Retirement income - Essay Example

Retirement Income The Canadian retirement income system provides a number of retirement income plans that canbenefit my financial plans upon my retirement. I have three sources of retirement income that I can benefit from including personal savings, government pension benefits, and employer pensions. Government pension benefits have the benefit of providing a modest source of retirement income. However, I will be faced with the challenge of maintaining a pre-retirement lifestyle and this where personal savings and employer pension plans come in handy (Brown, Chambers & Currie, 2001).

The accumulation of personal savings and income during my working period will form the largest bulk of my retirement income. This is because it requires a huge amount of retirement income to sustain a pre-retirement lifestyle. Examples of investment options that I am including in my retirement income plan are money in savings accounts, stocks and bonds investments, tax free savings accounts, and RRSPs and RRIFs (Brown, Chambers & Currie, 2001). The other investment option is accumulated property including a home and business assets.

The overall savings and investments strategy is long-term and this will involve a diversified savings and investment portfolio. The advantage of maintaining a diversified portfolio is that I will be in a good position to get returns in the long-run. It also eliminates the dilemma of deciding when to return to the market after making an exit when the market performance is low. I would also like to adjust my asset mix on a regular basis because this provides the opportunity to take advantage of differences in the performance of the different classes of assets.

Rebalancing will also ensure that I re-align my portfolio with my goals and level of risk tolerance. I will be making progressive and consistent financial contributions to a RRSP on an annual basis. RRSP have the benefit of generating earnings that grow on the basis of tax-deferral and its contributions provide a significant amount of tax savings (Brown, Chambers & Currie, 2001). I can use the savings to make additional investments or even pay existing debts. Employers offer two types of pension plans for their employees including defined benefits plans and defined contribution plans.

A defined benefits plan will involve getting a pre-determined amount of my income upon my retirement. On the other hand, a defined contribution plan will use my accumulated investment income and contributions in providing a pension benefit. I will go for a defined contribution plan because it is progressive (Brown, Chambers & Currie, 2001). I will accumulate a lot of contributions and investment income in order to maximize on its benefits. The Canadian government offers a number of pension plans including Canada Pension Plan (CPP), Old Age Security (OAS), and Guaranteed Income Supplement (GIS) (Brown, Chambers & Currie, 2001).

However, all of these plans require a minimum age of 65 years. In this case, I will be making plans to get membership for such retirement pension plans when I reach the minimum age requirement. I will include all the three plans so as to improve my retirement income. I have dedicated 32 years to my investment plan before retirement. The initial deposit for the investment plan is $5,000 with an annual deposit of $3,000. I also assume that the rate of return for the investment plan is going to be 8 percent.

At the end of 32 years, I am expecting that the initial investment of $ 5,000 supplemented by an annual deposit of $ 3,000 will accumulate to $ 493,537. This is a sufficient retirement income to sustain my pre-retirement lifestyle. ReferencesBrown, H. K., Chambers, F.T. & Currie, J.E. (2001). Personal Finance for Canadians. Toronto: Prentice-Hall.