When it’s time to retire and you no longer receive a salary, it’s time to consider disbursing your savings. How to go about it in order to avoid errors and thus promote optimal use of the savings that we will have spent a lifetime putting aside? Martin Lalonde, portfolio manager and president of Rivemont Investissements, offers some leads to follow.
Posted yesterday at 9:00 a.m.
The budget
“It is essential to draw up a list of current expenses in order to establish the amount of disbursement necessary, indicates Mr. Lalonde from the outset. People are going to take it simplistically and say they’ll need 60% or 70% of what they were spending before retirement. We must go further than that. Especially when you’ve always said to yourself: “I promise myself to do such and such a thing in retirement”. Unfortunately, the vast majority of people do not budget for this. »
Disburse to the correct account
“It is very important to know whether it is better to withdraw money from registered (RRSP), non-registered (TFSA) or cash accounts,” recalls Martin Lalonde. For example, in a given case, a person who would like to take full advantage of his QPP pension will start by disbursing his RRSPs. But there is no universal recipe. Each case is unique. You have to get the right things out of the right baskets at the right time. Hence the importance of doing business with a tax specialist, an accountant or a financial planner. »
PHOTO ROBERT SKINNER, LA PRESSE ARCHIVES
A person who hasn’t done their homework and educated themselves on the best way to disburse their assets may regret it.
Martin Lalonde, Portfolio Manager and President of Rivemont Investissements
Ongoing process and level of risk
According to Martin Lalonde, disbursement is, for most people, the conclusion of many savings efforts. “Yet the work is not finished,” he says. There are still important decisions to be made. It is an ongoing process. Especially if you don’t take advantage of a pension fund. For example, it is not always advantageous to reduce the level of risk in your investments at retirement. If someone has accumulated savings from 30 to 60 years (so for 30 years) and the life expectancy is 85 years, it means that the period of disbursement is almost as long as the period of accumulation. A period of 25 to 30 years has several economic cycles. If we lower our level of risk too much in retirement, income could fall. You have to keep growing your nest egg. »
Know your RRQ profile
“It’s an important calculation to make in order to know whether or not it is advantageous to delay until age 65 before withdrawing money from the Quebec Pension Plan. This can allow you to benefit from a bonus in your pension. A specialist (tax expert, accountant or financial planner) will help to see things more clearly and maximize retirement income. And you don’t have to be rich for that. »
Real estate, insurance and life annuity
“If the saver has the means, he can undertake his disbursement and acquire an income building. This can be interesting for people who would like to sell their big house and go into a smaller one; they will be able to occupy a rent of which they are owners. It allows you to stay active when you manage your own building. Also, it is possible to subscribe to certain insurances, because the insurance needs continue. Finally, as interest rates are higher, life annuities can become attractive. When rates are up, it costs less to buy an annuity. »