35 - Wednesday, May 2, 1990 - North Shore News BUSINESS What will your income be after retirement? WANT TO know how much money you will have to live on after you retire? Consider the five potential sources of that future income: (1) Your RRSP(s). (2) Non-RRSP savings and in- vestments. (3) Private pension. (4) Government benefits — Canada Pension Plan and Old Age Security. (5) Part-time (or even full-time) work. If you are very fortunate, you will be able to count on all five sources. But many people won't be so lucky. To make sure you are be- ing realistic in your planning, let’s take a closer look at each source. (1) Registered retirement savings plan. If you don’t belong to an employer (or union, association, etc.) pension plan, this should probably be your main focus: your own personal pension plan. Even if you do have an employer pension, the RRSP is still the most effective individual retirement savings pro- gram ior most people. You get a tax break when you put money into an RRSP and the money in the plan grows tax-free. You pay only when you receive the funds. And if you use a spousal plan, you can shift this future in- come to the spouse in the lower tax bracket. Computer programs can project your RRSP income. But you can also use two simple graphs devel- oped by financial planner Don Pooley. “One graph shows how much income the money you already have in your RRSP will produce at age 65 while the other shows how much income your future RRSP contributions will produce,” said Pooley. The calculations are based on using up the capital by age 100. Because the figures are in to- day’s dollars (adjusted for infla- tion), it’s easy to relate the results to your present/retirement cost of living. Pooley is offering this column’s readers free copies of these graphs plus an explanation of various ways to use the graphs in your retirement planning. Send a self- addressed stamped envelope to Don Pooley — RRSP Graphs, 1849 West 35th Avenue, Van- couver, B.C. V6M 1H5. dollars and sense Michael Grenby (2) Non-RRSP funds. Most fi- nancial planners suggest you don’t include the value of your principal residence. However, if you expect to move to a significantly less ex- pensive home before or after retirement, you can include the amount of cash left over after the move. Other typical non-RRSP_ in- vestments: Canada Savings Bonds and term deposits, stock market investments, revenue property and possibly a business. Again, you must look at what you have now and how much growth you can expect, plus what you will save between now and retirement. (Orly include an ex- pected inheritance if you are abso- oF knowled se for lutely certain you will receive the money.) (3) Employer closer you are to retirement, the easier it is to get an estimate of your pension income from your employer or the company manag- ing the pension. (4) Government benefits. Ottawa has already started to claw back the OAS pension; will CPP be next? The higher your retirement in- come is likely to be from employer pension, RRSP, non-RRSP funds and perhaps continued work, the lower your OAS and perhaps CPP will be. (5) Continued work. If you have the interest, energy and health, you might be able to count on income from further employment or self- employment. Financial planner Pooley sug- gests the following steps to find where you stand: (1) Pick your retirement age. (2) Estimate your pension income, whether or not you include OAS and CPP. All figures should be in today’s dollars. (3) Do the same for your partner (if applicable). (4) Is the total enough for you to live on (before tax)? If not ... (5) Decide how much more you need. Assume each extra $1 of monthly income you need at age 65 requires $100 of capital. So if you want another $1,000 a month, you will need another $100,000 in savings. (6) Use Pooley’s RRSP graphs (or in- terest tables, a calculator or com- puter) to find how your RRSP can contribute to your retirement in- come needs. (7) If you are still short, make up the difference with a non-RRSP investment program. Or plan to retire later — or live on less when you do retire. The alternative to all this is sim- ply to continue your present Arthur Allen Consultiants—8+ years PF. Backhouse & Associates—5 years Ballard Power Systems—3 years Bennett Surveys—2 years B.C, Rait--10+ years Roy Campbell, Consutting Eng.—2 years William Campden Archiiect--7+ years Cautteid Design—~8+ years Barie G. Chadwick—4 years Claus Engineering—15 years Concorde Copy Centre—2 years Cove, Dixon & Co.--10+ years Graham Crockart, Archiiect—10+ years Creative Goldsmiths—3 years David Naime & Associates—10+ years Dayton & Knight-—4+ years Design West Interiors—15+ years Dillingham Construction—10+ years Dodson Moroz Architects—10+ years DPD Management—3 years Dukes & Bradshaw Mechanical—10+ years Earls Restaurants—7+ years Ed Berwick Designs—7+ years Egit Lyngen Architecis—2 years pension. The. lifestyle and once you retire, then see (and perhaps be concerned about) how much you have to live on for the rest of your life. Only you (and partner) can decide which approach is the right one, given the kind of individual(s) you are. Mike Grenby is 2 Vancouver- based columnist and independent personal financial adviser; he will answer your questions as spice allows in his column. 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