Early retirement, now what?

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. My question: 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.

Gordon answers: 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 time, I don’t remmend 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.