Know what you need for retirement
(NC) — Whether you’re already retired or soon to be retired, worries about how far your savings will take you have probably crossed your mind more than once.
Gaetan Ruest, a retirement income sustainability expert at Investors Group, says the level and frequency of income you will need and the withdrawal rate from your investments, including Registered Retirement Savings Plans, depends on a number of factors.
“The number of years you plan to be retired, whether you are a conservative investor or more aggressive, and whether you want to receive income monthly or less frequently, are all key issues,” he explained. “Obviously, the longer you plan to be retired the more prudent your income plan should be. And, if you are a more conservative investor you should plan on a lower withdrawal. But the key factor is how much you plan to spend in retirement.”
Ruest suggests five steps towards determining a basic retirement income strategy:
1. Add up your income from sourcesother than your personal retirement savings such as the Canada Pension Plan/Québec Pension Plan (CPP/QPP), Old Age Security (OAS) and company pension plans.
2. Add up your expenses in retirement, both essential and discretionary.
3. Assess the gap between your known income and your expenses.
4. Determine the required withdrawal rate from your assets to bridge the gap between your income and your expenses.
5. Make adjustments if your expected withdrawal rate is too high, based on the projected returns from your savings and investments.
Specialists like Ruest suggest you monitor your plan and adjust your strategy to improve the long term sustainability of your investment income—otherwise you may find yourself needing to reduce the scope of your retirement plans.