A Retirement Income Planning Tool
A big challenge faced by retirees is how to manage the timing and sequence of withdrawals from their retirement savings and integrate it with other pension income sources.
You want to have enough income for your desired lifestyle, ensure it will last as long as you do, and only have to pay your fair share to the tax man.
How you draw down your retirement savings could save you thousands of dollars, but it can be tricky to figure out. Do you take your pension payments early and let your investments grow? Or, should you defer those benefits and start withdrawing from your portfolio instead? Which accounts do you tap into first?
On top of that, different types of income draw different tax rates. You need to consider your tax bracket, tax credits and clawbacks of government benefits and income splitting with your spouse.
I know there’s loads of information on line and plenty of calculators, but it can be difficult and time consuming to work it all out and, in many cases, they don’t quite fit your unique circumstances.
To make things easier for you, consider using this helpful retirement income planning tool called Cascades Financial Solutions.
Cascades is used by financial advisors, but it’s also available to regular consumers for a reasonable $85.
Once you sign up you fill out the online questionnaire and, if you have your financial information on hand – brokerage and pension statements, tax return – it doesn’t take long.
You can use the software for 30 days and run different scenarios during that time. Which income source is the most tax-efficient? Does it pay to delay the receipt of government benefits? It helps you compare the financial implications and outcomes of your many choices, allowing you to determine which would work best for you.
Cascades generates a comprehensive year by year projection showing exactly what your sources of income will be, the tax consequences and any benefit clawbacks, as well as net worth statements.
An investment summary shows graphically how your savings slowly decline.
The program then makes several recommendations for a “winning strategy.”
The bottom line
During your working years your income is pretty straightforward. Once you’re retired it becomes more complex. You want to use all your income sources in the most effective way so you can generate your desired net spendable retirement income and minimize taxes.
Cascades is a valuable tool that can be used by retired people as well as those still thinking about their retirement date.
It could influence the timing of several financial decisions that must be made because it helps you plan how to start drawing down income from various sources.
It gives you the confidence to make better choices and better choices can add hundreds of thousands of dollars to your cash flow and net worth.