Disburse wisely to survive your savings

This text is part of the special Personal Finance section

Reading the data from a Léger survey carried out this summer on behalf of the ÉducÉpargne organization, its president, Nathalie Bachand, admits to being positively surprised. “I was still surprised to see that half of the public (54%) knew what disbursement was, which is the key concept in preparing for retirement,” she told us.

Formerly known as Question Retraite, the NPO ÉducÉpargne was created in 2003 at the initiative of Retraite Québec to raise awareness among the population of the importance of planning. It now brings together around thirty organizations, ranging from Protégez-Vous to the Financial Markets Authority, including the Chamber of Financial Security and the Quebec Institute of Financial Planning.

But Nathalie Bachand is not resting on her laurels, because after all, if 54% of Quebecers know what disbursement is, that still leaves 46% who do not have a clear idea of ​​what happens next. “We have been emphasizing the notion of accumulating through savings for a long time, but we also have to ask ourselves what will happen afterwards. »

This is why the organization has just put five explanatory videos online on disbursement in order to show what strategies it is possible to use to maximize the funds available for one’s retirement.

How it works ?

Disbursement is simply the action of withdrawing your savings in order to use them. On the surface, it’s simple. However, things have become much more complex due to the proliferation of investment vehicles.

The survey reveals that more than 90% of respondents know what an RRSP or TFSA is, but that other tools are much less known, such as the life annuity, the locked-in retirement account (LIRA) or the income fund. life annuity (FRV). “People these days have retirement funds from multiple employers. That too is new. »

Any disbursement plan must take into account life expectancy, inflation, taxation, the nature of investments, personal intentions, such as whether or not to continue working, and your estate plan, explains Nathalie. Bachand, who is an actuary by training and founder of the planning firm Bachand Lafleur, a consulting group. “All these aspects are important. You have to be able to juggle all that. »

While each case is particular, Éduc-Épargne is banking on a few major, inevitable trends. The actuary gives as an example the postponement of the request for your pensions, which gives the right to very significant bonuses. Old Age Security, for example, is $8,400 per year, but if we postpone the application until age 70, it then increases to $11,400 per year (or 36% more). The Quebec Pension Plan is even more generous since it increases the full pension by 8.4% per year of deferral between ages 65 and 70 (a total bonus of 42%). And from next year, it will even be possible to carry this forward until age 72.

“It is difficult to get a better return, especially since these annuities are indexable and for life,” explains Nathalie Bachand. “When we know that the main risk of a retired person is that of longevity, the idea of ​​maximizing retirement funds indexable for life is critical. »

In his view, the planning imperative is long-term risk management. No one wants to outlive their savings. However, we read in The disbursement plan. Your ally to optimize your retirement incomeproduced by ÉducÉpargne, “life expectancy at age 65 has increased by approximately six years over the past 50 years and is expected to increase by another three over the next 50.”

What to watch out for in the current context?

Do the years of inflation and financial insecurity that Quebecers are currently experiencing change anything? In principle, no, because a well-planned disbursement is always done with a long-term perspective, according to Nathalie Bachand. The main risk would rather be to overreact to an immediate event to get out of the planned scenario, by selling everything because we are going through a period of stock market correction.

Nathalie Bachand explains that a good investment portfolio aims to reassure retirees by guaranteeing them the sums available through less risky investment vehicles. “It’s not necessarily about liquidity. The idea is to secure income over a period of five years to avoid having to sell investments at the wrong time. »

His work also aims to counter certain myths, such as that it would be better to withdraw your non-registered investments early to avoid paying taxes. “This is not necessarily the case, and that is why it is better to consult a specialist, who will do the analysis based on your situation, your projects and taxation. »

This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.

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