The need for a realistic, flexible retirement… The Power of 5 Michelle Connolly, CPA, CA, CFP VP, Wealth Planning, CI Investments

When should Canadians start planning for retirement? When do Canadians typically think of retirement? 2 30 YRS

Reactive triggers Unplanned Health issues Work re-organization Planned Nearing an age Enough $$$ Can collect their pensions 3

Retirement – The Power of 5 5 income and cash flow concepts to understand 5 key benefits of planning 5 minutes to capture attention and gauge retirement readiness

5 Retirement – The Power of 5 5 minutes to capture attention and gauge retirement readiness

Gauging retirement readiness How do you envision living – not spending – retirement? Competing demands for retirement savings A new retirement envisioned Life events happen What assets will fund retirement? 6 FinancialEmotionalPsychological

Quantifying needs, not savings target $1 million savings goal is not a retirement plan When are we saving and paying for lifestyle? Today or retirement? The dynamic consumption and savings equation 7

Competing demands Canadians are: Caring for parents Assisting children – education and home Paying debt off Wanting to live in the now … rather than saving for retirement 8

Retirement is being redefined Canadians are: Living longer Retiring earlier Leading more active lifestyles in retirement – they are “living” Balancing spouses view of retirement 9

Life events The grey divorce Premature death of a spouse New “experienced” marriage Significant health issue Supporting boomerang children 10

Retirement – The Power of 5 5 key benefits of planning

Managing FUDD Do your clients over … or underestimate? It’s all there in black and white, in stages Not just one source, unlike a paycheque Business owners/incorporated professionals 12 Why plan and map out retirement?

13 Managing FUDD Fear Uncertainty Doubt Denial

Over or underestimate When they will leave workforce Inheritance receipts/chances of winning lottery Costs of living retirement Health, dental and care costs CPP/OAS or other government benefits Capital withdrawal requirements from investments 14

A written, documented retirement plan All there in black and white  Fund desired retirement, or  Adjust retirement expectations Dynamic and flexible  Ongoing process, review and recap Stress test “what ifs”  Risks that can be managed versus those that can’t be controlled 15 Lump-sums Inflation Realistic?

16 Cash flow Income CPP/OASOpenTFSA Pension/Annuity RRSP/RRIF Not flexible Flexible Income and cash flow sources

Three stages of retirement First 5 to 10 years Middle 10 to 15 years The final years 17

What does a retirement plan provide? Scenarios to measure and interpret Security or confidence Client accountability 18 SecuritySustainabilityReliabilityStability

Business owners/incorporated professionals Different asset sources to consider Completely sever ties/part time for few years Huge change in lifestyle Additional insurance needs New will and POA’s Need for family discussion Remember R’s … Relax, reflect, revisit, recap and reassess Avoid short term, reactive missteps 19

5 Retirement – The Power of 5 5 income and cash flow concepts to understand You are a retirement facilitator You are a pension co-ordinator

Tax-efficient investing – what’s the tax-rate? When do you stop/start?  Contributing to RRSP  Working  Collect CPP/OAS or pension  RRIFs Don’t forget tax credits TFSA What financial and insurance products can help the retirement cause? 21

22 Tax-efficient investing Cash flow – generating flexible cash flow streams while mitigating associated tax liability. Income – is investment income needed to support lifestyle needs? Flexibility over when reported and type, and tax rate on income. Growth – minimizing distributions/income to facilitate compound growth on account of capital. What is the most tax-efficient source of income? Maintenance of portfolio allocation – making strategic or tactical shifts in portfolio: Does tax impact client’s decision?

23 Tax – it matters

Create the client’s pension plan Fund it Manage it Arrange distribution/payouts 24

RRSP/RRIF Accumulation How long? What amount? Value of Tax Deduction and Income Inclusion Payout When start? Minimum amount or smooth out? 25

TFSA $30 billion invested at end of 2011 (Dept. of Finance)  Assuming 30 million Canadians translates to $1,000 each  But average account is $4,000 Great vehicle for all Canadians – high/low income earners, every generation CASH FLOW Key tool in providing FLEXIBILTY 26

Financial products to help the retirement cause Base minimum – the paycheque Annuity G5|20 Series Flexibility – the play cheque or bat for curveballs Non-registered T-series TFSA 27

Insurance products to help the retirement cause As always – what are needs or risks? Health/dental/travel – continue, replace or top up? For whom? Disability – when terminate? LTC – when consider? For whom? Life – needs different? 28

You have great resources – use them! Existing clients – learn from those already retired Invest in financial planning software that accommodates inflation and tax Advisor.ca, Zoomer magazine and various Snowbird blogs 29

In conclusion Canadians are not saving adequately for retirement Advocate and educate clients on the need for retirement planning Every Canadian needs to:  Develop a written, documented retirement plan  Implement flexibility into the plan; and  Recognize the dynamic consumption and savings equation between today and retirement 30

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