Retirement planning: Big question #2
How do I choose my year-to-year cash flow requirements?
Taxes don’t stop with retirement, but it is a stage of life where you have the best opportunity to take advantage of the benefits of strategic tax planning.
You might be having questions like:
- When should I choose to RRIF or RRSP accounts?
- How quickly should I choose to deplete my RRIF accounts?
- What role does home equity play in my retirement funding plan?
- How do I ensure I optimize opportunities for income splitting?
- When should I choose to start to collect my Canada Pension Plan and Old Age Security?
- What strategies are available to avoid OAS clawback?
Strategically choosing when and where to source your annual cash flow can add hundreds of thousands to your nest egg and net worth during your drawdown years.
Your retirement nest egg is composed of three possibly four different account types: Registered Retirement Income Fund (RRIF or LIF), Tax Free Savings Account (TFSA) and non-registered (OPEN) account and perhaps a Corporate Holding Company. When funds are withdrawn, each of these account types have different tax implications.
The first is fully taxable, the second is non-taxable and the third and fourth account types are partially taxable. Therefore, where you choose to source your funds and how much you choose to withdraw from each of these accounts to meet your annual cash flow needs can have a significant impact on how much tax you pay. Choose poorly and anticipate getting caught in a retirement tax trap.
Others you may like:
Am I going to be OK?
How do I plan for course corrections in retirement?