How much do you have – and how much do you need?

1. Tchavdar Elenkov, BA Econ, CFP Insurance and Financial Advisor How much do you have – and how much do you need?

2. Agenda • Retirement Goals • Choosing a retirement lifestyle • Consider all your sources of income • Consider all your expenses • Determining how much you need • Live the retirement you want

3. Retirement Goals

4. R E T I R E M E N T G O A L S What are your goals for retirement? • Having enough to live and enjoy life • Leaving a legacy

5. R E T I R E M E N T G O A L S Meet Ray and Sarah • Early 40’s • Earning a good income • Saving for kids education • Hope to pay off house in 5 years

6. R E T I R E M E N T G O A L S Meet Ray and Sarah (cont.) • 20 years until retirement • Contributing to RRSPs for 15 years • Want to enjoy retirement to the fullest

7. Choosing a retirement lifestyle

8. C H O O S I N G A R E T I R E M E N T L I F E S T Y L E Did you know? • How you want to live = how much you will need • If you don’t have a plan no amount of money may be enough!

9. C H O O S I N G A R E T I R E M E N T L I F E S T Y L E Choosing a retirement lifestyle • Most important factor in determining how much money you’ll need • Do you want to… • Work part time? • Pursue a hobby? • Volunteer? • Travel frequently?

10. C H O O S I N G A R E T I R E M E N T L I F E S T Y L E What’s your retirement lifestyle? • Moderately60–70% pre-retirement income • Comfortably70–85% pre-retirement income • Well85–100% pre-retirement income

11. Consider all your sources of income

12. S O U R C E S O F I N C O M E How much will the government help? • Various different government sources of income • Amount received is based on your income

13. S O U R C E S O F I N C O M E Who‘s eligible for Canada Pension Plan (CPP) benefits? • For those who: • Have been in paid employment • Have made at least one payment into the CPP plan

14. S O U R C E S O F I N C O M E How CPP benefits work • Based on how much and how long you contributed • Designed to replace about 25% of the earnings paid into the plan

15. S O U R C E S O F I N C O M E How much can you expect to receive? • You must apply to receive CPP benefits • Maximum CPP income at age 65 is $814.17 per month, or $9,770.04 per year

16. S O U R C E S O F I N C O M E Who‘s eligible for Old age Security (OAS) benefits? • For those who: • Are 65 or older, whether you have held paid employment • Meet resident requirements

17. S O U R C E S O F I N C O M E How OAS benefits work • Payments are: • Taxable • Subject to clawbacks

18. S O U R C E S O F I N C O M E How much can you expect to receive? • You must apply to receive OAS benefits • Maximum OAS benefit is $471.76 per month

19. S O U R C E S O F I N C O M E Who‘s eligible for the Guaranteed Income Supplement (GIS)? • For those who: • Reside in Canada • Receive a basic, full, or partial OAS pension and who have little or no other income

20. S O U R C E S O F I N C O M E How GIS benefits work • Payments are: • Based on your annual income • Subject to reapplication each year • Not subject to income tax • Dependant on your receiving the OAS pension

21. S O U R C E S O F I N C O M E How much can you expect to receive? • Maximum GIS benefit is $560.69 per month for a single person and $365.21 for the spouse of a pensioner

22. S O U R C E S O F I N C O M E Who‘s eligible for Spouse’s Allowance? • For those who: • Are low-income earners between 60-64 if still married • Who have a spouse or common-law partner who is entitled to receive OAS and GIS benefits

23. S O U R C E S O F I N C O M E Who‘s eligible for Widow's Spouse’s Allowance? • For those who: • Are low-income earners between 60-64 years • Whose spouse or common-law partner is deceased

24. S O U R C E S O F I N C O M E How Allowance benefits work • Payments are: • Replaced by the OAS after age 64

25. Consider all your expenses

26. S O U R C E S O F E X P E N S E S The effects of inflation on income • “The most insidious force that can eat away at your savings is inflation” • Historically inflation has averaged 3% per year, so plan to have your income increase by about 3% per year

27. S O U R C E S O F E X P E N S E S How inflation will effect Ray & Sarah

28. S O U R C E S O F E X P E N S E S Other things that could take a bite out of your savings • Lack of company health benefits • Retirement homes • No more company expense account • No more company stock options and RRSP contribution • Retirement leisure activities

29. Determining how much you need

30. H O W M U C H Y O U N E E D Method 1 - Income Replacement Ratio Method • Percentage of working income you’ll need to maintain the same standard of living (60-100%)

31. H O W M U C H Y O U N E E D Let’s look at an example • Total annual income $100,000 • Pay $30,000 in taxes • $5,000 put into RRSPs • 70% income replacement ratio • Require $45,500 after tax

32. H O W M U C H Y O U N E E D Method 2 - Tracking Cash Flow • More detailed examination of how much you spend and where you spend it • Extremely useful the closer you get to retirement • Categorize your expenses (home, financial, medical, etc.) so you understand where you spend your money • Able to more accurately adjust for expenses

33. Live the retirement you want

34. L I V E T H E R E T I R E M E N T Y O U W A N T Things you can do now to ensure a happy retirement • Planning • Take advantage of RRSPs • Consider other sources • Talk to your advisor