Early retirement, now what?

Question: I am an early retiree on a defined benefits pension plan from my employer. I am on full pension after 33 years of public service. I also have some small holdings in my RRSP ($125,000). I am currently 55 years old so a long way from receiving OAS and CPP. The CPP is factored into my pension plan calculation.

Is it wise to use my RRSP savings before age 65 to avoid government clawbacks? Secondly, most financial advice is to invest for the long term for retirement but since I am already retired should I not take a more short-term investment horizon and stick to low-risk investments in order to protect my holdings (mutual funds and GICs). – K.M.


To answer your second question first, yes you certainly should take a more conservative approach to your investment portfolio now that you are retired. I suggest you focus on lower-risk, income-generating securities in your RRSP. I’m not a big fan of GICs right now, because of their low returns. High-quality bonds issued by provincial governments, crown corporations, and senior companies like banks with maturities of 5-10 years offer better yields.

As for depleting your RRSP at this tim I don’t recommend it. The OAS clawback does not cut in until net income (not total income) exceeds $59,790, and that figure rises each year because it is indexed to inflation. A decade from now, when you become eligible for OAS, it will be almost $73,000, if inflation averages just 2 per cent a year. Unless you have an extremely rich pension, you are unlikely to be affected. I suggest you use the coming decade to take full advantage of the tax sheltering offered by the RRSP.