Nine Key Issues for Pre-Retirement Planning

Planning for retirement is an old issue, but now there’s a new take on it: pre-retirement planning.  In the past, the focus was on how much pension income was needed to replace actively earned income from employment, to live comfortably until death. But these days retirement is anything but traditional and with employer pensions on the decline, especially defined benefit plans, many other factors must be taken into account when planning for life after work.

Planning for the Boomers brings several new technical issues not only to the management of income and capital but also to many other aspects, and for many people in today’s retirement planning environment:

1. A Longer Work Life: That means more employment and self-employment earnings in retirement, which requires new ways of planning for RRSPs, TFSAs, CPP and OAS benefits.
2. Real Estate:  More wealth and/or more debt, especially for those with one or more residences.
3. Double Incomes:  The pension accumulations of two people can be subject to income splitting, an opportunity not available in previous generations.
4. Tax-free Accumulations:  Home equity, TFSAs, insurance for life and health all bring new wealth planning opportunities.
5. Retirement Readiness: The Boomer male or female may be ready to retire, but the financial needs of others in the family may prohibit them from doing so (for example, they may still have to help put their kids through university, assist with the care and support of elderly relatives, or XXX). This may ring even truer for the Millennial generation, many of whom have pushed their childbearing years into their thirties.
6. More Minis: Grandparents may have younger grandchildren than in previous generations, as Millennials have their children later; these new families may require continued support from grandparents, especially for housing and for education planning for children.
7. Inheritances:  There will be a significant transfer of wealth both to the Boomers and from the Boomers to the next generation. These pools of capital need to be invested responsibly at a time when financial literacy is significantly lacking and trust tax rules are changing.
8. Potential Conflict:  Family complexities—including blended families and family members that are spread afar in a mobile, global economy—make planning with multiple stakeholders difficult.
9. Higher Taxation: The high tax rates that Boomers and their families face are unprecedented, on both income and capital, particularly in the absence of income averaging and income splitting.

Specialists in tax-efficient retirement planning must take all of these factors into account when developing strategies for income as well as the ongoing management of capital assets in retirement.

The Distinguished Advisor Workshops took on this area of specialization in its annual spring sessions, concluding May 31. Summer School for instructor-supported online training begins in June.  Early registrations are being accepted until June 30.  In addition, the Distinguished Advisor Videos on this subject will be available to supplement studies. For more information and to register please call 1-866-953-4769. Click here to register online.

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