The number of seniors in Canada is projected to grow from 4.2 million to 9.8 million between 2005 and 2036, largely representing the boomer population. These, of course, are the people who are worried today about whether they can retire, given the serious financial crisis being experienced at the doorstep of this new stage of life.
To bring context to the planning process, it helps to understand some of the parameters recent history provides us with, based on a July 2007 report from Human Resources Development Canada:
So the economic reality for most boomers is a transition out the workforce, rather than an entry into retirement on a "cold turkey" basis. From a planning perspective this means that there will be many "layers" of income, particularly at the start of retirement. The goal is to receive them tax efficiently, identify those tax efficiencies, and reinvest them. Your retirement income buckets will therefore be comprised of:
Remember that income from employment or self-employment may continue on a consulting or part-time basis for many years to come. You may find those sources will be taxed more advantageously now that you are in a lower tax bracket.
In addition, until you are age-ineligible (72) a portion of that income can be and likely should be tax-sheltered with RRSP contributions. Most people will still bear marginal tax rates of between twenty and fifty cents on every dollar they earn. You just can't afford not to take that double digit return the RRSP generates in tax savings.
And, there are some new options for tax-efficient savings that can really help prepare you for retirement, and in retirement to. Therefore tax savings generated by the RRSP contribution and deduction could be leveraged to help you save even more.
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