Saving During Retirement—Why Not?
Article revised on 17 July 2017
You’ve just retired! Maybe you’ve been able to build up a solid financial cushion in anticipation of the new chapter of your life. Are you thinking that you’ll now be spending all your savings? Don’t rule out that you can continue to save. It’ll just be a bit different now.
Financial security advisors will tell you it’s not a good idea to keep large amounts of cash in your chequing account. Keep the minimum amount you need to maintain your standard of living.
Of course, you can begin withdrawing money from your RRSP. However, you have to make a specific request to your financial institution for each withdrawal, and it’s subject to administrative fees and tax. That’s why it can be more advantageous to convert your RRSPs to RRIFs and schedule periodic payments into your chequing account even if you are not yet age 71, when conversion is mandatory.
Plus, it’s a good idea to keep some funds in other financial products that offer easy access if you decide on a last-minute project or have unexpected expenses.
Here are two options for continuing to save, even during retirement.
Open a high-interest savings account
High-interest savings accounts have a number of advantages that chequing accounts don’t offer such as that implied by the name: a higher rate of interest.
Here are the main advantages of a high-interest savings account:
- Options to create sub-accounts depending on your projects: travel, renovations, car purchase, etc.
- No service fees and no minimum balance
- Unlimited transactions
- Periodic deposits with preauthorized debit
- Withdrawals as desired, tax-free
- No maximum age: save as much and as long as you wish
- Opt for a Tax-Free Savings Account (TFSA)A TFSA offers a tax advantage, since it allows you to save and grow your money tax-free. It is not subject to tax, and your equity is available at any time. It’s the ideal product if you think you might need money quickly, since you can withdraw the money tax-free.Again, there is no maximum age limit for contributing to a TFSA. Before investing in this instrument, ensure that you have not reached the annual legal limit, which is $5,500 for 2016.If you haven’t invested all eligible amounts, don’t forget that the limit is cumulative. Unused contribution space can be deferred to subsequent years. Your contribution space is indicated on your notice of assessment.
Saving during retirement? It can be a wise choice since doing so will allow you to maintain a comfortable standard of living for longer.
Note: This article is intended for information purposes only and should not be construed as legal, financial, tax or other advice. The circumstances or elements may vary depending on your individual situation. We encourage you to consult a professional before taking action. La Capitale may not be held liable for any consequences arising from any decision taken based on the content presented in this article.
Start saving now!