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Essential Wealth Management Strategies for Canadians Approaching Retirement: Maximizing Benefits and Securing Your Financial Future at 60 and Beyond
As you approach your 60th birthday, it’s an ideal time to start refining your financial plan to ensure a comfortable and secure retirement. With key milestones on the horizon, such as eligibility for government benefits and important tax considerations, now is the moment to assess your wealth management strategy.
Planning for retirement involves many important decisions, and having the right expertise can make all the difference. Under our Wealth Optimization umbrella, we offer a full suite of tools and knowledgeable professionals to assist you. This guide will walk you through the essential steps to maximize your entitlements, optimize your savings, and secure your financial future. Whether you’re still working or preparing to enjoy the next chapter, careful planning today can help ensure a more confident tomorrow.
Income and Cash Flow Planning
- Pension Income
- If you have a workplace pension plan, decide on the timing and form of pension income. Some plans offer a lump sum, annuity, or phased retirement options.
- Tax Strategies
- Pension Income Splitting: At 65, you can split eligible pension income with your spouse or common-law partner, potentially lowering your overall tax bill.
- RRSP/RRIF Withdrawals: Consider your income needs and the impact of withdrawals on your tax bracket. Strategic withdrawals may reduce OAS clawback or other tax impacts.
- Retirement Spending Plan
- Develop a detailed retirement budget considering your expected income sources, living expenses, healthcare costs, and discretionary spending. Adjust your spending plan to maintain your desired lifestyle.
Estate Planning
- Updating Your Will and Power of Attorney
- Ensure that your will reflects your current wishes and consider appointing a power of attorney for both property and personal care.
- Estate Taxes
- Understand the tax implications of your estate upon death, particularly regarding RRSP/RRIF and real estate. Consider strategies to minimize estate taxes, such as gifting during your lifetime or using life insurance to cover potential taxes.
- Insurance Considerations
- Review existing life insurance policies to ensure they align with your current financial situation and estate planning goals
- Long Term Care
- While government-funded options exist, they may not meet all needs, making it essential to account for out-of-pocket expenses. Private long-term care costs approximately $5,000 per month, with rates even higher in other parts of the country. Factoring these expenses into your financial plan can help ensure you have the resources needed for quality care in the future.
Government Benefits and Entitlements
- Canada Pension Plan (CPP)
- Eligibility: CPP can be taken as early as age 60. However, if you start receiving it before 65, your benefits will be reduced by a set percentage for each month before your 65th birthday (0.6% per month as of 2023).
- Consideration: Delaying CPP to after 65 increases the monthly benefit by 0.7% for each month of delay, up to age 70.
- Old Age Security (OAS)
- Eligibility: OAS is available at age 65. There is an option to defer OAS payments up to age 70, increasing the monthly benefit by 0.6% for each month of deferral.
- Consideration: Be aware of the OAS claw back if your net income exceeds a certain threshold (around $90,997 in 2025).
- Guaranteed Income Supplement (GIS)
- Eligibility: Available to low-income individuals receiving OAS. GIS is based on income and marital status and provides additional support to those with limited income.
- Tax-Free Savings Account (TFSA)
- Consideration: Maximize TFSA contributions to take advantage of tax-free growth and withdrawals. At 60, you may have unused contribution room, which can be a great tool for retirement savings and estate equalization.
- Registered Retirement Savings Plan (RRSP)
- Consideration: Continue contributing to your RRSP if you have contribution room, and consider how you will convert your RRSP to a RRIF (Registered Retirement Income Fund) by the end of the year you turn 71. Strategize the timing of RRSP withdrawals to minimize tax impacts, especially if you retire before 65. Converting some RRSP’s to a Registered Retirement Income Fund (RIFF) at age 65 will make you eligible for tax credit up to $2,000.00
Healthcare and Lifestyle Considerations
- Health Insurance
As you age, healthcare costs may increase. Consider supplemental health insurance if you are retiring and losing employer benefits. - Living Arrangements
Think about your long-term living arrangements, including the potential need for downsizing, relocating, or modifying your home to accommodate aging needs. - Planning for Longevity
Ensure your retirement plan is sustainable if you live longer than expected. Consider longevity risk and plan for the potential need for income beyond the average life expectancy. - Senior Drug Plan
Saskatchewan residents aged 65+ with an income of $73,250 or less (as of 2024) can apply for the Saskatchewan Seniors’ Drug Plan through the Saskatchewan Ministry of Health. The drug plan covers most prescription medications under the Saskatchewan Formulary, capping costs at $25 per prescription plus dispensing fees.
By addressing these considerations, Canadians turning 60 can better prepare for retirement, ensuring they maximize their benefits and maintain a comfortable lifestyle throughout their retirement years. Contact us today so we can discuss your current and future plans.
Additonal Resources
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