A few retirement planning tips you might find useful -
a) Income Tax
That monthly pension dollar amount you got, or will soon be requesting, from human resources – did you skim at least 15% off the top of that figure for income tax before you starting working on your retirement budget? If not, take a deep breath, and carefully scrutinze that figure again. The human resources figure – it’s a “before tax” dollar amount, usually referred to as “gross income” in accountant-speak. (“Gross” as in “it’s gross that I have to deduct income tax from this figure!")
What you need to do now is figure out what 15% of this amount is.
At this point, you may have to drag out a calculator.
Then you need to deduct this 15% dollar amount from the human resources figure.
What you have left is the actual dollar amount you will have to live on, each and every month, once you retire.
This lower, dollar amount is the figure you use to rework your retirement budget.
Just 'cause you’re retired doesn’t mean you don’t have to pay income tax anymore!
Sorry about that!
Please note – and this is important - 15% was a ballpark percentage I used to calculate income tax when I was working on my retirement budget.
If you are not comfortable working with a ballpark percentage to calculate potential post-retirement income tax – talk to human resources or take all of the financial information you get from human resources to a financial resource you trust and have them work out the exact percentage of your pension that will have to go to income tax.
But do not ignore the issue of income tax when you are planning for retirement.
Just prior to your official retirement date, a package of paperwork will be mailed to your home.
In the package will be reams and reams of forms for you to read and sign.
There will be some “Canada Revenue” forms for you to review. (If you are like me, it will have been decades since you actually laid eyes on any sort of Canada Revenue paperwork.)
In a nutshell, if you fill out and sign the Revenue Canada forms, you will be authorizing the Royal Bank (they're the bank that actually issues Ryerson pension cheques) to deduct income tax “at source”.
In other words, to deduct all income tax before they send you your pension cheque
Exactly the same way income taxes are being deducted from your pay cheque right now.
My advice, sign the forms. Have all income tax deducted “at source”.
Remember that 15% dollar amount from the previous paragraph.
Multiply it by 12 months.
If you do not sign the Revenue Canada forms, come every April, you will have to find that dollar amount somewhere.
What are the chances you could scrap together that much money right now, pre-retirement?
What are the chances you think you could scrap together that much money post-retirement?
Filing income tax every April will be a lot easier if you just sign the forms. Like I did.
But again – and this important. If you are not comfortable with “just signing” stuff, talk to a trusted financial adviser and ask for their help.
If you are not comfortable with signing, or do not totally understand any of the paperwork that materializes around your retirement, talk to a trusted third party.
Don’t just listen to me. I promise I will not be offended!
c) Copy
After you have filled out all the required retirement paperwork that came in your retirement package – photocopy or scan every form and page you filled out or signed, including the envelope the package was mailed in. Specifically, the postmark on the envelope. You want to make sure the processing date on the postmark is clearly visible – just in case there is any question in the future as to when you actually received the package.
(Or you can just be careful when you actually open the envelope and not damage the postmark. And then just keep the envelope in a safe place!)
d) Registered Mail
This gave me a written record of the date and time the package was actually mailed.
And since someone had to sign for and log receipt of the package at the other end, there was also a written record of when my package was delivered.
If at this point in time, you are able to forward all of your paperwork electronically, make sure there is a date and time stamp clearly visible somewhere on every page, again, so there is a "written" record of when you electronically returned all of your paperwork.
e) Scan
If you scanned or electronically “mailed” your paperwork - at some point, print yourself a hard copy of all pages and file in a safe place.
Just in case your computer system crashes. (Like mine just did. Where is Hrire when I need him!)
ABOVE ALL, WHEN IT COMES TO THE FINANCIAL ASPECTS OF RETIREMENT - INCOME TAX, DEBT REPAYMENT, ESTATE PLANNING, GOVERNMENT PLANS, PRIVATE PLANS, EXTENDED HEALTH CARE, ETC., ETC, ETC., - ASK QUESTIONS!!!!!!
If you do not understand how any of this financial stuff works - ask questions.
If you do not understand how any of this financial stuff works in relation to your retirement plans - ask questions.
When it comes to your financial future and your understanding of it - there is no such thing as a dumb question. If you do not understand the answers or how the answers apply to you, specifically - ask. If you still don't really understand - ask someone else.
And keep asking questions (and keeping detailed notes) until you are satisfied with, and understand all the answers.
Your "retirement to do list" is only a piece a paper if you don't have the financial means to pull any of it off!
