Summer school and other ways to boost your retirement savings
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“Boy, I wish I had your pension!” “Well, you won’t have to worry when you retire.” As an education member, you’ve heard comments like these before.
Many education members have a longer retirement than other working people. You contribute to the Ontario Teachers’ Pension Plan (OTPP) for years and in return it provides a good income in retirement. But you know what else is true? If you’re retired for longer, your retirement savings will need to stretch further. Furthermore, the responsibility to ensure you have the income you need for the retirement of your dreams is yours.
Here are 6 ways to supplement your retirement income:
1. Work with a Financial Advisor.
Be smart, and make the most of the professional knowledge available to you.
Before you retire, a Financial Advisor can help you with:
- Reviewing and enhancing your cash flow through debt and lifestyle management
- Planning and managing investments to build savings
- Determining your retirement needs based on your projected lifestyle
- Calculating what income you will have from a variety of sources
- Managing your assets before and after retirement to make sure you have the income you need
- Assisting with tax planning before and during retirement
- Managing risk (such as critical illness, long-term care)
- Planning your estate
After you retire, a Financial Advisor can advise you on strategies to maximize your income while minimizing your taxes.
2. Understand and maximize your RRSP.
Here’s something Educators Financial Group knows probably better than anyone: the amount that you contribute to your OTPP impacts how much you can contribute to your Registered Retirement Savings Plan (RRSP). If you receive a gratuity, it will have tax implications and may impact your RRSP. Why do we say that we know this better? Because at Educators, we’ve helped education professionals plan for their retirement since 1975, and we know how to maximize ALL your sources of retirement income.
3. Go back to (summer) school.
While we’re talking RRSPs, here’s a tip: you only contribute to your OTPP for 194 days a year, so if you work more than that – at summer school or another summer job – some of the extra money you earn can go towards your RRSP to boost your retirement savings.
4. Love your Tax-Free Savings Account (TFSA).
The fact that it’s easier to withdraw funds in a TFSA than from an RRSP makes many people use it as an emergency fund or savings account. But since investments held inside a TFSA increase in value tax-free, it’s another way you can save for retirement faster.
5. Discover the advantages of part-time employment during retirement.
Supplementing your income with a part-time job can go a long way towards maintaining your retirement savings longer.
The following chart from Moneysense.ca shows the impact of part-time earnings for a retired couple with lifestyle expenses of $60,000 who stop work at 65 and earn no extra income. Although we realize many education members retire earlier – some in their early fifties – nonetheless it illustrates that earning additional income decreases the amount, and the rate, at which retirement savings were depleted.
The orange line shows that, with no extra income, the retirement savings reached $0 by the time the retiree reached 80 years of age…whereas, part-time income of $1,000 stretched that income to last until the couple was in their 90’s.
Retirees who take on part-time employment report another big plus: utilizing skills and meeting other people.
6. Make retirement planning a priority.
It’s your retirement, and your responsibility. Don’t leave it up to chance. Get the expertise you need to ensure your retirement is all you dreamed of.