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Retirement: Before and After

Retirement is something many of us long for and yet rarely give a moments thought in planning for. The average person works for 30 years and retires around 65 years of age. Given that the average life expectancy is around 83 years, the majority of people will be retired for about 20 years! That's a long time to go without earning a wage or having something to do for eight hours five days a week. How does one survive financially and what does one do to alleviate boredom? The best advice is to save as much money as is possible. To be more specific, taking into account inflation and desired living style when retired, most people should be saving about 13% of their gross annual income per year. One should save enough to replace 70-80% of his/her gross income to live on when retired or save to replace 100% of the net disposable income. The earlier one begins saving for retirement, the less that needs to be saved each year as there will be more years to save the same amount of money.

When someone retires, there are many options for utilizing the money saved. RRSP's must be withdrawn by the end of the year of a person's 69th birthday as either cash, an annuity, or by converting it to an RRIF. To save some tax, make an RRSP contribution before December 31 of the year you turn 69.

The three most common annuities are: term-certain annuities, which are payable for a fixed number of years; single life annuities, which are payable for as long as you live; and joint-and-last-survivor annuities, which are payable as long as you or your spouse lives. However, annuities are bad options when interest rates are low.

Stocks, bonds, mutual funds, and GIC's can be used for investment in RRIF's. Strip bonds accrue interest and can be packaged into coupon annuity packages or retirement savings packages. If converting funds to an RRIF, consolidating into one plan makes management easier. Any funds located in tax shelters will be taxed upon their removal as will unsheltered funds, however, the interest rate charged will depend on the retiree's age and sex. Obtain the KPMG's Tax Planning For You and Your Family to help you.

Retirees are also eligible to receive various government payments on a monthly or more frequent basis and are guaranteed for a certain period of time (5, 10 or 15 years). Such government payments are protected from inflation and survivor benefits are based on the percentage of income earned by the deceased. Government programs include

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