People spend their whole lives saving for retirement. But when the time comes to withdraw funds, it can be easy to feel anxious about tapping those savings. Kim Parlee speaks with Chris Gandhu, a High Net Worth Planner with TD Wealth, about what people can do to alleviate their fears so they may retire with confidence.
- Many of us save our entire lives for our retirement. But when the time comes for you actually to withdraw those funds, you might find that a bit scary. After all, you spent most of your life building up those funds to have them last for the rest of your life. And if you're anxious about how long they're going to last, the pandemic may have added to that anxiety.
Chris Gandhu is a High Net Worth Planner with TD Wealth, and he joins us for today's Ask MoneyTalk question. Chris, the question is, how do I get over my fear of withdrawing from my retirement savings?
- All right, Kim, I think this is quite common. When people look into the future and they see uncertainty, and the pandemic adds to that uncertainty, then it's natural to be anxious. And that really is where a financial planner can help. Because they can look at your income sources, look at your future expenses, see how inflation and longevity may impact that, and give you a data-based analysis of what to expect. And once you have some tangible data in front of you, that helps to lessen that anxiety and worry.
- Let me talk to you a bit about timing, Chris, because for some people, they may have planned to retire early. And now they're-- because of what's going on-- even more scared to run out of money. And you say that timing is important.
- Yeah, for sure. I mean, there are some things that are in your control. Certainly, if you choose to retire early, that means there is less time for you to contribute to your retirement savings and, of course, a longer retirement period. So that has financial implications. Conversely, the opposite of that is that if you choose to work until 70, you've had a long savings horizon and less time to spend that money.
There is also some timing elements, Kim, that are perhaps out of your control. With your CPP pension, for instance, although you have some toggle room here, but the earliest you can take is 60, and the latest you can defer that to is age 70. A RRIF is somewhat similar. Typically, you would convert your RRSP into a pension, into the RRIF pension, in the year you turn 71. But there, you do have some flexibility. You could choose to make it into a RRIF sooner or simply make those RRSP withdrawals sooner.
Your company pension may have its own terms and conditions. Perhaps the most flexible tool that we have in our arsenal is the TFSA, because you're able to withdraw money at any point tax free. And in fact, what's a nice bonus with the TFSA is that you're able to recontribute that money so that room isn't lost, as long as you wait until the new fiscal year.
- Let me ask you about the company pension, if I could, and just maybe get a bit more detail about that. You said there is some flexibility, or could be some flexibility.
- Yeah, absolutely. I mean, first of all, with your company pension, they are all going to be different. But the easy answer is, if you want to retire early, of course, it's going to have less value to you. And if you choose to retire later, it's going to have a greater value. But sometimes you have the option, for instance, to decide, well, do I want a regular pension? Or do I want to take the lump sum? And that's a decision that you might want an advisor to help you with.
Sometimes at retirement, you have the option to decide, hey, do you want some survivor benefits? Is it 100% survivor benefit or a 50% survivor benefit? Do I want inflation protection, for instance? So again, these are some technical queries where you'd want an advisor to help out.
- What if I was planning to retire soon, and given everything that's going on, is it too late to make changes?
- No, obviously not. I think some fact-based analysis is always helpful. So even though your time horizon might be more immediate, I would encourage you to talk to an advisor. And on top of regular retirement planning, there could also be some tax strategies that this advisor could bring to the table that you previously weren't aware of.
- Chris, always a pleasure. Thanks so much.
- Thank you, Kim.
- Chris Gandhu, a High Net Worth Planner with TD Wealth. And a reminder, if you have any questions, if you would like to ask MoneyTalk a question, you can send it to firstname.lastname@example.org with the subject line "Ask MoneyTalk." And we will ask-- you ask us your question, we'll find the person for you to answer it. And keep in mind, you can always go to moneytalkgo.com to find a whole bunch of questions that have already been answered for you.