More than Building a Financial Nest Egg

by Catherine Wilson, Editor


There’s good news and bad news.

The good news? People are living longer, healthier, more vital lives than ever before.

The bad news? People are living longer, healthier, more vital lives than ever before.

Seniors (not necessarily synonymous with retirees) are one of the fastest-growing population groups in Canada. In 2000, there were an estimated 3.8 million Canadians aged 65 and over, up 62 percent from 2.4 million in 1981. In fact, the senior population has grown about twice as fast as the overall population since the early 1980s. As a result, more than one out of every eight Canadians is a senior. In 2000, 13 percent of the population were seniors: in 1921, five percent of people living in Canada were seniors. StatsCanada has projected that by 2021 there will be almost seven million seniors who will represent almost 20 percent of the population.

As Barry McNulty, financial advisor with Assante Capital Management writes in this special issue of DPM, “Define what retirement will mean to you. Be specific. Everybody has different needs. What may be meaningful in terms of a ‘retirement lifestyle’ for you may not be at all suitable for your colleague. Imagine you have completed a successful transition and are now enjoying the ‘good life’. What’s it look like? Where will you live? What will you do to give yourself purpose and create a sense of satisfaction? Will you develop new skills or interests? What about travel? A critical component of a successful transition and retirement strategy is a well-defined set of goals or objectives.”

To successfully plan for retirement, dentists need to assess their savings, the length of the retirement period and their dependence on the sale of the practice. Research has shown that a majority of dentists do not depend on the sale of their practice to finance their retirement.

“I still believe,” writes Tim Cestnick in ROB magazine, “you should set aside enough in your RRSP for a comfortable retirement. Beyond that, however, it may now make more sense to hold more investments outside of your RRSP or RRIF. This is true particularly if you’re going to borrow to invest outside your registered plan, since you’ll generally be entitled to an interest deduction, which can replace your RRSP deduction once you have enough in your RRSP.” Be careful, he warns. Not everyone is a candidate for borrowing for investing. Equity investments outside your RRSP or RRIF provide the potential for capital gains. Given that 50 cents of every dollar of capital gains realized will now be tax-exempt, perhaps you should focus on capital growth. Remember, as well, that RRSPs are a means of deferring taxes, not avoiding them altogether. After you retire, withdrawals from your RRSP will be taxable as regular income.

There are so many questions:

Should we retire to the cottage?

What’s involved in retiring abroad?

How do I set up a RRIF?

What’s my money ‘personality’?

When should I consider an annuity?

Could I undertake a second career?

While we can’t address every retirement question, this special issue of Dental Practice Management is an excellent start. We hope that those of you considering or facing retirement will find meaningful answers to some of your questions.