Savings for Retirement

Allegiance Wealth Management

Planning for your retirement is never too early. Time is a very good friend for your retirement savings plan. The sooner you start the easier to reach your retirement goal. A sound retirement plan should outline your retirement income needs, the capital amount required to meet that income needs, the periodic savings amount, and the appropriate investing solutions.

To properly develop a retirement plan for you, we take on a process in three stages. First, we help you to specify your financial needs. While it might be a challenge to project your retirement cash flow if you are still far from retiring, but we can draw assumptions from your current lifestyle expenses. Most people do not change their lifestyle drastically after retirement and that is a good starting point for projecting your future income needs.

Second stage is to calculate the amount of capital you need to prepare to meet income needs at retirement. The outcome of this calculation depends on how long the income is needed and the type of income that will be generated. Certain forms of income attract more taxation while others are more tax efficient. The higher the amount of income required on the after-tax basis, the more capital is needed. By estimating the amount of capital will also lead to determining the amount of periodic savings. Knowing how much you need to put away every month or year, you can then start to budget for the savings plan.

The final stage of retirement planning is to make appropriate selection of savings vehicles and investments. It is important to find an efficient way to save using vehicles that might offer significant tax breaks. We evaluate each savings options and incorporate those that fit in your retirement plan.

Registered Retirement Savings Plan (RRSP)

A tax assisted program which provides tax deduction on your contributions. Tax deduction means less tax for your income as taxable income is reduced by tax deduction. The assets that are accumulated within the plan are tax sheltered. In another word, any investment gains or income are not subject to taxation within the plan. You can grow your savings inside an RRSP without immediate taxation until upon withdrawal. Using RRSP to save money is a tax efficient way to prepare for long-term savings goals such as retirement, home purchase, and lifelong learning purposes.

Tax Free Savings Account (TFSA)

A registered tax free savings plan as the name itself has described. Each year, you can save up to $5,000 in TFSA. All types of investment income are free from taxation. Assets you have accumulated in the TFSA can be withdrawn without any taxation. There are many planning opportunities to use TFSA as a primary savings vehicle especially during time when your tax rate is low.

Group Pension

Employer sponsored savings program that is designed for the purpose of retirement savings purpose. Group pension can be in a form of a Registered Pension Plan (RPP) or a group savings plan like Group-RRSP and Deferred Profit Sharing Plan (DPSP).

Individual Pension Plan (IPP)

An individual defined benefit plan which is typically sponsored and established by the employer. IPP is a plan which might allows contributions beyond general registered savings vehicles to meet individual pensioner’s income goal.

Retirement Compensation Arrangement (RCA)

A supplementary savings plan which is sponsored by the employer. An RCA is designed for business owners and management executives who generally have substantial retirement savings needs that cannot be met by traditional registered savings vehicles.

Insured Retirement Program (IRP)

The Insured Retirement Program (IRP) is a financial planning concept which provides tax deferred accumulation and tax-free income. By overfunding a tax-exempted life insurance policy and creating significant cash values, the concept illustrates how these values can be used to secure loans from a lending institution. The amounts borrowed can then be used to supplement retirement income, fund investments, make gifts, etc. The loan will finally be settled at death by the insurance policy.

To establish a retirement plan do not need to be complicated, contact one of our advisors to assist you start savings for your future.