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Retirement Income - Not All Income is Created Equal 2/3
The key to creating a balanced income in retirement is to diversify your financial assets and income streams.
This is the focus of the second part of my series on Retirement Income - Not All Income is Created Equal.
(If you missed part 1 - check it out here - Retirement Income - How much is Enough Part 1/3.)
For this article I will be comparing Canada Pension Plan, Guaranteed Income Supplement, Old Age Security, GIC/Term Deposits, Segregated Funds, Guaranteed Minimum Withdrawal Benefit (GMWB), Defined Benefit Pension Plans, Defined Contribution Pension Plans, Locked In RSP's, Locked in Retirement Accounts, Group RSP's, Individual RSP's and Savings Accounts.
Income Guarantee | Cost of Living | Principle Protection | Access to Capital | |
| CPP/GIC/OAS |
Y
|
Y
|
n/a
|
N
|
| GIC/Term Deposit |
Y
|
N
|
Y *4
|
Y
|
| Seg Fund |
N
|
N
|
Y
|
Y
|
| GMWP |
Y
|
Y *1
|
Y
|
Y *2
|
| Annuity |
Y
|
Y *1
|
n/a
|
N
|
| Pension - DB |
Y
|
Y *1
|
n/a
|
n/a
|
| Pension - DC |
N
|
N
|
maybe *3
|
Y
|
| LRSP/LIRA |
N
|
Y
|
N
|
maybe *5
|
| Group RSP |
N
|
N
|
maybe *3
|
Y
|
| Individual RSP |
N
|
N
|
maybe *3
|
Y
|
| TFSA |
N
|
N
|
maybe *3
|
Y
|
| Savings Account |
N
|
N
|
Y *4
|
Y
|
*1 Cost of Living can be selected as a option. *2 Access to principle maybe be available but may result in the forfeiture of other benefits. *3 Principle protection maybe available depending on the product chosen *4 Principle protection for deposits such as bank accounts provided by CDIC. *5 Access to your account is based on Provincial or Federal Pension Acts.
Nothing is worse than having your income eroded by market loses or the inability to access your principle when emergencies occur. The key to having a good retirement is income diversification by income type and access to principle.
Not all financial guarantees are created equal. Pension benefits can change, fees on risk can go up that can have a negative impact on income, and plans can be changed altogether.
Keep this in mind as you select your options on how to allocate your assets to create income in retirement. Plan type of diversification is as important as investment diversification.
In the last part of this 3 part series on "Retirement Income" we will look at how to calculate how much income you can expect and need from each source.
If you missed the first part of the series "Retirement Income - How Much is Enough" go back and view here .
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