulate assets for your retirement. Folks like RRSPs because contributions are deductible for tax purposes, which often gives rise to a tax refund. Any earnings inside the RRSP are tax-free, although you'll face tax on withdrawals from the plan. The maximum contribution to an RRSP is 18 per cent of your prior year's earned income, or $27,230 for 2020, whichever is less.

Tax-free savings account (TFSA)

TFSAs were introduced in 2009 and are a cousin to the RRSP. TFSAs are a vehicle to hold many types of investments - as with an RRSP. You won't be entitled to a deduction for contributions to your TFSA, but you'll enjoy the same tax-free growth inside the plan that an RRSP provides, and you won't face tax on any withdrawals. Once you've made a withdrawal, you can recontribute that amount starting in the following calendar year. You've got to be 18 or older to have a TFSA, and you'll be able to contribute $6,000 for 2020 (and a total of $69,500 if you were 18 in 2009 and haven't contributed to a TFSA yet).

Non-registered investments

In addition to the pensions and savings plans above, you can simply accumulate investments outside of those plans in a non-registered investment account. The big difference with a non-registered account is that it's not tax-sheltered. That is, the growth and income you earn each year will be subject to income tax. For this reason, you'd be wisest to hold your most highly taxed investments (those earning interest) inside your registered plans to the extent possible. Investments in your non-registered accounts should be more tax-efficient, which will generally mean holding all or a portion of any equity investments in your non-registered accounts.

Permanent life insurance

You can use a permanent life-insurance policy to accumulate investments for retirement. I realize that term life insurance is the cheapest type to buy, but you may be better off investing in permanent insurance to accumulate investments (called the "cash value") inside the policy. You won't face tax personally on the growth or income inside the policy. You can then make withdrawals of those savings from the policy (which will be taxable), or you can borrow against the policy's cash value to provide cash in retirement. When you die, the life insurance proceeds can repay any borrowings and the remainder goes to your named beneficiaries.

Real estate

Real estate can help to provide cash in retirement in a few ways. First, you could downsize to a less expensive home to free up some cash to invest, providing additional retirement income. Second, you could buy a rental property, or rent out part of your home, to create income. Next, you could buy a property, fix it up and flip it for a profit, creating additional cash for retirement - but beware, this idea isn't for the faint of heart or the inexperienced; it can backfire if you overpay for the property or spend too much fixing it up. Finally, you might consider using your home or a rental property to take out a reverse mortgage (where you borrow against the value of the property to provide cash in retirement) - although this is my least favourite option.

I'll have more to say about retirement planning next time.
Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. He can be reached at tim@ourfamilyoffice.ca.

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Eight core strategies for creating financial security in retirement in Canada

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I'd like to make one suggestion when it comes to a New Year's resolution for 2020: Make sure your retirement planning is in order. After all, your financial well-being should be a top priority. The U.S.

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Q) What did you learn about your topic that surprised you the most?
A) I think the thing that surprised me the most about retirement plans and financial security was that we should start planning for retirement soon. Between our mid to late 20's. This came as a shock to me because I have no started to think of myself as an "adult" per say, let alone plan for my retirement.

Q) Provide a real life example of how this topic is relevant or interesting to you.
A) This topic is relevant to me because my parents plan to retire in the next 4 years, but have yet to create a solid retirement plan. Their plan so far is to sell and move back to Newfoundland. Now with my newly acquired knowledge of retirement planning, I can suggest some things for them to consider and look into.

Q) If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?
A) I believe the most important thing to pass on is to START RIGHT NOW. There is no time like the present and we can not get back lost time. It is imperative to start planning as soon as possible to ensure you have enough time to meet all of your goals and expectations before heading into retirement.

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There are some main pillars to retirement planning. They are all large, complex, and quickly changing.

Main Pillars of Retirement Planning has Lots of Moving Parts!

Retirement planning can be one of the most stressful concerns for most Americans. Recent studies show that the average American has just over $100,000 in retirement savings while many rely solely on Social Security. It doesn't need to be that way. If you plan properly using these main pillars of retirement planning, you can establish reasonable goals and expectations for your retirement years.

The most common questions that persist in people's minds that are at or near retirement are:

What type of lifestyle can I expect to have?

Will I have enough monthly income to meet my monthly expenses?

Will my retirement nest egg last throughout my lifetime?

What about healthcare?

What about Long-Term Care?

How do I minimize my taxes?

Is there a way to minimize the end-of-life turmoil for my children?

Retirement Planning - Putting the Pieces Together

Answer these questions and you will have a comprehensive retirement plan! Look at all aspects of retirement expenses and all of your available income from Social Security, pensions, retirement funds, and any other assets you may have. Develop various retirement scenarios based on your life expectancy, your risk tolerance for investing, inflation factors.

Add in healthcare and long-term care (yes, they are different!), legacy and estate planning - those pillars of retirement planning are critical as well. Don't forget about what you will DO in retirement. Even if you have all the financial aspects figured out, you may find yourself bored if you don't have a comprehensive "Successful Aging" plan.

Often overlooked, is the most effective spend-down strategy of your invested asset pool. It makes a difference on what assets you spend first to minimize your tax liability. Analyze your spend-down strategy to make the most effective use of your retirement assets and minimize your taxes.

The Main Pillars of Retirement Planning

Successful Aging

What will you DO in retirement? The World Health Organization has done an in-depth study on a sedentary lifestyle and the impact on health. Don't fall into the trap of having all your financials in order and then fall short because you didn't plan for a mentally and physically healthy retirement lifestyle!

A good resource developed by Kastler Financial Planning may help you answer the questions about what you will DO in retirement and can be found at Successful Aging.

Income Planning

The first part of retirement planning includes an estimate of your monthly cash flow requirements necessary to meet the lifestyle you would like to have. You should analyze your current monthly spending plan and categorize your retirement needs including fixed expenses, discretionary spending, emergencies, travel, and healthcare requirements. Discuss with your spouse any debt pay-off scenarios and how that may impact your cash flow and long term nest egg.

Next, analyze your expected income available from the various sources available to you.

Social Security

For many people, Social Security is the major and sometimes the only component of their retirement plan. It may also be the only benefit you have that is a Lifetime Benefit. So getting it right is very important! Maximizing your Social Security benefit can make the difference between living fairly well or not.

Social Security planning areas include:

Claiming strategies to maximize your Social Security benefit

Spousal benefits

How benefits are taxed

How divorce or widowhood affect your benefit

How working or pension income affects your benefit

How to apply for your Social Security benefit

Pensions

If you are fortunate enough to have a pension, we can help you analyze the plethora of claiming options available to you. Such options have a life-long effect and are critical to your income planning for you and your spouse. Just one example is the Joint and Survivorship benefit may have multiple options and each option may have a 'revert-to' clause. Sort through all of the nuances and determine the best claiming option for you.

Tap Other Retirement Funds?

If your "guaranteed" income sources don't meet your monthly expenses, and you can't trim expenses any further, then you may want to analyze the impact of tapping into your other assets to bridge the income "gap." Some people call funding the income gap a "retirement paycheck." I don't like that term, but it's already out there in various circles.

Basically, bridging the income "gap" means withdrawing money from your invested assets to maintain the lifestyle that you want. The challenge is to make sure that by doing so, you don't jeopardize your long term goals, such as paying for long-term care.

Investment Planning

Investment planning can help alleviate the concern about outliving your money. Develop an understanding of your risk tolerance for investing. Apply those rules to a well thought out diversified portfolio.

If you are ambitious to learn about investing, check out Investment Styles and determine if you are Active or Passive investor.

Depending on your situation, develop a portfolio design (stocks, bonds, other assets) that fit your risk tolerance and investing style. Your invested assets throughout your retirement time horizon should generally last until you are age 95 unless there are compelling reasons to plan for a shorter time period, such as a known serious health issue. Make sure to include money for long-term care at the end of your retirement time horizon.

Seek out a finance professional to help you through this!

Healthcare

There is a myriad of claiming options for Medicare. Part A (hospitalization). Part B (medical). Part C (Medicare Advantage) and Part D (Prescriptions). There are also "gap" plans that can be added to traditional Medicare. Or instead of Medicare plus "gap", you can opt for a Medicare Advantage plan. Whew! That's a lot of possible combinations! The only way to sort through all that to get the best possible plan for YOU is to have a Medicare specialist provide you with various quotations. Then you can compare the services and costs.

Also, your neighbor's Medicare plan may not be best for you. Everyone is different and has different medical and prescription requirements. Often times, even spouses will have a different Medicar plan than the other, depending on their individual medical situation.

Keep in mind that Medicare is no longer linked to Social Security and has its own claiming strategy and timing. If you don't apply in a timely matter, a penalty may be added to your yearly premiums - forever!

Long-Term Care

Important note: Long-Term Care is not covered by Medicare.

With the soaring cost of nursing home care now averaging well over $90,000 per year in Michigan, Long-Term Care (LTC) is a critical component of retirement planning and your risk management plan. Determine if you can self-fund or if LTC insurance is a viable option for you. Some life insurance hybrid policies can also be a useful strategy.

It is true that Medicaid may be invoked for long-term care, but that is only after significant qualifications are met, such as only $2,000 in assets and one home. It is not a pleasant option.

Tax Planning

Nobody wants to pay more taxes than they have to. What's a really bad situation is when you end up with a surprise tax bill for lack of tax planning. Run some projections on what your tax bill will be when you first retire and compare that to a later tax bill, at 70 1/2 for example, when RMDs kick in. You want to know in advance how you can minimize those tax payments in later years!

Roth Conversions can be a useful tool to help reduce those later year taxes and add significant dollars to your overall asset pool through your retirement years. But when do you convert? How much should you convert? Those are all critical questions that you, your Planner, and your CPA need to tackle!

Estate and Legacy Planning

Estate Planning isn't just for the wealthy. Everyone needs a Will, Power of Attorney, Medical Power of Attorney and Beneficiary Designations. Not having these documents in place can cause great consternation at times of crisis. It's best to have your wishes nailed down in writing.

Not everyone needs a trust, but your Estate Planning Attorney can advise you the pros and cons. Generally, a trust is advisable if you have significant assets, want to specifically exclude certain individual(s), are a blended family with children from previous marriages, or simply want to avoid the public probate process.

If you focus on these main pillars of retirement planning, you should be in a good position to understand where you are at, and what you need to do to meet your retirement goals.

Is a "Bucket Strategy" Best for You?

If you are like most people, you have worked hard for the money you have and you want the best retirement that you can afford. It's also nice to sleep well at night knowing that you have a strategy to cover yourself. It's critical to navigate the complexity of retirement planning, run various retirement scenarios, and come up with a written Plan with recommendations and actions so you can have the best lifestyle possible.

Additionally, you may benefit from a "bucket strategy". Think of your retirement plan in terms of 3 buckets:

Income bucket to meet your monthly expenses

Cash reserve bucket to meet your emergencies (and to limit the risk of the invested portion of the portfolio)

Investment bucket that is the portion of your portfolio that is invested for long term goals, such as funding your long-term care

About Kastler Financial Planning

We are a fiduciary firm, providing fee-only, professional financial services with affordable and a transparent Fee Schedule. Our core purpose is to help improve your financial situation and to help you Get Retirement Ready. We do not sell financial products. We believe everyone should have access to financial advice without the pressure or bias of product sales or commissions.

For individuals, we offer fee-only Financial Planning services, Retirement Planning services, and fixed flat-fee Investment Management services. We have a special affinity toward Step Families and their unique financial planning needs.

For business owners, we offer Small Business Retirement Plan Consulting to help you and your employees leverage your company retirement plan. If you don't have a company retirement plan, we'll help you navigate the options to get one for you and your employees with our Guide to Selecting a Company Retirement Plan.

We perform these services either as hourly, a one-time fee-only project, as on-going financial planning, or Assets Under Management (AUM), depending on your needs. Whether you live in our backyard or across the country, we aim for a pleasant client experience through our Client Portal and computer screen-sharing technology.

Contact Us

If you have any question on how our services may apply to you, please contact us at the number below or submit an email through our Contact Us form.

© 2020 All Rights Reserved
Kastler Financial Planning | Ortonville, MI 48462
248-793-7314

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Main Pillars Retirement Planning | Kastler Financial Planning

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There are some main pillars to retirement planning. They are all large, complex, and quickly changing. Retirement planning can be one of the most stressful concerns for most Americans. Recent studies show that the average American has just over $100,000 in retirement savings while many rely solely on Social Security.