Countdown to Retirement – Your Last Year at Work

Retirement reality starts to hit home around six to 12 months before you leave work.  You become more focused on future lifestyle and wonder whether your retirement nest egg will be adequate for your plans.

At least one year before you retire:

1.  Review your company pension benefits

You have several decisions to make regarding your pension benefit.  If you take a monthly payment, you’ll likely have several payment options to consider. 

If you plan to retire prior to age 65, some Defined Benefit Pension Plans include a bridge benefit to regulate your pension payments.  If you make this choice, you’ll receive a higher pension payment until you start taking CPP at age 65, then it is reduced.

If you have a defined contribution pension plan, you’ll have a large sum of money that needs to be transformed into income.

Do you still have a pension from a former employer?  Be sure to contact your old company to get all the details and make sure they have your contact information so there are no delays when you want to start drawing from it.

These decisions need to be made well ahead of your planned retirement date.

Related:  Should You Accept Your Pension or Take a Lump Sum

2.  Decide when to start taking CPP and OAS

You can start taking Canada Pension Plan benefits between the ages of 60 and 70.  It’s worth spending some time figuring out which age is right for you. 

When should you start tapping into the Old Age Security benefit?  You can start at age 65 or delay up to age 70 for a larger payment.

Research the tax and income factors that could guide you in your choice.  Evaluate all the pros and cons.

If you are married, the planning should involve both spouse’s benefits.

3.  Develop a withdrawal strategy

Once you’ve verified your base pension income, it’s time to review your assets and retirement savings to determine the best ways to use them to best support your retirement lifestyle.  

Related:  Determining Your Retirement Income

Decide which resources to tap into and the sequence of those withdrawals.

Should you convert to a RRIF or purchase an Annuity, or some combination of the two?

The bottom line

The year before you retire is a crucial time from a planning perspective.  It’s a time to make some important decisions so you can make a smooth transition.  Income streams need to be established.  CPP and OAS applications need to be submitted at least six to nine months before your intended retirement date. 

You want to minimize taxes and optimize your portfolio for both income and growth.

This might be a good point to engage the services of a financial planner.

Retirement can be a great time of life, but you need proper planning to help ensure your financial success.  Don’t just leave it to chance.

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