If you want to ensure you have enough income in retirement, you have plan ahead. A professional financial planner can walk you through a process to identify your sources of income and how they'll be incorporated in your overall financial picture.
Ideally, you start planning for your retirement well ahead of the actual date you retire. Here are a few key steps to the retirement planning process we use at HollisWealth.
1. Identify Your Income Sources
The first step in understanding your income in retirement is to identify the components of that income. Potential income sources may be a company pension, government benefits, and withdrawals from your savings to name a few.
2. Consider the Amounts and Tax Implications of each
Once your income sources are known, you can start to evaluate whether you have enough savings to provide the income you want. First you'll want to know the amount government benefits, work pensions, etc. will generate and how each of these sources are taxed. The remainder of your income will typically come from savings. RRSPs, TFSAs, investment accounts and, for those who own small businesses, corporate savings are examples. How the money is pulled from each of these savings accounts is key to ensure the tax man doesn't tax more than their fair share.
3. Have an idea of what your budget may look like in retirement
Different lifestyle needs in retirement will require different amounts monthly so it is always a good exercise to explore what your retirement will look like. Your financial planning professional can help you through this exercise.
4. Create a Plan for Retirement
Creating a Retirement Plan essentially pulls all of this important information together to get a comprehensive understanding of your income. The best way to develop a view to your income stream in retirement is to build a financial plan with the help of a Financial Planning Professional. Utilizing the skill and knowledge of a professional means you will have a comprehensive view developed with reasonable assumptions ensuring accuracy and quality in your income estimates.
The income component will be one of the key outputs of a financial plan along with a better understanding of your taxes and your estate. Ultimately, the financial plan will give you the holistic perspective of your financial future!