Preparing for Retirement

Author: Jeff Saunders, CPA, CA, Tax Partner, Teed Saunders Doyle & Co., Fredericton, NB, DFK Affiliate Firm

As many Canadians approach retirement age, they find that they are faced with many decisions regarding their income in the years before and after they retire.

They may have done everything right during their working years and have a comfortable nest egg set aside to fund their retirement. However, they may find that this nest egg is spread over many different accounts. This can lead to some uncertainty as to where they should be drawing their income from, as well as the timing of when they draw income from the various available sources.

Many Canadians approaching retirement will have funds available from many (or perhaps all) of the following:

  • Registered Retirement Savings Plan (RRSP)
  • Spousal RRSP
  • Tax Free Savings Account (TFSA)
  • Employer sponsored pension plan
  • Old Age Security (OAS) • Canada Pension Plan (CPP)
  • Non-registered investment accounts
  • Investment accounts inside a privately held corporation
  • A cottage or rental property that can be sold to help fund retirement

There are many different factors to consider when deciding when and how much to draw from each of these available sources. One of the biggest factors to consider is the tax consequences. Will the withdrawal be taxable (such as withdrawals from an RRSP) or will it be tax-free (such as withdrawals from a TFSA)? Will the taxable income lead to clawback of the OAS? There are many other questions you will need to answer as well, such as, when should I start taking CPP? Is it worth the penalty to start receiving CPP before age 65, or is it better to wait? Also, what are the consequences of converting the RRSP to a Registered Retirement Income Fund (RRIF) at age 71, and how much will the mandatory minimum withdrawals be each year?

Proper planning can help minimize tax and maximize the funds available for you to enjoy during your retirement years. As you approach retirement age and begin to face many of these complex decisions, your local DFK affiliate can work with you and your financial advisors to help determine the optimal approach to meet your retirement needs.


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