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It’s not what you make. It’s what you keep. That is true for all of us, but retirees who are no longer working don’t likely have a way to make more money to keep. So they need help to control what they can. Once they’ve made the wrong choice on the timing of withdrawing income, it’s often too late to do anything about it. I talk about this all the time in employee education programs. There are so many retirement planning strategies that have helped many build up plenty of assets, but need some tweaks to the timing of withdrawals or starting income types to maximize how much a client will keep.

Timing is everything 

As a regular part of the retirement planning discussion, be sure to help your clients understand how much control they have over the timing of various retirement resources. For clients with pensions, what happens to that benefit if they delay it and take more income from their RRIF for a few years? What if they put off their CPP or OAS? How much higher will their guaranteed retirement income be if they use another taxable, but non-guaranteed income source at first? Many can keep more if they control the timing of withdrawals, or of triggering regular payments of fully taxable retirement income.

You can get ahead of it

Clients that are very close to retirement can’t go back in time and fill up their TFSA, and capture the up to 14 years these accounts could’ve been growing since they launched. But for those clients who still have some time to go before they get close to winding down their working lives, they could create a lot of tax-free income in retirement if they are aware of it now. One of the best things clients can do is maximize their TFSA contributions as soon as possible. Only 8.9% of TFSA account holders have maxed out their contributions. Too often these accounts are only maximized after RRSPs are tapped out. But while RRSPs contributions will create some tax savings during our working lives, RRSPs are 100% taxable income upon withdrawal. I’m still very concerned at the sheer number of people we educate who don’t realize this. We still see far too many people assuming that if they wait to take funds out of their RRSP until it’s a RRIF, or until they are a certain age, that some of the withdrawals aren’t taxable. Building up a strong TFSA balance can create a tax-free layer of income, and give clients more options when it comes to the timing of other withdrawals. 

Using the retirement cash flow planning process to determine a more accurate retirement income need can also help you, so you can help your clients figure out where their retirement savings need to go in order to give them the net income they’ll likely need. 

Thank you for reading.

Here’s to meaningful financial change. 🙌

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CacheFlo Inc., Halifax, Nova Scotia Canada support@cacheflo.co