Financial planning is a lifelong process. No matter your age or financial status, nearly everyone benefits from reviewing their financial situation and practicing good financial habits to secure their assets and their quality of retirement.
Even if you’re retired or planning retirement, you do not want to find yourself in a situation where your savings and retirement funds are depleting faster than your needs. Today, we’re going to look at what you can do to help you understand your situation and the tools you can use to ensure your income safety and integrity.
Developing A Financial Plan
Knowing What You Need
Earlier in life, you may have made a financial plan and likely changed it along the way. A good financial plan helps you determine your needs versus wants and the goals you wish to achieve. Take these points into consideration when you’re reviewing your financial retirement plan:
- Current and future value of your investments and assets
- Current and future expenses
- Current and future sources of income, benefits, savings, assets, and government plans
Common questions you should be asking yourself when assessing your situation include:
- How long do you plan to keep working?
- How much income will you need to retire?
- If retired, how much income do you need to maintain yourself for the rest of your life?
- What assets and properties will you need to sell?
- Which government programs can you apply for and how much money can you expect from them?
- How long will your savings last?
- How can I diminish my indebtedness as quickly as possible?
- What are my necessities versus ‘extras’ I can live without?
Even if you’re starting your financial plan late in life, answering these questions will help you get a better understanding of what you need to do to achieve to safeguard your financial well-being.
Planning For Your Needs
The Canadian Pension Plan & Registered Retirement Savings Plan
The Canadian Pension Plan (CCP) and the Registered Retirement Savings Plan (RRSP) are some of the most common ways seniors can generate income during retirement. It’s important to understand what they can do for you and how they differ from each other.
The Canadian Pension Plan
The CPP is a taxable benefit paid monthly to help replace a portion of your income when you enter retirement. To access this benefit, you are to be at least 60 years old and have made at least one valid contribution to the CPP in your lifetime, either through working in Canada or receiving credits from a former spouse or common-law partner.
The amount of money provided to you from the CPP will depend on your average earnings throughout your working life and the age you start accessing it. The earlier you start using the benefit, the smaller the amount of money you will receive. Generally, people start accessing their CPP around the age of 65. If you wait until 71 to start your CPP your monthly cheque will be much greater than starting it at 55 or 65 and you may need it most in older life in the event your other funds have been depleted!
Registered Retirement Savings Plan
An RRSP can still help fund your retirement even if you don’t start making contributions to it later in life. You can establish an RRSP at your bank and set it up to collect automatic contributions from your choice of account.
What makes RRSPs important to invest in is that the contributions you make will grow over time, allowing you to make different decisions with the money after turning 71:
- You can transfer RRSP funds into a registered retirement income fund (RRIF) to receive a minimum payment every year (subject to taxation).
- You can purchase an annuity to help receive guaranteed payments for a period of your life (subject to taxation). You can also receive this annuity in a lump-sum commutation that is equal to the current value of all or part of your future annuity payments.
Health & Housing
It’s a very real possibility that some elders may start to experience a loss of independence, which may require you to look for personal assistance, care and/or housing to meet your needs. These changes will have implications on your retirement savings and plans.
Different types of assistance are available if you find yourself becoming more reliant on caregivers. Alberta cities usually have senior associations that can be contacted for information and guidance on support from local and provincial programs. There are also federal programs you may enroll in to acquire additional funding, if eligible, including Old Age Security and Guaranteed Income Supplement.
Protecting Yourself From Financial Abuse
Financial abuse is a very real threat to seniors. It can occur in various forms, including scams and frauds, misuse of power of attorney, and even emotional or physical manipulation.
Abusers can be strangers, family members, friends, and neighbours. But how do you protect yourself from this threat? There are many resources available to help you identify what financial abuse may look like and the steps you can take to ensure your safety, including:
- Keeping a record of money loaned or given plus the date due for repayment
- Signing nothing before getting professional legal advice even if the document is from a family member or friend
- Getting financial and legal advice from professionals about how you’re spending your money or resolving debt issues
- Finding an enduring power of attorney that you unequivocally trust
Powers of Attorney
A power of attorney is a legal document that gives another person the authority to manage your money and property on your behalf. Despite the name, you can appoint anyone you trust to be your power of attorney.
Having an attorney is important if you find yourself in a situation where you can’t reliably manage your assets on your own. There are 2 types of power of attorney:
- A general power of attorney (POA) gives your attorney the authority to manage all of your finances and property while you’re still able to manage your personal affairs. This may be revoked at any time.
- Enduring power of attorney will give your attorney the authority to continue managing your assets after you’re not mentally capable of handling them.
Depending on the agreement you make, a power of attorney can also manage your health care and living situation. But as long as you’re mentally capable, you can still make all the decisions about your finances, assets, well-being, housing and care. Your POA is your backup if something happens to you so they can pay bills for you on your behalf.
Debt doesn’t go away as you get older, and the payments that you make on your debt every month will continue to affect your finances and quality of life as it always has. Managing debt versus income as an elder, however, may be very different when income was based on salary and job potential in addition to having or not having savings, assets and investments.
Some of the ways you can manage your debt more effectively include:
- Not incurring more debt
- Consolidating your debts into one easy-to-manage monthly payment
- Negotiating with your creditors through a formal Consumer Proposal
- Talking to one of our debt and credit counsellors
Help is available if you need it. Below are some financial benefits; some already mentioned:
- Alberta Seniors Benefit
- Old Age Security
- Guaranteed Income Supplement
- CPP Post-Retirement Benefits
- CPP Survivor Benefits
For independent assistance and advice about these programs, call your local seniors association. For example, SAGE (Seniors Association of Greater Edmonton) 780-423-5510 has staff to talk to you about your needs and these benefits. They can also discuss housing, well-being, recreation, practical support, elder abuse, power of attorney and more.