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Advice from an expert: Planning your retirement.

We asked Lisa Armstrong, Member Financial Relationship Advisor (MFRA) at SCU, to highlight some of the questions members might have when planning for retirement. Here is what she had to say:

What do you recommend as a first step for someone who is starting to think about retirement?
It’s not easy to know how much money you’ll need to save for retirement, but a great place to start is with the retirement nest egg calculator available on our website within the Retirement Planner Calculators. This tool can help you determine how much money you need to save for retirement by using information like your age, the age you want to retire, and your current annual income. Play around with this tool to find the best retirement age for your financial situation or to help you decide how much you need to start saving. It’s a great tool to use at any stage in your retirement planning and will give you an idea of what you want to focus on when you book an appointment with an MFRA.

What should members bring with them when meeting with an MFRA about retirement?
When meeting with an MFRA, it’s helpful to have a list of your monthly expenses and sources of income. We’ll look at the current value of Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs), pension, and any other sources of monthly income, such as Old Age Security (OAS) and Canada Pension Plan (CPP), to calculate how much money you will have when you retire. We’ll also cross-reference your expected retirement income to your monthly expenses to establish how much you will need to draw from your RRSPs annually when you retire. It’s important to remember that everyone’s needs are different, and we’ll work together to find the best solution for each member based on their individual lifestyle.

Do I need RRSPs and RRIFs?
Think of an RRSP as a holding account where you accumulate savings, and a RRIF as the vehicle to pay out those savings. Money from an RRSP is tax protected until it is withdrawn, but you can only contribute to them until the end of the calendar year when you turn 71, at which point they must be converted to a RRIF. But there’s more. Between the ages of 65 and 71, you can transfer $2,000 from your RRSP into a RRIF annually, allowing you access of up to $2,000 in Pension Income Credits. At that point there is a minimum amount you must withdraw each year, which is calculated based on your age and the amount of money in the account as of January 1st. 

Beyond age 71, RRIFs keep your RRSP savings tax-sheltered so you can continue to grow your nest egg at competitive interest rates, without paying taxes as you earn. You will only be taxed on that income in the year of withdrawal. 

What do the recent changes to the Pension Benefits Act in Manitoba mean? 
A recent change implemented to the Pension Benefits Act in Manitoba allows individuals aged 65 and over to unlock 100% of their funds from their locked-in retirement accounts (LIRA) or life income fund (LIF). At age 55, 50% of your LIRA can be transferred to a LIF and the other 50% to a Prescribed Retirement Income Fund (PRIF). Once you turn 65, you have the option to transfer 100% of your LIRA or LIF into a RRIF, giving you access to your money as needed, without any limitation on how much you can withdraw each year, keeping in mind that withholding tax will apply on any amounts withdrawn above the minimum requirement.

Planning for retirement can seem overwhelming, but you don’t have to do this alone. SCU is here to provide you options and guide you through the process. Our MFRAs are always happy to meet with you and review your plan to help you find the best solution to suit your financial needs.

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