Reality Test Your Financial Plan – MoneySense

I am 63 years old and single and living in Ontario. My house is worth $1,200,000 and my investments are also worth $1,200,000. I have a small indexed pension of $17,000 and expect full CPP. What do you think?
-John

A. Many years ago, part of my training in the insurance industry was to find a person’s hot button and press it! Is there any chance the planner has tossed around ideas in the same way to hook you? There’s nothing wrong with that, because before a planner can help you, you need to be aware that there’s something to work out. (That said, I also think there was a big chunk missing from your conversation, which I’ll share with you later.)

Let’s have fun browsing through common advice for people in your situation. Keeping in mind that all of the points listed below represent good advice, we’ll see how each could be used as a hook.

Delay CPP to 70

I’m sure all your friends tell you to take Canada Pension Plan (PRC) as soon as possible. So when a professional suggests deferring your CPP to age 70, allowing your benefits to increase by 8.4% each year after age 65, and giving you a larger indexed life annuity, that should catch your eye.

However, the reasons for the deferral are even better: the initial amount of CPP benefits is based on the YMPE (annual maximum pensionable earnings) and not on the CPI (the general rate of inflation). Last year the YMPE increased by approximately 5%, which means that if you don’t receive CPP, your initial benefit will be based on an amount that is 5% higher than last year’s amount. If you already collect CPP, you only got a 1% raise to reflect changes in the CPI.

Sell ​​your high cost mutual funds for low cost ETFs

If paying a fee really bothers you, a cheaper alternative would make a good hook. Now there’s a company trying to hit the hot button on people and grow their business by announcing that you can retire 30% richer just by cutting fees. Maybe, maybe not. Investment returns and planning services also play a role in earning money.

Identify the account to withdraw first: RRIF, non-registered or TFSA

When you have tax-exempt, partially tax-exempt, and 100% taxable accounts, the question of where to tap first can seem like a very complicated puzzle. If someone comes along saying they can simplify this, it can be a big relief for you.

However, I have modeled this many times and there is often very little difference in the count you are drawing from; often the best approach is to be as tax efficient as possible each calendar year.