Episode 72 – What to Know If You’re Planning on Working Past 65
We’re back with another episode of Heart of Your Money. In this week’s episode, we’re talking about what you need to expect when you’re planning on working past 65.
As we all know, retirement is a big deal. It’s the time when you get to relax and enjoy life after a long time spent working hard for your future. But what if you’re planning on working past 65? How do you make sure that your retirement plan is solid?
In this episode, we’ll talk about what you need to expect when you’re planning on working past 65 and how to make sure your retirement plan is on track. We’ll also talk about how much money you need to save up in order to retire comfortably. Listen now.
Hey there. Welcome back. Today let’s talk about a few things to keep in mind if you want to continue working later in life.
Retirement is changing. It’s now a new hybrid of part-time working, unretiring and continuing to stay busy a lot longer than we used to consider. Here’s a quick little history I found on the internet. The concept of retirement is a relatively new one and it’s credited to German Chancellor Otto Von Bismarck. That part I didn’t know. I know that retirement’s only really a hundred years old. But, German chancellor in 1889 at a time when unemployment was high, he introduced an old-age pension program that paid German seniors to leave the workforce.
The plan was to make room for the younger new workers to join and get paid and try to bring back some of that unemployment and get some of the economy going. The life expectancy in Germany at that time was only 70 years of age, so German retirement tended to be short-lived, and I imagine he probably didn’t have to pay out too long.
I think that typical Canadian retirees should plan for retirement of almost 30 years, so that has changed. bBut it is possible that the window of retirement could be decreased with this new hybrid – A prolonged working trend that is happening right now in the last few years. It might be because of rising costs in the last few years, that dreaded word we’ve heard, inflation.
It might be because we still want purpose past our sixties, whatever the reason is, whatever that reason for working longer, there are a few things that we should consider in the financial planning world. The first thing is find out about your employer’s health benefits. Most benefits will stay the same past age 65.
So for example, I’m talking about extended health, dental and sick leave coverage. Those will not change. There might be one that you need to look into and just confirm- that is long term disability sometimes ends at age 65. Group life insurance coverage generally ceases around the end of age 65. But double-check that with your employer. I have seen exceptions, things of changing depending on how they write up those insurance policies. But you need to double-check that. You want to make sure that you’re not leaving any risks or anything overlooked. So, double-check the long-term disability and the life insurance coverage.
Now when it comes to your employer pension, whether it’s defined contribution (matching one) or defined benefit, you can continue with that. No problem. That goes on until the end of your 71st birthday. That’s when the government has required you have to start taking out a registered plan, so that could be your RSP or your pension plan. You then have to start taking a minimum amount out each year. No matter what, if you plan on working, you’ve got until the end of 71st year to still be adding to your pension. Another thing to think about is CPP and Old Age Security taxes. If you continue to work past the age of 65, you are going to most likely wanna delay receiving your CPP and OAS.
You’re going to want to let Service Canada know, “Hey, please defer” because there’s no sense in taking it if you’re receiving taxable income because then CPP and OAS is just going to be on top of that, more taxable income and they’re going to shave more off the top in taxes. So you’re better off waiting until you’re all done working because you’ll get more bang for your buck with CPP and OAS each month.
If you delay it, you get a bonus. And so you’ll be able to lock in a lifetime amount of CPP and OAS at a higher amount while you’re working by getting those bonuses and deferring.
Another thing to think about is revisiting your portfolio allocation investment choices. This is the last thing that I’ll share with you- you just want to sit down and revisit your risk tolerance.
Revisit the whole big picture. Meaning, what other pensions do you have? What are your investments? Where are you going to receive income and when? And that’s going to help you to structure your investment portfolio to match your needs. Making sure it matches your risk tolerance now past age 65.
So those are the main takeaways but make sure to sit down and plan this with your financial planner and make sure you’ve covered all those angles. That’s it. Until next week, take care.