Do I have enough money to retire?Posted: June 20, 2012
Do I have enough money to retire? For many baby boomers, that is the burning question. Projecting after-tax cash flows over an average 15-year retirement period can be a daunting task. To ease the strain, the Knowledge Bureau has two retirement-planning calculators in its Toolkit ó Tax-Efficient Retirement Income Calculator and the CPP Income Calculator
Most retirees have several sources of income: public pensions ó Old Age Security (OAS) and Canada Pension Plan (CPP) ó as well as private pension income from registered pension plans (RPPs), RRSPs/RRIFs, or possibly Deferred Profit-Sharing Plans (DPSP). They may also have foreign-source pensions, not to mention investment income. Income from some sources will increase over time through indexation while income from other sources will decrease as the capital is diminished. And there's the income tax component to take into account.
The Knowledge Bureauís calculators are designed to deal with these issues. The Tax-Efficient Retirement Income Calculator, for example, allows you to look at the various income streams over the entire retirement period. By projecting how each source of income will vary over time and by adjusting for the cumulative effects of inflation and taxation, the calculator paints a picture of the retiree's income stream during retirement. Then, by adding the projected monthly expenses, you can identify excesses and shortfalls and adjust your plan accordingly.
Another burning question for those approaching age 60 is when to begin receiving CPP benefits. The days of having to stop work in order to get CPP are behind us. However, if you take your CPP and continue to earn pensionable income, you will have to continue contributing ó at least until age 65. The factors to consider when deciding when to start taking CPP include:
- to how much CPP benefits are you entitled?
are you receiving a CPP survivor pension?
will you keep earning income and, if so, how much?
- how long will you live?
The CPP Income Calculator will take all of these factors into account and project your CPP benefit for each option available, from age 60 to age 70.
The Tax-Efficient Retirement Income Calculator and the CPP Income Calculator are just two of the calculators available in the Knowledge Bureau Toolkit. If you're not already using them, register now for a free trial.