Things to consider when entering retirement

Taking a proactive approach to managing your retirement savings can make all the difference in how the transition will affect your well-being. Let’s take a closer look at how you can prepare for both expected and unexpected situations in retirement planning to ensure a smooth transition into any new phase of your life. 

What should I expect when entering retirement?

The transition into retirement is different for everyone. Some people ease into it gradually by working part time to continue receiving income while others choose to permanently stop working altogether. The two most important decisions to consider are when you want to retire and where your retirement income will come from.

1 When should you retire?

Deciding when to retire requires thinking through several factors:

• Healthcare needs and expenses
• Housing expenses
• Lifestyle and living expenses

You may want to meet with a financial advisor to help you decide when is the best time to retire.

2 Where will your retirement income come from?

Once you have an approximate retirement date in mind, think about where your retirement income will come from. You may have a number of income streams available to you, including government-funded pensions, retirement savings plans, and retirement income plans.

Government-funded pensions

Government-funded pensions are designed to help individuals maintain financial security during retirement. Here are some ways you can receive income when you retire:

• OAS—The Old Age Security (OAS) plan offers payments to individuals who are 65 years or older and meet the income and residency requirements in Canada.
• CPP/QPP—The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) are both contributory programs that offer payments to Canadian workers and their families. Contributions are made throughout an individual’s working years and are then based on the amount contributed and the individual’s earnings history.
• GIS—The Guaranteed Income Supplement (GIS) is a nontaxable payment offered to low-income individuals to provide them with additional financial support.  

Retirement savings plans

You might have a variety of group or individual savings plans and accounts such as:

• Registered Pension Plan
• Registered Retirement Savings Plan
• Tax-free savings account
• Deferred Profit-Sharing Plan
• Employee Profit-Sharing Plan
• Non-registered savings plan 

Retirement income plans

When you turn 71, you’ll be required by law to convert some of your group retirement savings plans to retirement income plans. One option for converting registered savings to income is to transfer them to a group retirement income plan (GRIP).

There are several types of GRIPs to choose from, including a Registered Retirement Income Fund, a Life Income Fund, and a life or fixed-term annuity. Each option has specific features and considerations, including provincial regulations, minimum and maximum withdrawal amounts, tax implications, and income guarantees. With all the options available to you, an advisor or transition specialist can be a valuable resource for evaluating each option and determining how to manage your retirement income needs. 

Expect the unexpected

There are many factors that might affect when and how you enter retirement. A change in employment or unexpected health concerns can change your plans for retirement in an instant.

Let's say you lose your job or leave your current employer. You'll have to decide where to keep your retirement savings and what to do next. If you choose to continue investing your retirement savings, you may have the option to either stay in your current plan, move to another account, transfer them to an individual savings plan, or withdraw as cash. Each of these options has its unique pros and cons, so evaluate each one carefully to make the decision that's best for your situation.

Be mindful about how flexible and customizable the option you choose is. Ideally you want to be able to adjust your investments according to any changes that may arise, customize your risk tolerance, and have a wide range of alternatives to choose from. Additionally, you want to look for a plan that offers tax benefits and lower fees.

Retirement income can be complicated to understand and manage. Once again, you may want to speak to a financial advisor to help you understand all the features of each option.

The value of an advisor during a transition

We all know that life is full of transitions, and we can't always predict when or how they'll happen. Planning ahead can help you avoid financial stress and make these transitions a little easier. While you may want to do the research and planning on your own, you may also want to have a trusted advisor who can support you to adjust for these changes and make the most of your savings.

If you’re a member of a Manulife group savings plan, an advisor is just a click away.