CSANews 107

Finance By James Dolan 12 ways take control of your income during retirement Ideas and strategies for getting a little “more” coming through your door 1. Get smart about spending: the 4% rule Fact: one of the simplest, most effective ways to boost your retirement income is to ensure that you don’t spend too much of it right off the top. To do that, you’ll need to set a reasonable annual spending limit, expressed as a percentage of your overall portfolio. A generation ago, a 6% withdrawal rate was what most professional wealth advisors and financial planners recommended. In large part, that number was based on longevity: an average Canadian who retired at age 65, for example, could expect to live for perhaps 15 years, give or take a few years on either side. Needless to say, things have changed. People are retiring earlier and they’re living longer. And interest rates aren’t nearly as high as they were in the past (although that looks to be changing – see below). Long story short: these days, a 4%withdrawal rate is probably a lot more reasonable. So if you have a portfolio of $1 million, you can withdraw $40,000 from that portfolio without significantly impacting your capital. Keep in mind that this is on top of CPP, OAS and any pension payments which you may have. Like any rule of thumb, this one comes with a couple of key assumptions: namely, it assumes a portfolio split of 50-50 between bonds and stocks, as well as a 30-year retirement. Feel free to adjust the number up or down based on your risk tolerance (more bonds = less risk = less return = lower withdrawal rate), or your longevity expectations (the longer you live = the longer your portfolio has to last = lower withdrawal rate). It’s best to think about the 4% rule as a starting point for a more in-depth examination of your personal spending habits and lifestyle goals. Early retirees would be wise to reduce their withdrawal rate to account for those extra years. The same goes for those of you who plan to spend on a large “bucket list” item (retirement cottage; grandkid’s education; trip around the world, etc.). Income: it can make or break your retirement. No matter what you plan to do during your years away from work, no matter where you plan to do it, or who you plan to do it with, you’ll need some form of income to pull it off. By now, most of us have thought about where that income will be coming from during retirement. A retirement portfolio. A rental property. Government benefits such as CPP or OAS. Or, if we’re very lucky, a lifetime pension. But, let’s face it…a littlemore money coming through the door probably wouldn’t hurt. So the question becomes: how can you boost your income? Or, if you prefer, how can you cut your expenses so that your current income stretches a little further? Most important of all: how can you ensure that the income you’ve got doesn’t run out during your retirement? Good questions. Here are several possible answers. Not all of them will be relevant to all snowbirds at all times but, taken together, they form a solid library of income ideas for you to consider. 30 | www.snowbirds.org

RkJQdWJsaXNoZXIy MzMzNzMx