Health care professionals have endured a lot in recent years, and many are burning out. If you’re considering early retirement, you may wonder what that entails. Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, joins Kim Parlee to discuss the key things to keep in mind.
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* If you are a health care professional, you have endured some tough times over the last few years. It's been pretty stressful. And that brings us to today's Ask MoneyTalk question. Nicole Ewing is Director of Tax and Estate Planning. She joins us now.
* Question is, Nicole, as a health care professional, I had planned to retire in five years, but I'm burning out. Can I retire early?
* Well, as always, our health is our priority and we need to take care of that. And so if burnout is an issue, we really do need to focus on that and find a way, if we can, to pull back on that work. So when we look at whether or not when we can retire, when that might be, we need to look at our income sources. We need to look at where we would be drawing down money if we no longer have a salary.
* So this will depend on whether you're an employed health care professional or whether you have a corporation. Are you pulling out dividends from your corporation? And what's the strategy for doing that over the long term? What are your savings? Do you have RRSPs? Do you have private pension plans?
* Perhaps you're thinking about the government benefits, like CPP, Canada Pension Plan, or Old Age Security. Now, those are likely not going to kick in for some time. So we'd be looking at whether or not you have the funds to bridge that gap until those government benefits begin to be collected, and being mindful that if we collect those early, the amount that we're able to pull from them will be reduced as well.
* So if we're thinking about that retirement we need to think about what our lifestyle cost is going to be and really build out the budget to see whether or not we're in a position to retire completely, or perhaps just pull back a little bit.
* Yeah, the lifestyle cost, I mean, you talk about, this really comes down to where you had a plan to do it at a certain time, you will not have the same amount as you would have with your original plan. So you need to think about that, and just maybe the lifestyle cost needs to change, which means the lifestyle needs to change.
* Exactly. Exactly. And you may have some of those costs being reduced as well. So we might not have some of the dry cleaning fees or the car expenses or the commuting expenses. So we might be able to reduce some of the costs that we're experiencing now. But we certainly need to do, to revise the plan that we were working from before, working with our professionals to determine what needs to change in terms of the assumptions that have been built into the plan. Because our plan is only as solid as those assumptions are. So if they have changed, if we have retired much earlier than expected, we will need to do an overall review of our financial planning strategy.
* I know a lot of people, and not just health care professionals, sometimes they retire, they kind of get a break and can recover somewhat from the burnout and then decide, you know what, I'd like to come back maybe part-time and help with things. What financial impact can that have?
* Well, as I mentioned with the CPP, it is calculated based on how long you were in the workforce for. So if we go back into the workforce, then that might potentially be impacting that calculation as well. If we've already taken our CPP or OAS and we're now going back into the workforce, we need to be mindful of the income that we are going to be generating because it could potentially have an impact on our OAS and whether or not there's going to be any clawback that would apply to us if we've bumped ourselves into that higher income strategy.
* And we want to look at, as well, what those costs might be. And if we are getting back into the workforce, some of those costs that I said we'd be saving might come back on the table. So we'll have our commuting costs. We might have some of those extra expenses that go along with leaving the house every day and going off to work.
* So I would really recommend working with a professional and working with your financial advisor, your team of advisors, to develop a plan that works for you and build that flexibility in. Just say, what if? What if I want to come back out of retirement? What does that look like for me?
* Nicole, thanks so much. That is Nicole Ewing. And that is today's Ask MoneyTalk. And if you have a question, send it in to moneytalk@td.com.
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* If you are a health care professional, you have endured some tough times over the last few years. It's been pretty stressful. And that brings us to today's Ask MoneyTalk question. Nicole Ewing is Director of Tax and Estate Planning. She joins us now.
* Question is, Nicole, as a health care professional, I had planned to retire in five years, but I'm burning out. Can I retire early?
* Well, as always, our health is our priority and we need to take care of that. And so if burnout is an issue, we really do need to focus on that and find a way, if we can, to pull back on that work. So when we look at whether or not when we can retire, when that might be, we need to look at our income sources. We need to look at where we would be drawing down money if we no longer have a salary.
* So this will depend on whether you're an employed health care professional or whether you have a corporation. Are you pulling out dividends from your corporation? And what's the strategy for doing that over the long term? What are your savings? Do you have RRSPs? Do you have private pension plans?
* Perhaps you're thinking about the government benefits, like CPP, Canada Pension Plan, or Old Age Security. Now, those are likely not going to kick in for some time. So we'd be looking at whether or not you have the funds to bridge that gap until those government benefits begin to be collected, and being mindful that if we collect those early, the amount that we're able to pull from them will be reduced as well.
* So if we're thinking about that retirement we need to think about what our lifestyle cost is going to be and really build out the budget to see whether or not we're in a position to retire completely, or perhaps just pull back a little bit.
* Yeah, the lifestyle cost, I mean, you talk about, this really comes down to where you had a plan to do it at a certain time, you will not have the same amount as you would have with your original plan. So you need to think about that, and just maybe the lifestyle cost needs to change, which means the lifestyle needs to change.
* Exactly. Exactly. And you may have some of those costs being reduced as well. So we might not have some of the dry cleaning fees or the car expenses or the commuting expenses. So we might be able to reduce some of the costs that we're experiencing now. But we certainly need to do, to revise the plan that we were working from before, working with our professionals to determine what needs to change in terms of the assumptions that have been built into the plan. Because our plan is only as solid as those assumptions are. So if they have changed, if we have retired much earlier than expected, we will need to do an overall review of our financial planning strategy.
* I know a lot of people, and not just health care professionals, sometimes they retire, they kind of get a break and can recover somewhat from the burnout and then decide, you know what, I'd like to come back maybe part-time and help with things. What financial impact can that have?
* Well, as I mentioned with the CPP, it is calculated based on how long you were in the workforce for. So if we go back into the workforce, then that might potentially be impacting that calculation as well. If we've already taken our CPP or OAS and we're now going back into the workforce, we need to be mindful of the income that we are going to be generating because it could potentially have an impact on our OAS and whether or not there's going to be any clawback that would apply to us if we've bumped ourselves into that higher income strategy.
* And we want to look at, as well, what those costs might be. And if we are getting back into the workforce, some of those costs that I said we'd be saving might come back on the table. So we'll have our commuting costs. We might have some of those extra expenses that go along with leaving the house every day and going off to work.
* So I would really recommend working with a professional and working with your financial advisor, your team of advisors, to develop a plan that works for you and build that flexibility in. Just say, what if? What if I want to come back out of retirement? What does that look like for me?
* Nicole, thanks so much. That is Nicole Ewing. And that is today's Ask MoneyTalk. And if you have a question, send it in to moneytalk@td.com.
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