Approaching retirement

The question stops being how much you've saved and becomes how you turn it into an income that lasts.

Illustration of an older couple looking toward a steady income stream

How do I know if I have enough?

Enough means your savings, CPP, OAS and any pensions together cover what you plan to spend, after tax, for as long as you plan to live. Working it out is arithmetic, not a mystery. We start with your actual spending now, adjust it for what retirement looks like for you, then compare it against what your accounts can reliably pay out.

Most people who run this calculation find one of two things. Either they are fine and they can stop worrying, or they are a few years of saving away from fine and there is still time to fix it. The uncomfortable answer is not knowing, so we put real numbers on it in the first meeting.

Bring your latest statements to a complimentary assessment and we will run it with you. See how retirement planning works.

Which accounts should I draw from first?

Drawing in the right order is called drawdown sequencing, and it can be worth tens of thousands of dollars over a retirement. The usual logic is simple: withdraw from taxable and registered accounts that are growing tax-sheltered later, and take registered income in the years your tax rate is lowest.

A common pattern looks like this: spend non-registered savings and any leftover salary first, delay RRSP withdrawals until a year with a lower tax rate, and leave TFSAs untouched as long as possible because their growth is never taxed. CPP and OAS usually start later, which raises their annual amounts.

The right order depends on your tax bracket each year, so it is worth reviewing annually rather than deciding once in your sixties.

When should I start CPP and OAS?

CPP, the Canada Pension Plan, pays more every month you delay it, from age 60 up to age 70. Starting at 60 cuts the payment by up to 36 percent compared with 65; delaying to 70 raises it by 42 percent. OAS, Old Age Security, follows the same shape: smaller if you start early, 36 percent larger if you wait until 70.

The best starting age depends on your health, your other income and whether you need the money yet. If you can bridge the early years from savings, delaying is often the better deal, because the larger payments last for life and are indexed to inflation. If you need the income now, starting early is a perfectly sound choice.

We model your actual numbers both ways before you decide. Retirement planning is where this lives.

Should I take the pension or the commuted value?

The commuted value is the lump sum that equals what your pension is worth today. If you leave a defined benefit pension, your employer offers you the choice: keep the monthly cheque for life, or take that lump sum into a locked-in account and manage it yourself.

Neither answer is automatic. The guaranteed pension is valuable protection if you value certainty and dislike market ups and downs. The commuted value can come out ahead if you have other guaranteed income, a long family history of longevity, or a spouse whose situation makes flexibility worth more. It also shifts all the investing and longevity risk onto you, which is a real cost and not a marketing line.

This decision is usually one-way and time-limited, so we run the numbers with you and, where it matters, alongside your accountant before the deadline.

How do I avoid the OAS clawback?

The OAS clawback is the informal name for a recovery tax on Old Age Security. If your individual taxable income goes above a set threshold, about $90,000 a year, the government takes back 15 cents of every dollar of OAS above it, until the whole payment is gone. It is not a penalty, it is an income test, and plenty of ordinary retirees cross the line without realising.

The usual cause is a large RRSP withdrawal or a big lump sum in a single year, because registered income counts fully toward the threshold. The fix is spreading withdrawals across years, using TFSAs for extra income since TFSA withdrawals do not count, and splitting eligible pension income with a spouse where it helps.

A year of planning before large withdrawals usually saves more than the clawback would have taken.

What happens to what's left?

Whatever you don't spend becomes your estate, and the difference between a planned and an unplanned estate is usually measured in months of delay and a large tax bill. Registered accounts, a spouse's rights, the family home and your will each have their own rules, and they interact.

Two moves cover most of the ground: naming beneficiaries directly on registered plans so they pass outside the estate where the rules allow, and understanding that on the second death an RRSP or RRIF can hand most of its balance to the taxman. That is where life insurance written for the tax bill earns its place.

We work through all of it on our estate planning page, and with your accountant when it comes time.

Case study placeholder

What can a retirement plan change?

A detailed approaching-retirement case study will be added here when the approved figures and story are ready.

See all case studies

What else should you know before retiring?

When should we start planning for retirement?

Ideally five to ten years before you plan to stop working. That leaves time to use remaining contribution room, choose a drawdown order and make any pension decisions without rushing. A plan made in your last year has far fewer good options left in it.

How are you paid?

It depends on the work. Planning can be fee based, and insurance or investment arrangements pay commissions. We explain every cost before you decide on anything, and we put it in writing.

Can you work with my accountant?

Yes, and we think it is the right way to do it. Retirement income decisions touch your tax return every single year, so we put the plan in place alongside your accountant rather than around them.

Do I have to move my investments to work with you?

No. If your current accounts and holdings fit your plan, we will tell you. The first assessment looks at what you have and where changing something would actually make a difference.

What happens in the complimentary assessment?

We spend 20 minutes learning what you own, owe and expect to receive, and how you want retirement to look. You leave with a clear picture of your income gaps and what closing them would involve.

What should your savings pay you, and when?

Bring your pension, CPP or drawdown question to a complimentary 20-minute assessment.

Book a complimentary 20-minute assessment Call us directly: 604-618-7365