You’ve saved it. 

Now you need to know how to spend it.  Which account do you withdraw money from?  How do you reduce the risk of running out of money?

A blog is no place to give individual advice, and I believe everyone should have a personalized plan.  A blog can give an outline of how your income is affected by your withdrawal choices, and how an advisor can help you reach your goals.

During retirement, you may have income from several sources.  Government pensions such a Canada Pension Plan (CPP) and Old Age Security (OAS) are sent monthly once you apply.  These amounts are taxable income to you.  You (and your employer) contributed to CPP during your working career and it not ever clawed back during retirement.  Your OAS amount depends on the amount of time you have lived in Canada and may be partially or totally clawed back depending on your total income declared in a given year.  You do not contribute directly to OAS; it is intended as an income stabilization amount.

You may have a defined-benefit pension plan from your employer.  This amount will also be paid to you monthly once you retire.  This amount is also taxable income to you when it is received.

Retirement Savings Plans (RSP) are common accounts to hold your savings and investments for retirement.  Once you retire, this account is likely to change it’s name to a Retirement Income Fund (RIF).  This is a name change that indicates to Revenue Canada that withdrawals will happen regularly from this account.  You must convert your RSP to a RIF in the year that you turn 71.  As you make withdrawals, the withdrawal amount is taxed in the same way as earned income is taxed.  You will receive a yearly T4RIF from the institution holding your account.  RIF accounts have a required minimum yearly payment; Revenue Canada has never taxed the money in that account, they will only wait so long for the taxes owing.  Remember that RSP contributions are a tax-deferral mechanism, not a tax-avoidance mechanism.

Tax-Free Savings Accounts (TFSA) started in 2009, and have new contribution room available yearly (even through retirement, unlike RSP accounts).  Withdrawals from TFSAs are not taxable as income, unlike income from the above sources.  There are no forced withdrawals from these accounts.

Non-registered investment accounts have no yearly maximum amounts, are taxed yearly on interest, dividends and capital gains received by the holder.  There are no forced withdrawals during retirement, unlike RIF accounts.

A comprehensive plan will help clarify how to withdraw money from savings during retirement in the context of your goals.

A financial plan tailored to your specific goals and family situation will give you the information that you need to make decisions today and in the future.  Contact WD Development at 519-569-7526 or [email protected] to book an appointment.

Disclaimer: the above is intended for information purposes only.  WD Development recommends a comprehensive financial plan developed by a qualified advisor.  Please consult with your financial and tax advisors before making decisions.