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It's Your Money  

Planning now for an easier retirement later

Planning for retirement

During your working years, you generally have clarity on your monthly income because it is automated and predictable.

The process of planning for retirement income is different because it is not what you are used to - and that can cause feelings of uncertainty. That’s why working with a financial planning professional is a great way to build confidence that your plans for today will help you meet your goals for tomorrow.

Below, you’ll discover the key sources of potential income in retirement. Each of these types of income has pros and cons associated with them including the taxation that they incur when you draw from them and the tax-advantages they have for the investment growth they earn.

For most people in retirement, you should plan to draw an income from multiple sources. The two most common types of income you can expect come from either “guaranteed” or “asset-based” sources:

Guaranteed:

• CPP benefits

• OAS benefits

• Defined Benefit Pensions

• Annuities

Asset-Based:

• Non-Registered Investments

• RRSPs/RRIFs

• TFSAs

• Defined Contribution Pensions

The guaranteed income sources are easy to plan with since the amounts they pay out each month or year are guaranteed to keep coming no matter what the markets do. Asset-based sources however require much more planning.

In order to ensure a comfortable and predictable income in retirement, you will typically need to withdraw money from your retirement income sources strategically. If you simply draw all of the money out of one source first and then move onto the next one, you will most likely end up paying too much tax in some years which will more than offset any tax savings in the other ones.

Drawing too much tax in certain years of retirement can have additional negative consequences such as a claw-back of government run programs like OAS. Any claw-backs you experience in a given year are gone for good, you don’t get extra the money back the following year if you drop down in taxable income.

This just goes to illustrate how important a proper retirement income plan is to ensuring you get the most out of the money you saved with all of your hard work over your career – and how important a plan is to ensuring you maximize the amount of income you have each year in retirement.

And not matter how ideal the withdrawal plan you do create in retirement is, it won’t work forever. Changing account values, tax laws and any number of other variables means that your strategic withdrawal plans need to be regularly reviewed and adjusted.

You’ve worked hard to earn it, so make sure you plan now to pay yourself top dollar later.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]



The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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