It's Your Money  

Five steps to retire in five years time

Ready for retirement

Congratulations! You’re five short years away from retirement.

For the last couple of decades, you’ve been saving diligently, but now that you’re so close to the big day, does your financial plan need to change?

Here are five steps for plotting a financially smart retirement that you can start in advance of your last workday.

Tidy your finances

You want to enter retirement with your finances in top shape, so rerun the numbers to make sure you have enough to support your ideal lifestyle.

That may mean ensuring you have money for travel and hobbies in the first few years of retirement, but factor in your older senior years, too, when the high cost of care could come into play.

Be sure to stress test your retirement projections with “what if” scenarios, such as an inflation spike, market crash or other major event.

Itemize your income

The timing of your retirement could impact some of your income sources and that should be looked into now, before you stop working. Add up your company pensions based on your retirement date and your RRSPs and TFSAs.

Then, understand the nuances of government programs. For the Canada Pension Plan (CPP), you can receive benefits any time between the ages of 60 and 70, but they are reduced by 0.6 of 1 per cent for each month prior to age 65. Old Age Security (OAS) is available as of age 65, but it is clawed back when your net income exceeds certain levels. Maybe you don’t feel you need these government income sources, but best to know what you qualify for, in advance, so you can choose.

Consider taxes

You should also be thinking about how to minimize tax in retirement. By age 71, you must convert RRSPs into Registered Retirement Income Funds (RRIF), and withdrawals are fully taxable. Start crunching the numbers so you’re ready to withdraw the ideal amount to keep taxes low while still funding your lifestyle.

Some ideas to consider include income splitting with your spouse on your pensions and assets. You may want to use a spousal RRSP, so your money can get taxed in the lower income spouse’s hands come withdrawal time.

If you are likely to have a high income in retirement, but have more money to save now, think about putting as much as possible into a TFSA to avoid a tax burden later. Your financial planner may have other smart tax strategies that can be set up now.

Review your portfolio

When it comes to investments, now is the time to make any changes based on your close-to-retirement horizon. Consider the possibility of a(nother) market correction. Should some of your investments be moved into safer fixed-income securities? Inflation over the next decades can erode the buying power of your savings, so be sure you are still growing your portfolio before retirement and even into your earlier retirement years.

Plan to enjoy life

Your retirement should be years of the adventures you dreamed about – now, and not when you’ve reached your retirement date, is the time to plan them.

A certified financial planner, with advanced financial planning software, can help you synchronize all the dimensions of your financial plan. They’ll be able to make suggestions that will make the most sense for your unique set of circumstances.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

More It's Your Money articles

About the Author

Brett has worked in the financial advice industry for over 15 years and is designated as a chartered investment manager(CIM) and certified financial planner (CFP).

In 2014, Brett was appointed to the board of directors of FP Canada (the national professional body for financial planning) and spent seven years on the board, including his final two as board chair. More recently, he was appointed to the Financial Planning Standards Board (FPSB), which is the international professional body for this industry with a three-year term beginning in April 2023.

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy-to-understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the national and global boards focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns or if you’d like a referral to a qualified CFP professional in your area by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

Previous Stories