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Retiring This Year? Time to Start SpendingBMO helps seniors make the psychological shift from saving to spending through the concept of an RSEP – a Retirement Spending Education Program

After decades of saving diligently, Canadians 69 and older can now begin to reap the rewards of their hard work by converting their Retirement Savings Plan (RSP) into a Retirement Income Fund (RIF). By law, Canadians must choose a retirement income option for their RSP by December 31st of the year they turn 71.

However, the psychological shift from saving to spending can be difficult for many older Canadians who may not know how to turn their savings into retirement income that may need to last them more than 20 years. That's where the concept of an RSEP can help.

WHAT'S AN RSEP?
Similar to building a retirement nest egg, drawing on the funds saved requires expert advice. BMO Mutual Funds came up with the term Retirement Spending Education Program (RSEP) – a concept, not a product, to help educate Canadians who are close to retirement on how to make a plan to spend that nest egg.

Linda Knight, President of BMO Mutual Funds has the following tips to help Canadians create their own RSEP and make the switch from saving to spending in a tax-efficient way.

  1. A good place to start is to sit down with an investment professional to discuss your situation and the options available. For example, BMO Bank of Montreal offers free advice and planning at its branches across the country.
  2. Make withdrawals from any non-registered investments before taking money from a RIF. Money in a registered investment is tax-sheltered, while income from non-registered investments increases annual taxable income.
  3. If a RIF represents your main source of income, make monthly withdrawals, taking account any other amounts you may be receiving, such as income from a company pension fund. Otherwise, think about making annual withdrawals (at the end of the year) so your capital can grow tax-free.
  4. Consolidate all of your investments into a single RIF to make keeping track of your retirement income easier.
  5. Like any other investments, examine your RIF on a regular basis to make sure it corresponds to your personal goals, risk tolerance, and time horizon.
  6. Enjoy your retirement money! Similar to investing in an RSP, working with your investment professional to develop an RSEP will allow you to relax and enjoy what you've worked so hard to save.

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