SUPPLEMENTING PENSION PLANS WITH REGISTERED SAVINGS PLANS (RRSP'S)

Question: I am 35 years old and I have a decent job that pays well. My employer also offers a pension plan, which I expect will provide me with about 60% of my pre-retirement income for the remainder of my life. Thus, I am not too worried about my retirement, and I do not see the need for any extra retirement planning. However, my wife thinks we should think more about retirement planning and purchase RRSPs. Is this necessary?

Answer: Retirement planning is never a worthless exercise. You don't want to get too complacent about the future just because of your pension plan. What would you do if you lost your job prior to retirement? Do you have any idea how much money you will actually need for retirement? Will your pension benefits be enough to support yourself and your spouse?

It may be useful to sit down with a financial planner and go through a formal retirement planning exercise. The first step in this process would involve establishing your retirement objectives, such as the age at which you would like to retire, and to the lifestyle you would like to live during retirement. By considering your existing financial situation and your objectives, a financial planner could then project the amount of additional funds needed at retirement.

It may turn out that your pension, together with anticipated Canada Pension Plan and Old Age Security benefits, will be sufficient to meet your expected needs. However, it is likely you may need to accumulate additional funds for retirement. If this is the case, a financial advisor can advise you as to how much you should save for your retirement each year. He/She may also be able to help you implement a savings strategy. Do not give up because you can only afford a little each month. With RRSPs, you can contribute as little as $25.00 per month and even postpone payments. You control the payments. It is never too late to start. It is prudent to save what you can.

Finally, your retirement plans should be reviewed yearly to ensure that you are still on track to meeting your retirement objectives. Your retirement may still be 20 to 25 years away and a lot can change in that time period. If you have any questions please don't hesitate to contact me.

This information is general in nature, and is intended for educational purposes only. For specific situations you should consult the appropriate legal, accounting or tax expert.

The material herein is provided solely for informational and educational purposes and is not to be considered as an offer or solicitation. Users are encouraged to consult with their professional.

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