Tax Refunds – Did you Pay Too Much

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Tax RefundsIt is the time of year when we begin to consider filing our income taxes with the government. Some of us get it done as fast as possible to get it over with, while others will wait until the last day and run to the post office to send in their tax statements. With electronic systems now, many people use tax software programs such as Intuit to complete and file their taxes online. Submitting your tax report only takes minutes, and you are finished if you get a refund. Just wait for that check to arrive.

But what if you owe tax? You can still file online; however, you had better follow up with either a check in the mail with the envelope postdated on the deadline or send the money from your bank electronically. Is it better to get a refund or to owe money at tax time? The answer is somewhat complicated and really depends on the individual and how you manage your money.

Should You Owe Money to the Fed”s? or Tax Refunds

The writer believes it is better to owe money. After all, it is your money to start with, and why should the government use it when you can? If you are the type of person who has no problem coming up with the money when it comes time to file, then this approach is probably the one to take.

However, if you have a problem saving or you do not like surprises, then it is probably best that you allow a larger source deduction to take place and receive a refund each year. Some people even consider this approach of paying too much as a means of saving. They like to get a refund in April of every year, which they use to pay bills or go on a trip.

Besides, for some people, it is another way of saving money. Who doesn’t want to get a refund and some money in April or May from the government? It can be a nice little present that you can use for special activities or even saving for retirement.  Here is a summary of what the options are and the benefits of each scenario:

Receive a tax Refund.

  • The government has access to your money for up to a year
  • Nice surprise
  • Pay off bills when you get it
  • Another way of saving money

Taxes Owing at Tax Time

  • Did you save enough to pay your taxes, or will it be a hardship
  • You had access to the money
  • If you have loans, then you may pay less interest
  • The government may assess a penalty if your late filing
  • Government may tell you to pay more during the year

These are just a few issues to consider when considering a Tax Refund and whether you paid too much. The main thing that all of us need to focus on is completing our tax forms and getting them filed on time. Oh yes, if we owe money, we should pay it on time as well. At the time of writing, it is only the end of February, and we have almost two months to get this done, so don’t procrastinate. Complete your tax forms and file on time.

Also, if you have to pay a lot at tax time, the government may send you a notice reminding you to pay more during the year and reduce what you owe at the end of the year. While this is not the end of the world, it is a reminder that you must pay your taxes in regular monthly or biweekly installments.

If you have strong opinions on this subject, submit a comment. Well-written comments help our readers, especially if they present a different point of view. We will even approve comments with links for well-written comments. Our filter systems will likely catch all other comments.

For more tax saving ideas, click here.

Calgary SEO Specialists and Global Com Team Up

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Calgary SEO SpecialistsGlobal Com, owner of this website, and several others has recently teamed up with Calgary SEO Specialists to offer SEO services in the Ottawa, Ontario area. Both companies have been building web sites for customers for the past 8 years. They have decided to merge their expertise to offer small and medium businesses an SEO service. It is designed to bring additional business to them through optimized web advertising. This is all about spending your online advertising dollars efficiently and bringing your business qualified customers. For more information and a quote for our services, visit Calgary SEO Specialists.

Why Team Up with Calgary SEO Specialists

Many companies are beginning to realize that advertising through traditional mediums such as the TV, and Newspapers is no longer effective. More and more people purchase smartphones and browsing the internet on their phones. The value of traditional advertising to attract customers has declined. Today many people search online for products and services that they need. When they find it they click on a link, an email, or a telephone number. They expect to immediately be put in touch with the company that provides these products and services. If you are not taking advantage of web advertising, then you will not see these clicks. You could be missing these customer opportunities.

It is not enough to just have a website. Regardless of which search engine you use, if you are not on the first or second page of the results you are not going to be seen. Developing an SEO optimize web site that ranks high with all search engines is extremely important. It is a competitive world addition of new content and optimization is required to maintain this level of search results.

The combined expertise of Calgary SEO Specialists and Global Com provide not only optimized web sites with content management services. But they also provide continuously updated content that stays fresh and current. All search engines prefer this type of site. They rank even new sites higher as a result when they have continuous new content on their web pages.

Services Offered

If you are a small business owner and wish to find out more about this service, prices, etc, click on this link which will take you to the launch page of the combined service offering for the Ottawa area. All services provided are described along with links to our pricing and service packages for small, medium, and large business needs.

Contact us for a free consultation or sign up for service and one of our associates will be in touch with you within 24 hours or the next business day. We will need some basic information about your business and the products or services you are trying to promote. We can also provide you with a free keyword report and analysis. It is that easy and rest assured that we will do all of the work needed to drive customer qualified traffic to your business.

We recommend a minimum of three months’ commitment. This provides time to get the site up and running and customer traffic coming your way. Google and the other search engines will index your site and rank it according to their formula. When they do you will be at the top of the ranking and on the first page of search results. With an excellent call to action on your pages, you will begin receiving calls about the services that you offer.

For more information on these items and much more, visit our main website at Calgary SEO Specialists. Give us a call today about how we can help increase your sales in this new advertising world.

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Retirement – Live Well on Less

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Retirement - Live Well on LessWhen do you have enough money to retire? What kind of lifestyle will you be happy with?  Will you have to learn to live well on less money? These are questions that millions of baby boomers are asking all around the world and the answers are as varied as there are people on the planet. It is an intensely personal question and most people are stressed out to some degree about the answers.

Depending on your age you may have time to prepare. If you are still in you 40’s or younger, then you have time to prepare and save for retirement. We have a lot of posts on this site that talk about how to go about saving for and planning for retirement. But, what if you are 55 or 60 and suddenly are forced to retire due to health or downsizing at your company? You may not have saved enough money and must make a lot of decisions about what you will do going forward and the lifestyle you will lead. You can still have a wonderful fulfilling retirement with a lot less money than what you planned, as long as you adjust your expectations.

Retirement – Live Well on Less – Some Ideas

We have compiled a few ideas about this stage based on a combination or personal experience as well as from reading a lot of information on the web and talking with friends and colleagues.  Let us know if this rings true for you and or if you have comments or suggestions.

You will have to cope with your situation, what ever it is. Here are six things to think about as you adjust to retirement and learn to live well on less.

  • Fine Tune your Budget
  • Turn Time into Money
  • Live Smaller
  • Move to a lower Cost Area
  • Work Part Time
  • Become Debt Free

Retirement – Live Well on Less – More detail

Fine Tune your Budget

Regardless of how much money you have or receive as pension income, you must balance your spending with this income. This is probably a first step were you take stock of how much money you will take in. You must match your expenses to this income.

You might have to take fewer vacations or different vacations than you planned. Perhaps instead of going on a cruise, a trip by car might be in order. You may have to down size or give up some of the things you took for granted. This is the time to really take stock of what you can afford.

Turn Time into Money

When we are working, we do not have the time to do our own repairs around the home, we do not have time to look for sales and find the best deals. We end up spending a great deal more money as a result. Friends of ours are like this and think nothing of spending money like it will never end.

Once we are retired and living on a fixed income , we have time to do all of these things. A friend once was amazed that I can go on a trip for less than half of what he and his wife paid. It really was quite simple. I looked for a deal and I also was flexible when I  traveled. As a result I saved more than 50% of the cost of the trip compared to my friend.

Look for sales on tools, clothes, food items, travel and whatever you are buying. You can save thousands of dollars by negotiating everything from hotels to furniture.  Look for hotels that include free parking, WI-fi, breakfast and more when you travel.

Apply this simple concept to almost everything you do and you will be amazed at how much money you can save.

Live Smaller

Many people live in a larger home, especially when they are raising a family. Once the family is gone, they really do not need all of that space and cost over head. It may be time to find another home that has a lower cost overhead.

A smaller home will cost less to heat, to cool and to decorate. Taxes should even be less as well. Consider all of these things when you look for something that will reduce your monthly costs.

There is one issue that you must take into account. It does cost dollars to move. These include real estate commissions, legal fees, moving costs and decorating costs. If your savings will not quickly make up for these extra costs you may want to just stay were you are! Compare and make an informed decision before you leap.

Move to a lower Cost Area

Some areas of a city, state or province are known to be expensive, while others are known to be less expensive to live in. Taxes may be less, and the general cost of homes and utilities all may be less. Moving to these areas can also save you money.

We even know one couple who have purchased a home in Mexico because the cost of living is so much cheaper. If you do plan to consider something as radical as moving out of the country there are many things to consider such as immigration issues and health coverage.

Work Part Time

Many retirees are finding that they can make a little play money by going back to work full-time or part-time. This is an excellent way to enjoy your retirement, renew your social life at work, meet new friends and make a little extra money.

some people do  not care about the money. They just want somewhere to go every day and interact with people. Others have to work to make up for the income they have lost. Either way working can be good for you in many ways.

Volunteering is another approach to consider. Money is not a factor, since it is volunteer work you are doing. You are helping the community, you are meeting people and you are getting out several times a week. Many people are afraid of volunteering because it can quickly become a job without pay. The organization begins to depend on you and you feel guilty if you do not go in. Be firm and strike the right balance that works for you and your family.

Become Debt Free

Becoming debt free takes a lot of pressure off of you when you retire. This should be a primary objective for everyone. Just think that if you did not have that mortgage payment or that car loan, just how nice if would be to have that extra money to use for your personal needs.

Transition to one car, move to a smaller home,  work part time , do whatever it takes to become debt free and enjoy the freedom of being debt free.

 

Not Saving Enough for Retirement!

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Not Saving Enough for RetirementA recent poll released by one of the big Canadian banks, CIBC, indicates that a large percentage of Canadians are not financially prepared for their retirement! This may come as a surprise to many people in the US who have the impression that Canadians are conservative savers and have a sound banking system. We may have the banking system but many of us have not taken advantage of everything we should have done over the years and now face a retirement that is going to be less than what we thought or planned for.

Not Saving Enough for Retirement

Key findings of the poll by CIBC include: 44 percent of all Canadians say they are not financially prepared for their retirement. Also among Baby boomers at the leading edge of the boom (aged 55-64), 31 percent say they do not feel financially prepared for retirement. Are Americans in a similar situation? Most likely and probably worse if you listen to all of the news reports!

Having a Plan Improves Your Optimism

A lot of people have their heads in the sand because they are afraid to find out just how bad their situation is relative to retirement. They are afraid of what a plan will tell them so they simply do not want to know. The reality is actually far from the truth. Although your situation may not be great, finding out exactly where you are at financially with respect to retirement can be enlightening and helpful. At the very minimum, you will find out exactly what you need to do to get into a better place with respect to saving enough for retirement.

The same poll by CIBC found that among Canadians who say they have a long-term investment plan for retirement, 76 percent say they are financially prepared for retirement, versus just 25 percent among those who don’t have a plan. That is very significant! Having a plan lets you set goals to help you get to were you need to be financially and helps you meet those goals as well

Plan all Year Long, Not just at Tax Time

Reviewing your plan at tax time is better than not having a plan at all. However, you really should sit down with your spouse. Review your retirement plan several times a year. Update assumptions about your retirement. If there are changes update your plan with current values so that you are never surprised. Another advantage of updating your plan several times a year is that you can make decisions immediately. Increase savings for retirement during the year instead of at the end of the year when you have lots of other expenses.

Continuing to work during Retirement

This same poll by CIBC indicated that fully 69 % of Canadians who are at the age of 65 or older plan to continue working during retirement. Boomers younger than 65 appear to have accepted the reality that they will need to work past 65 to maintain the lifestyle they need for retirement. If they have not saved enough for retirement, this is really the only option they have.

If you are not yet 65 or have retired, now is the time to complete an assessment of your finances. Take steps to at least make your retirement as comfortable as possible. Here are a couple of steps to take if you feel that you are not saving enough for retirement or do not know if you have enough for retirement.

  • Meet with an Adviser
  • Build your plan or Review your Retirement Strategy
  • Contribute regularly to a retirement savings plan:
  • Manage and Track Day to Day Spending against a budget
  • Prepare for the Unexpected i.e. have an emergency fund

Not Saving Enough for Retirement: Get Active Today

The steps above are pretty basic and easy to follow with the help of an adviser.  Are you are laying in bed awake at night losing sleep? Will be ok financially in retirement. Take action now and get started. List all of your assets of every kind. List all of your anticipated income from all sources. Assemble all of your day to day budgeted expenses and finally include any special expenses you may have. This includes major repairs to the house, a new car, travel, and also health-related issues.

Once you have this information together, talk to a financial adviser. Speak to one, who is willing to help you answer the questions you have. Of course, in return, he or she is going to want you to place your investments with him. This is ok, provided you are getting the assistance you need. Any adviser who is only interested in helping you with investments is not really an adviser. Instead, they are only interested in how much money they can make and not really helping you!

Comments are welcome. If you want a link, provide a meaningful constructive comment that our readers will appreciate.

 

Living Pay Check To Pay Check

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Living Pay Check To Pay CheckLiving pay check to  pay check is something that many people do all over the US and Canada, as well as around the world. We normally talk about retirement planning and getting ready for retirement, however we felt that this topic was so important that we wanted to post it here on this website. If you can get your monthly budget under control and develop some savings, you will be at far less risk of losing your home as well as being ready to retire when the time comes. Saving money around the home will make it much easier to survive a job loss and other major expenses that you have not planned for.

The following survey is a sad picture of Canadian savings habits. It also high lights the exposure that over 60% of Canadians have to lose their homes, cars and more if they were to lose their jobs. We suspect that Americans are in the same position. The blunt advice that these people need to follow is :

  • Save 10% of your paycheck every month
  • Have 3 months salary in  savings available if you should lose your job
  • Get your budget under control and learn to live with less money so you can prepare for the future.

Living Pay Check To Pay Check – Survey

The results of the survey follow and it is a sobering message for many Canadians.Almost 60 per cent of Canadians live pay check to pay check and say they’d be in financial difficulty if their pay check was a week late.

A new survey from the Canadian Payroll Association released Monday showed some troubling signs about Canadians’ personal finances.

The 59 per cent figure is the same rate as the one found in last year’s survey. It is the second year that the agency has undertaken the payroll survey.

Almost half of respondents to a national survey said they are saving five per cent or less of their income. Financial planning experts generally recommend a retirement savings rate of about 10 per cent of net pay. Also save  three months’ worth of expenses in an emergency fund.

Although they don’t appear to be having much success doing so, 60 per cent of respondents said they were trying to save more money than they used to. The remaining 40 per cent said they were not trying to save any money at all.

“The most significant result of Canadians continuing to live pay check to pay check  is its impact on their concerns about personal finances and retirement.

Younger workers feel especially vulnerable. 65 per cent of respondents aged 18 to 35 saying they would find it difficult to make ends meet if they missed a single pay check.

More than two thirds (69 per cent) of respondents said it would be difficult to find comparable employment with a similar salary if they lost their job.

For the survey, the agency interviewed 2,766 Canadian employees across the country. The survey is considered to be accurate within 1.86 per cent, 19 times out of 20.

It was taken between June of 2009 and July of 2010.

“End of Survey”

In case US citizens are reading this and feel that they may be better off than Canadians, think again. You have just gone through and are beginning to come out of a major recession which Canada pretty much avoided. You need to adopt these savings approaches even more than Canadians. Jobs are more difficult to come by in the US than they are in Canada.

In fact emergency savings are probably the single most important thing to think about. This is next to putting food on the table and paying for somewhere to live. Invest wisely and conservatively.  If you are able to save a lot of money, diversify and avoid the get rich quick schemes. Only a few people succeed at this approach and most just end up losing their hard earned savings. Hire a competent financial manager, but always do your own research and make your own decisions.

How Much do You Really Need to Retire

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How Much do You Really Need to RetireHow much do you really need to retire? This is the question that many millions of people are asking themselves as they approach the time in their lives where they might consider retiring. We wrote an extensive post about this subject back in March 2010. We felt that we should repeat some of the ideas once again this year to remind everyone that a little planning will go along way to answering this question. For the older post, click here.

Here is what you need to consider to be able to answer your question about much do you really need to retire:

  • Total income during retirement
  • Current Expenses
  • Loan and debt payments that you may have
  • Travel plans and other special expenses
  • Health expenses
  • Rainy day funds
  • Long term expenses – new car, house maintenance, etc
  • Your total savings and how quickly you want to draw down on these savings

How Much do You Really Need to Retire –

Gather Your Financial Data

This is a pretty general list, but if you gather this information and apply it to your personal situation, you will have a good start towards knowing what your financial situation will be during retirement.

Next, you need to assess what changes you may need to make based on finances. If you do not make enough income during retirement, then you are going to have to either generate more or cut somewhere. Tough choices, but it needs to be done to ensure that you and your family have the life you desire.

What Will You do during Retirement?

Next, you need to give some serious thought to what you will do with your time and how you will fill the hours. Basically, you are looking at 40 plus hours a week to fill including commuting time. You need things to do that you enjoy and will have fun at, as well as perhaps even challenging. For some people, they will need the social side as well if they are of a more social bent. Spend some time thinking about this part as well. If you are bored, chances are you will spend more money than you plan!

Discuss Your Plans with Your Family

This is the most important part actually. You have to gather your financial information together. You have thought about what you want to do during retirement. Now you need to find out if your family has the same ideas. If your spouse for example wants to travel the world and your finances indicate that this is not affordable, then some serious discussion is needed. But it is also about the small things as well, for example, hobbies, going back to work, contract work, etc

Maybe your spouse expects you to complete a number of projects around the home and this is way down your list of things to do. Discussion and compromise usually win the day and is needed for your retirement plan to work and for you to answer the question of “How much do you really need to retire”?

Get your Savings Started

Your savings can play a major part in your retirement plans in addition to pension income. Some people believe that you should not touch your savings principle but spend the income. This is definitely one scenario to consider and if the income from your savings is sufficient to top up your pension income, you are in good shape. However, with low-interest rates and markets fluctuating a great deal these days, you may have to begin drawing down on your principle. Many experts believe 4% is a reasonable number were as others believe that you can draw much faster. This really depends on your age, expected remaining years, and your tax situation as well. Lots to think about as you approach retirement.

The first step is to get started by reading articles like this one and then take the next step to collect all your information and begin planning!

Constructive comments appreciated. For more information, thoughts, and ideas about what to consider in retirement, click here.

 

How do You Know It is Time to Retire

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How do You Know It is Time to RetireWhen is the best time to retire? The answer is that is really depends on many personal issues that each person must consider. Retirement is a very personal issue which for most people is emotional as well as extremely stressful as you try to understand whether you have sufficient funds to retire on. Most people have no idea and are unable to determine if they have enough to live on. They need help figuring this out and should have a good financial adviser to help them, one that they can trust and be able to consult with. Here is a list of some of them. We will discuss them in more detail later in the post:

  • Hate going to work
  • Health issues
  • Family requirements, such as grandchildren
  • Time to move on to enjoy life
  • Other work opportunities
  • Change your lifestyle

Time to Retire

We used to work until the magic age of 65, now people are retiring voluntarily at 50 or even younger and doing some of the things they always wanted to do. Some just move on to another job, so you cannot really call that retirement. Other work contracts and take time off during the year, so you might call this semi-retirement or transition to retirement.

If you are flexible with your living expenses or somehow have sufficient funds to live on, why not take time and do something different. For most people, the trigger is something that either happens on the job where they have just had enough, or there is something in their personal life that triggers retirement.

If you cannot stand going to work, then it is probably time to retire or at least change. You are not going to do as good a job and it will become more frustrating as your boss gets on your case. Don’t let this happen, take control of your life, and make your own decisions.

Questions You Should Ask

Before you make the big decision it is important to have some sort of plan and I am not talking about a golden parachute. Sure money is important, but so is what you are going to do with your time. One of my neighbors was quoted as saying he watches the grass grow since he is so bored. This is not good for him or his family. Here are some questions to ask yourself. Depending on your answers, you may need to really think about retirement and plan appropriately:

  • Do I have a life outside of my job?
  • How will this affect my family?
  • What else can I see myself doing?

Do I have a life outside of my job? Build a social life outside of and away from the job. Once you move on, after not too long a time, your colleagues at work will move on. Also, they are not available when you are.

How will this affect my family? What will your spouse do and are your kids old enough and do you have sufficient income to enjoy retirement. You cannot go from managing your employees to managing your family. This will generate all kinds of conflict which you do not need or want. Spend quality time with your kids, and your grandchildren!

What else can I see myself doing? You need to have a plan for what you will do with your time after you retire. Typically you need to fill 40 hours of work plus your commute time. Sitting watching TV is not a good idea and you cannot golf every day. You really need a broad mix of things which can include more golf, but also other hobbies and projects around the house. Even volunteering or part-time work or starting a business or whatever you may find enjoyable. The important thing is to do what you find interesting and enjoyable.

The best time to retire is when you can afford it and the life outside work looks much more interesting!

Choosing a Retirement Location

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Choosing a Retirement LocationThis is one of our biggest issues, choosing a retirement location. Were do we retire to? Should we stay were we are or move somewhere where it is warm. What about earthquakes , tornadoes, fire and hurricanes?  There always seems to be a negative with places that are warm. There is the entire family issue. We do not want to be far away from the grand kids, while at the same time we need to live our lives too and enjoy the few years we have left. This is the dilemma we are facing along with many Americans and Canadians in choosing a retirement location.

Depending on what your priorities are, some locations will be better than others. Here is a list that we are currently struggling with. They are not in any order of priority since each person or family will rank these items with their own set of priorities. They will be different for everyone. You may want to assign you own priority to each item on the list.

Choosing a Retirement Location – Criteria

Here is our list that we are using to make a decision about choosing a retirement location:

  • Climate, warm weather.
  • Health care
  • Emergency health care
  • Personal safety
  • Proximity to the grand kids
  • Proximity to friends
  • Interesting things to do
  • 2nd Careers for some people
  • Volunteer organizations that you belong to
  • Financially affordable
  • Living costs
  • Sentimental ties to home and area you live in
  • Tax issues
  • Travel costs to return home to visit the family
  • Length if time you can stay in a foreign country

These are just a few of the things we are thinking about. In fact it is too many and the net result is that we will be paralyzed by too much indecision. We do like our home and neighborhood, however the winters are not fun and we enjoy the sunshine and warm temperatures of the south. We do not want to be around hurricanes, tornadoes and earth quakes or fires.  Millions of people deal with this every day, however when you come from an area were the main issue is cold winters, this seems minor compared to a hurricane.

Move to Another Country

One option is to go to another country. Health costs are a big issue as are landed immigrant status and tax issues. If you plan to move to another country, you must take into account these issues and have a well defined plan, particularly for health coverage. Changing countries these days is very complex and this alone will scare many people away from say moving from Canada to the US or Mexico.

Safety is another major issue for many people. The area you may be moving into must be safe for you and your family. While no place these days is truly safe, some are much better than others. Many people are opting for gated communities, however in my opinion this is an illusion. It keeps the rift raft out and tourists, but if a criminal really wants to get in, he or she will with no problems what so ever. It does stop the opportunists.

Quality of Life

It really comes down to quality of life, which for us means that family and friends are really important. This seems to be the highest priority for us, which means we will stay right were we are and enjoy our family and friends. Of course we will take longer trips and travel quite a bit, but our home base will be right were we are today other than perhaps down sizing to a smaller home.

For the time being we are going to stay right where we are and not move. We will rent condo’s in various locations to see if any of these locations would be interesting to us as a retirement  place to live. We can get to know the city, the people and whether we can be away from the kids that long. This is a compromise or perhaps a cop out as some people might put it, but this is what is working for us at the moment.

We would appreciate your ideas and thoughts about this subject of choosing a retirement location.

 

 

Transitioning into Retirement

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Transitioning into RetirementMost people don’t want to retire to a life of just hitting a tiny white ball around a well-manicured lawn. They actually want to do something after they retire from their primary career. Trouble is, most people these days do not have a clue how to go about it. They have no idea what steps to take to figure out what to do next in their lives or transitioning into retirement. I just had a conversation this morning about this very subject with a good friend of mine.

He thinks that over the next five years he will either receive a buy-out or he will continue to work for at least five years more. The problem is that he is all consumed by work and has no idea of what he will do during retirement. Fortunately for my friend money is not an issue for him, however, he is thinking about taking steps to transition into retirement from a financial perspective, however in his case he is missing the main issue.  Financially he has decided that he and his wife are going to live on what he expects his retirement income to be. This is a good plan, however, the real issue is what is he going to do with his time!

Steps to Transitioning into Retirement

According to the experts, there are 5 stages that people go through when they are approaching retirement. Some go through these stages quite quickly, especially when they are laid off or receive a bonus package to leave. Others have time to plan and get ready for retirement both mentally and financially. Here are the five steps.

  • Acknowledging the need to transition
  • Discovering your potential
  • Discover your options.
  • Discovering your goals
  • Transforming “what’s next into what’s now

Each stage is linked to a specific purpose, as well as tasks, outcomes, and questions as you get comfortable with the idea of retirement or transitioning to something different in your life.

Acknowledging the need to transition

For some people, it is forced on them through a premature lay off or forced retirement. In this case, there may be also an angry phase that you must get through. For others, it is simply recognizing that it is time to begin planning your transition to the next phase. There is also disconnection from present employers and employees as you begin to separate in your mind from what you are currently doing to the next phase. It is time to figure out what comes next.

Sometimes there is tension, ambiguity, apprehension, and confusion that is associated with this stage as you try to figure out what it is you would like to do with the rest of your life.

Discovering your potential

Discovering your potential is all about figuring out what your strengths are and what the possibilities might be for your next career or stage in life. It is very personal and different for everyone.  Explore what you enjoy, explore what you need to do to be satisfied, explore what you want your relationship with your family should be, including spouse, sons and daughters, and grandchildren. You may also want to evaluate your resources in terms of finances, but also in terms of pf physical health and demands by other family members.

Discovering your options

This stage focuses more on testing some of your ideas and options. If you thought you always wanted to golf every day then try it out and see how that goes. If you thought you always wanted to travel do that. The important thing is to try out or test what you feel is the right option for you and try lots of things until you find something that really works for you. Find out what fits and what works for you over a period of time. Remember this is a transition over time and not a flash change in your lifestyle.

Discovering your goals

Once you have an idea of what it is you want to do, it is time to set goals and objectives to help you meet your plans. What resources are you going to need? What are the next steps and who do you need to talk to for assistance in order to complete your goals.

Transitioning into Retirement – Transform what’ next into what’s now

This is the implementation and engagement phase. This is where you actually make it happen. Along the way, you may fine-tune your activities, your goals, etc, Which is fine and you learn more about yourself and your new life. But the main focus of this stage is really turning all of your plans into reality.

Knowing that you are in one phase or another can be helpful. Or that you are cycling between phases as you figure out what you are going to do is actually helpful to many people. While there is a lot of ambiguity and confusion, at least you know that this is normal.

My friend has barely started this exercise. He is in phase one. Because he has begun to recognize that he needs to make the transition and begin planning. This is a good first step. However, he has a long way to go yet. If he suddenly finds that he is downsized, he may not be ready. He will struggle somewhat for a while as he is forced to speed up his planning.

Your comments are welcome, any advice you can provide to my friend about this subject and retirement, in general, is much appreciated.

When Should I Take My CPP

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When Should I Take My CPPI am turning 60 next year and wondering if I should take my CPP early along with the penalties or should I wait a few years and then take my CPP with fewer penalties? That is the question that is faced by many people every year. The common theme that I hear is “Take it Now”.  From close friends to financial advisers, they all seem to agree. Don’t wait to take your CPP you could be dead early and miss out entirely. But what about the economics of taking it early?

I decided to do a few calculations and this is what I came up with. If you have suggestions or disagree with this approach, please leave a comment with details in the comment field. This is a pretty common decision that many people are faced with. There are lots of ideas about what to do regarding taking your CPP earlier than age 65. Comments and ideas are very welcome.

When Should I Take My CPP  – at 60?

Canadians have always been able to collect their CPP before turning 65 (the earliest you can start is age 60), although there is a penalty that depends on when you start receiving the benefit. As a rule, the pension is reduced by 0.5% for each month prior to turning 65. If you start at 60, for example, you will reduce your benefit by 30%, making it considerably less than if you wait until 65.

That’s the dilemma I faced myself as I approach turning 60 and I am considering the pros and cons. As it turns out the math is pretty simple. I assumed that I would start taking my CPP at 60, and would live for 15 years after that. With a 30% penalty, my income from CPP would be a total of $133k excluding any increases from indexation.  If I wait until 65, there will not be any penalty when I begin collecting. But I will only collect for 10 years under this assumption. The total is $108k. So obviously I am further ahead if I only collect for 15 years. The breakeven point appears to be 17 years and if I live longer then the delay scenario begins to pull ahead.

Government Changing the Laws

Another factor to keep in mind particularly this year is the federal government’s announcement last spring that it is bringing in legislation designed to improve the system’s fairness. The legislation was passed in December and the government will be phasing in changes between 2011 and 2016.

Starting in 2012, the penalty to take the CPP early will be 0.6% instead of .5%  a month for each month before turning 65. This move bumps the penalty up to 36% if you start at age 60.

As well, starting in 2011, the government is phasing in new rules if you delay the benefit after turning 65. The so-called “late pension augmentation” will be increased to 0.7% a month, from 0.5%, for each month after age 65 until age 70. This means you can collect an additional 42%, versus 30% under the old rules, assuming you wait until 70.

In addition, starting in 2012, you will no longer have to stop working or earn significantly less, to start receiving the benefit.

If your genes suggest that you may live well into your 90’s, then you might consider taking the risk of delaying collection of your CPP, however in my case no one has lived past 80 years of age, so I am taking mine early and the math bears out this decision. If your health is not great, this may be another reason to begin collecting early.

No More Contributions to CPP

There is another major advantage in that once you start receiving the CPP, you no longer have to contribute to the plan. This means a saving of $2,100 a year, assuming you are earning up to $46,300 in employment income. Over five years this adds up to $10,500 in total savings and if you are self-employed, the saving is doubled, to $21,000, because self-employed individuals also have to pay the employer’s share of CPP contributions.

Starting in 2012, if you start collecting before 65, you must continue contributing to the CPP. Once you reach 65, you can still make voluntary contributions to the CPP. Both of which will increase your CPP retirement benefit.

These are some of the factors that need to be considered in this decision. Mine is pretty simple, but readers should take into account the following:

  • Current health
  • Life expectancy
  • How long you will work
  • Tax consequences and impacts of other income
  • Government plans to phase in changes to the CPP plan

Comments and suggestions are welcome.