Pre-retirement workshop March Shafique Pirani, BA, CRM, EPC, CFP Senior Education Consultant

Transcription

1 Pre-retirement workshop March 2014 Shafique Pirani, BA, CRM, EPC, CFP Senior Education Consultant

2 Key Topics What retirement looks like today What does retirement mean to you? Next steps : how to prepare today for tomorrow

3 my financial future how do I see my retirement?

4 You have four friends who are all retired. How many will still have a mortgage? A. None B. One C. Four One Almost 1 in 4 retirees still have a mortgage

5 What percentage of men say they will still be working at age 66 because they want to? A. 5% B. 32% C. 75% 32% Apparently it s a guy thing

6 In 1981 one in ten people were older than 65. In 2016, how many people will be over 65? About 2 in 10 A. Still 1 in 10 B. About 2 in10 C. 8 in 10

7 what retirement looks like today

8 WHAT DO YOU WANT?

9

10 Converting dreams to reality How much will your retirement lifestyle cost and how will you get there?

11 What s important to me? Dreams Wants Needs

12 Your priorities will change

13 Your retirement has many parts Stay the same (keeping in line with inflation) Expenses Decrease Increase Groceries Property taxes Homeowner s insurance Utility bills Rent Vehicle Life insurance Mortgage Savings for retirement Savings for pension plan No CPP/QPP/EI payment Commute/parking Work-related expenses Taxes Hobbies Entertainment Travel Health care

14 Value of money historical comparison 1980 TODAY A basket of goods and services + $100 $271 $6,715 $18,140 * Cost of a car Cost of a house $110,292 $366,773 ** The rule of 72: 72 divided by the estimated inflation rate that is approximately how many years it will take inflation to double your costs. + Inflation impact of the cost of groceries is measured by the CPI sub-index for food purchased from stores. Data source: Statistics Canada * Canadian MSRP for a 2012 Honda Civic Sedan DX with air conditioning **Average price for a detached bungalow in Canada, as at September 30, 2012.

15 my retirement lifestyle what will it cost?

16 Interesting facts Four in five Canadians do not have a written financial plan. 86% of Canadians with a group savings plan would like more advice. Source: Sun Life Financial 2011 Unretirement Index Report

17 EVERYONE NEEDS A PLAN (you already have one!)

18 Your retirement plan: A long term strategy customized to you and your family designed to identify your future retirement income Matches your risk tolerance Includes all possible sources of income Provides peace of mind Considers changes in lifestyle once retired and the estimated costs

19 Understand where you are today How are you saving Do you contribute regularly Do you leave money on the table Are your investments diversified Are there other saving options you should consider

20 You and your spouse are 65 years old. What are the chances that one of you reach The age of 91?

21 How long should your money last? 65 Retirement 91 50% chance one spouse will live to age % chance one spouse will live to age 95 Source: Canadian Institute of Actuaries 1994 Uninsured Pensioner Mortality Table Projected to 2020.

22 How much pre-retirement income will you need?

23 my money Retirement Planner Determine how much you need to save now to provide you with your desired income level in retirement Adjust a number of variables as they change over time by updating your calculations in the Retirement planner Does not take the place of a real financial planner

24 my retirement lifestyle prepare today for tomorrow

25 Important considerations What will be your retirement income sources? Length of time you will rely on retirement income Inflation / your money losing value Rate of return on your investments Unexpected expenses

26 Getting ready to retire Switching saving to income Income sources Life and health insurance coverage Understand what products are available to you Understand your next steps to make retirement a reality

27 Age Retirement income comes from many sources Earliest company pension may be available Earliest CPP is available Average retirement age Earliest Old Age Security is available Latest registered savings plans must be converted to retirement income plans Your personal savings Work part time Employer pension (defined contribution) RRSP converted to income Savings converted to income for life Reduced CPP Canada Pension Plan (for life) Old Age Security (for life)

28 Government programs CPP Canada Pension Plan OAS GIS Old Age Security Guaranteed Income Supplement

29 Government programs CPP OAS GIS Eligibility Age 60 or older Made a contribution Age 65 or older Lived in Canada for at least 10 years after reaching age 18 Canadian citizen or legal resident Must be receiving OAS and have an income less than $16,367 (single) or $21,647 (couple) Payments Based on how much and how long you contributed Based on how long you lived in Canada as a Canadian citizen or legal resident Only available for low income Canadians Government programs will represent approximately 25% of your retirement income

30 CPP Payments 2014 maximum 2014 average $1,038.33/month $12,460/year $594.19/month $7,130/year

31 CPP Changes Who is impacted? All employees currently contributing to CPP AND All employees between age 60 and 70 who are also receiving CPP payments

32 CPP Changes What is impacted? Changes began in 2012 and are gradually rolling out through 2016 CPP retirement pension reduction = 0.6% per month (2016) CPP retirement pension increase = 0.7% per month (2013) Work Cessation Test no longer applicable

33 CPP - Things to consider Are you still earning income and are you contributing to CPP? How long and how much have you contributed? What is the amount of CPP you will receive? Do you have other retirement income? Your health

34 OAS Payments 2014 maximum 2014 average $551.54/month $6,618/year $515.97/month $6,192/year

35 OAS full payment 100% 40 years of continuous residency since age 18

36 OAS partial payment Partial payment 100% Example If you had 10 years you would be eligible for 25% of the OAS 1/40 for each year of residency since age 18

37 OAS Changes Eligibility of age changing from 65 to 67 No changes for anyone born on or before March 31, 1958 No changes if you were 54 and older as of March 31, 2012 Anyone born in February 1962 or later will be eligible at age 67 Gradual increase for all other birth years Visit to determine how you are impacted

38 OAS Changes Voluntary deferral Effective July 1, 2013 You can defer your OAS up to 5 years from your eligibility providing you have a higher adjusted amount 7.2% per year or 0.6 per month

39 Your Usask savings plans may include: converts to How I save now converts to Income once retired Defined Contribution Pension Plan (DCPP) Locked-in savings Annuity Prescribed Retirement Income Fund (PRIF)

40 Retirement income options ANNUITY A contract issued by a life insurance company A fixed sum of money paid to someone each year, typically for the rest of their life. PRIF Your pension funds cannot be transferred to a PRIF before the age of 55. Your spouse s consent is required. No annual maximum withdrawal limit. Guaranteed Minimum Withdrawal Benefit (GMWB) Adds insurance coverage to your retirement savings. Provides guaranteed income for life. Your retirement income won t decline due to market fluctuations. YOU CAN USE A COMBINATION OF THESE OPTIONS

41 The University of Saskatchewan Custom PRIF/RIF Competitive rates & management fees Allows for transfers-in No fees to transfer between funds* One-stop for benefits & savings Convenient preauthorized payments Free guidance and support * Short Term Trading Policy: A 2% fee will be charged when a plan member initiates an inter fund transfer into a fund followed by an inter fund transfer out of the same fund within 30 days.

42 The University of Saskatchewan Group Retirement Fund Due to your participation in your group plan, you can join the University of Saskatchewan Group Retirement Fund Investment fees are substantially lower that retail products (like you re used to with your current group plan) Same great investment options Continued access to the Customer Care Centre and Plan Member Website

43 Fee advantages One of the greatest benefits of transferring your retirement savings into the University of Saskatchewan Group Retirement Fund is the low fund management fees you pay for your investment funds You ll pay fund management fees that are significantly lower than those you would pay as an individual investor at a mutual fund company or other financial institution That s the benefit of belonging to a group plan- more bargaining power than you would have on your own. That fee difference can have a large impact on the growth of your retirement income

44 Low management fees matter Money Market Fixed Income Canadian Equity U.S. Equity 0.84% 1.71% 2.42% 2.58% International Equity 2.49%

45

46 Annuity - Overview Series of future payments in exchange for a lump sum today Irrevocable once purchased Sensitive to interest rates at time of purchase Once your beneficiary passes on, payments will cease under most circumstances Does not require active management Is not affected by financial markets

47 Annuity- Features Life annuity - Annuity continues for your entire life Joint life or last survivor - Includes your spouse and only ends once the last person dies Guarantee period - The length of time that the annuity payment is guaranteed to be paid to your estate Inflation protection Increases each year by inflation to protect your purchasing power throughout retirement

48 Savings required to obtain a monthly income of $1,000 Example $237,163 $220,449 $208,676 $192, yrs old 65 yrs old Female Male Source: my money annuity premium calculator Assumptions: Individual Life Annuity with a guaranteed period of 10 years

49 How much monthly income from $100,000? Single Life Annuity and Joint Life Last Survivor Annuity Single Life Joint Life Last Survivor Age 60 $422 $454 Age 60 $393 $404 Age 65 $479 $520 Age 65 $445 $459 Female Male Female Annuitant / Male Spouse Male Annuitant / Female spouse Source: my money annuity premium calculator Assumptions: Single Life Annuity Amount is guaranteed to be paid for a minimum period of 10 years. Joint Life Last Survivor Amount is guaranteed to be paid for a minimum period of 10 years and payable at the rate of 60% of the initial amount to your spouse.

50 Annuity vs. PRIF/RIF FEATURE / RISK LEVEL GUARANTEED INCOME ANNUITY Guaranteed for life PRIF/RIF Not guaranteed for life INVESTMENT CHOICE None Yes MARKET RISK None Some INFLATION RISK Varies Some DEATH BENEFIT Varies Market Value

51 Understanding your insurance needs Working years Retirement years Long term care insurance Critical illness insurance Disability insurance Personal health insurance Income protection Retirement income protection Retirement income protection

52 How to maintain life insurance coverage My LIFE Choice (for members under age 65) Features My LIFE Choice allows you to continue competitive coverage similar to what you have under your group plan, up to $1 million No medical exam, and no appointment is necessary Optional accidental death coverage is also available Eligibility You and/or your spouse must be age 65 or under Within 60 days of leaving your employer s group plan Pass a few simple health questions You must be actively at work the day your employee group coverage ends How to purchase Available over the phone through the Client Solutions Centre You will be asked a few simple health questions to determine eligibility and the level of coverage you qualify for Contact a Retirement Specialist at to discuss conversion of existing insurance to continue coverage.* *To guarantee up to $200,000 of life insurance coverage, application must be done within 31 days of group coverage ending.

53 Maintaining health insurance coverage My Health Choice Features Continue health and dental coverage for you, your spouse and dependent children No appointment is necessary and no medical exam is required Best Doctors allows you to connect with top specialists should you become seriously ill Eligibility Between the ages of You must be actively at work the day your employee group coverage ends Apply within 60 days of the date your employee group coverage ends How to purchase Contact a Retirement Specialist at

54 Next steps

55 Important considerations Making your money last Retirement age vs. government income options Income tax Working part-time vs. full retirement Health and life insurance coverage Ongoing retirement plan management Leaving a legacy

56 Put your plan in to action Talk with your family Use tools available Review your group savings plan Consider your other investment and insurance needs.

57 Calculating your savings and expenses? Retirement expense calculator:

58

59 Online tools Online mysunlife.ca myretirementcafe.ca Brighterlife.ca Self-service tools available online Educational articles and videos Financial planning tools available at mysunlife.ca including: Retirement Planner Investment Risk Profler OAS clawback calculator Registered Retirement Income Fund (RRIF) calculator Annuity premium calculator

60 Thank you!