How To Develop A Tax-Smart Retirement Income Strategy

May 23, 2019

How To Develop A Tax-Smart Retirement Income Strategy

Canadians are living longer. A significant rise in average life expectancy has been observed over the past 25 years. This could have a serious impact on how Canadians think about their future and retirement. It becomes challenging to plan for retirement and create sustainable sources of lifetime income. Rising life expectancy is not the only challenge; inflation, taxes and market risk may reduce savings in retirement. Therefore, it’s important to consult a financial planner to develop a tax-smart retirement income strategy.

Taxes can have a negative impact on your savings; however, a tax-efficient retirement strategy will help you reduce tax stress and have a financially stable retirement.

Predicting taxes in retirement

It’s difficult to plan for future taxes due to uncertainty; tax reform debates, public policy, and how income will be taxed are some of the factors that give birth to uncertainty. In addition, it’s hard to predict what tax policy will be endorsed by lawmakers in the future. However, an expert financial planner can help you make fair assumptions about the future of taxes. It is likely that taxes will increase in the future. Some people think their tax rate will decrease when they retire. However, some retirees could face higher tax rates come retirement.

The objective of ensuring lasting retirement income is more important than ever before. Talk to an expert who can help you meet these challenges through a combination of fundamental and advanced strategies.

Strategies to protect your investment

RRSP is a key tool to accumulate wealth during your working years. It helps you accumulate a retirement nest egg and minimizes income tax on taxable income. People who don’t plan may find it difficult to deal with situations where tax is one of their biggest expenses surpassing housing costs and food, especially when you turn 71, this is the last year you have to turn your RRSP into RRIF. The following are some important tax strategies to protect your assets:

  • Plan to retire in a low tax bracket with the right mix of RRSP and TFSA
  • Keep Canadian fixed-income securities including bonds and GICs in your registered account (RRSP)
  • Consider holding foreign stocks outside of registered investments
  • Use tax-free savings account (TFSA) as a source of emergency cash
  • Plan carefully if you earn over $200,000
  • Make strategic use of capital losses
  • Consult a professional

Most retirees earn less during retirement years. However, your income may not change if you have contributed to RRSP, or operate a small business part-time or earn rental income. No matter the source of your income during retirement, make sure it’s tax-efficient. It’s time for you to develop a tax-efficient retirement plan.

“Smart financial planning – such as budgeting, saving for emergencies, and preparing for retirement – can help households enjoy better lives while weathering financial shocks. Financial education can play a key role in getting to these outcomes.”
– Ben Bernanke

About Kewcorp Financial

Kewcorp Financial helps individuals develop tax-smart retirement income strategies in Edmonton. If you want to consult a highly experienced financial planner in Edmonton, feel free to contact us!