He has nearly $1 million invested, a $1.5 million debt-free home and an employer pension, but he is still significantly short of what he would need to fully fund the retirement lifestyle he wants.

What makes his situation especially interesting is the number of different paths available to him.

In the article, I look at:

• Why he is significantly short of his desired retirement, and the very different options he has to close the gap.
• When he should access his RRSP, employer pension, CPP and OAS, based partly on the projected rates of return from each decision.
• Why taking his employer pension about 10 years earlier may make sense, even though the annual pension would be less than half as much.
• How he can structure his withdrawals to try to stay in the lowest tax bracket possible.
• Why delaying his property taxes in B.C. is probably not worthwhile for him.
• Whether leaving his $1.5 million home to his children should really be the priority.
• How to get the least expensive financial plan that actually helps you make these decisions, and why a real financial plan needs to be interactive.

Kevin has enough resources to create several possible retirement futures. The important question is deciding which future he actually wants to live.

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

Everything changed when Kevin’s wife died. He now wants to retire next year, at 54, but can he afford to?

Kevin* has reprioritized life choices since his wife passed away recently. “We spent a lot of time delaying everything we wanted to do. All of those plans have disappeared.” 

Kevin is now ready to make new plans. Specifically, he would like to retire next year, when he turns 54, to spend as much time as he can with his two children, who are both in university. “I haven’t decided what retirement will look like. I’ve never stopped working. I may decide to take a part time position, but I don’t want to have to work fulltime anymore.”

Kevin earns $135,000 a year before tax. His annual expenses are between $40,000 and $45,000. His target annual income in retirement is approximately $80,000 before tax. If he does choose to work part time, he expects he’ll be able to earn about $20,000 a year before tax. 

His hybrid employer contribution-defined benefit pension will pay a minimum of approximately $30,000 a year at 65. He can take it as early as age 55, but it would be reduced to less than half per year. When his wife died, Kevin claimed the one-time death benefit of $2,500. He also receives a Canada Pension Plan Survivor benefit of $8,000 a year. 

He is trying to decide when to take his employer pension, CPP and Old Age Security to ensure he has the cash flow he needs, while maximizing tax efficiency and government benefits. 

Kevin lives in British Columbia, is debt-free and owns a home valued at $1.5 million. He has no immediate plans to downsize. Ideally, he would like to leave the home to his children as their inheritance.

His investment portfolio is valued at $900,000 and includes $700,000 in registered retirement savings plans invested in bank-managed growth oriented mutual funds, $150,000 in a tax-free savings account invested in a low-fee managed portfolio ($130,000) and equities ($20,0000). He also has an unregistered account with $20,000 invested in individual stocks and $30,000 in cash equivalents.

He plans to start working with a retirement planner, but would like advice on how to go about choosing a credible advisor. “What questions should I ask? Should I hire a fee-only advisor? Or should I use the financial planning services offered by my bank?”

While he wants to enjoy life now, Kevin is concerned about ensuring his savings will last throughout his lifetime.  He’d like his retirement income plan to extend to age 95 and end up with zero.

“How much can my portfolio safely generate each year? Is it reasonable to attempt to retire comfortably but responsibly next year? What is the best scenario in terms of when to start drawing from RRSPs, take my employer pension, CPP and OAS, keeping in mind the ceiling for combined CPP (survivor and personal)?” he asked.

“Are there tax strategies I can take advantage of? I’ve heard of delaying property tax as a strategy in BC. Will I be able to leave the family home to my children?”

Financial Plan

“How much can my portfolio safely generate each year? Is it reasonable to attempt to retire comfortably but responsibly next year?

To fully retire next year, Kevin would need about $1.4 million in investments. He is projected to have about $960,000, so he is 31% or $440,000 short of his desired goal.

If he would work part-time earning $20,000/year until age 65, he would need about $1.2 million by next year, so he is still 19% short.

He has a variety of life options to achieve his desired retirement income, such as working full-time until age 59, working full-time to age 58 and then part-time to age 65, downsizing his home so he can invest $450,000 more, or retiring next year with only $64,000/year income.

Having a full financial plan and interactively looking at all his options should help him decide which of these possible future lives he wants to live.

Questions:

Portfolio allocation

Kevin’s investments are about 67% equity and 33% fixed income. The fixed income is in the cash equivalents and portions of his 2 managed portfolios. His expected return over time is expected to be about 6.76%/year. He would only be $270,000 or 22% short if he invested all in equities.

His hybrid employer contribution-defined benefit pension will pay a minimum of approximately $30,000 a year at 65. He can take it as early as age 55, but it would be reduced to less than half per year.

His hybrid employer pension plan likely earns a lower return than his investments, so it is best for him to start his pension when he retires, even if it is less than half of what it would be at age 65. That would allow his investments to continue to grow for 11 more years.

What is the best scenario in terms of when to start drawing from RRSPs, take my employer pension, CPP and OAS, keeping in mind the ceiling for combined CPP (survivor and personal)?” he asked.

Deferring CPP from age 60 to 65 gives him an implied return of 10.4%/year on investments they would have to withdraw to provide the same income. Deferring to age 70 gives him an implied return of 6.8%/year. Since his investments are about 2/3 equity investments, they should provide roughly the same as 6.8% while giving him more flexibility with his income, but would be quite unlikely to beat 10.4%. It is probably best for him to start CPP and OAS at age 65.

He would likely still get about 75% of the maximum CPP if h retires next year. He should only lose a small amount of his CPP survivor benefit when he starts his own CPP at age 65.

“Are there tax strategies I can take advantage of?

He could optimize his tax rate on withdrawing his taxable income if he withdraws less from his RRSPs and more from his non-registered investments or his TFSAs to target a taxable income after he retires of $58,000/year. If he can do that, all his income will be taxed at 22% or less. If he withdraws the same proportion from each of his accounts, his taxable income would be about $71,000/year, so he would need to withdraw a smaller percentage from his RRSP and larger from his non-registered investments or TFSA.

He should ideally not withdraw from his TFSA and continue to maximize it every year, using his non-registered investments both for cash flow and for TFSA contributions. He should completely deplete his non-registered investments before touching his TFSA, since it is all tax-free.

I’ve heard of delaying property tax as a strategy in BC.

It is not worthwhile for Kevin to delay his property tax, especially with the new changes for 2026. The interest rate has been increased from prime -2% to prime +2%. With prime today at 4.45%, he would be charged 6.45% interest. If he withdrew less from investments and deferred his property tax, the investment return is a similar amount but he would have to pay tax on it.

In addition, there is some administration and they put a lien on his property, which can limit his ability to use his home for any other type of financing.

A less expensive and more flexible option is to just put a secured credit line on his home. That is usually at prime +.5% and can be borrowed and repaid any time. It can also be used in any amount and for any reason.

Will I be able to leave the family home to my children?”

If Kevin can make his retirement plan work without using his home equity, then he can leave that for his children. He is significantly short of his goal and has $1.5 million equity on his home, so he can retire far more comfortably if he accesses his home equity in some way. He can have the retirement he wants just by downsizing his home or borrowing against his home equity either to spend or to invest. He would need professional advice, discipline and a plan if he wants to consider accessing his home equity.

It may sound nice to him to leave his home for his children, but if he lives an average lifetime, his kids will likely be almost retired and grandkids likely adults before he passes away. His home equity would be a one-time bonus at that point in their lives. Meanwhile, Kevin could retire far more comfortably if he accesses his home equity in some way to improve his lifestyle. He has $1.5 million in equity. It’s worth thinking through what is important to him.

He plans to start working with a retirement planner, but would like advice on how to go about choosing a credible advisor. “What questions should I ask? Should I hire a fee-only advisor? Or should I use the financial planning services offered by my bank?”

Kevin needs a real financial plan, which is really a life plan for him, to make the right decisions now. He is significantly behind his retirement goal and has a variety of life & financial options to give him the life he wants. A real plan should allow him to interactively look at each of these options to see how they work out to decide what is best for him. Work longer, work part-time, retire on less, downsize, access his home equity, and many other options.

Usually, only a fee-for-service financial planner or fee-only financial planner does this type of interactive financial plan. His free financial plan is usually worth what you paid for it. My insight here from experience is that the cheapest financial plan is the one you actually pay for. The financial and life benefits to Kevin from making these decisions right over his life could easily be 10 times or more the cost of a professional interactive financial plan.

Ed

The post National Post article: Everything changed when Kevin’s wife died. He now wants to retire next year, at 54, but can he afford to? appeared first on Ed Rempel.

What if living to 100 becomes normal?

With advances in medicine, technology, AI, and longevity research, there is a real possibility that many people today could live much longer than previous generations.

That raises some important financial questions:

• Will your retirement savings last long enough?
• How much more would you need to save?
• Will CPP, OAS, and pensions be sustainable?
• Will working longer become the new normal?
• How should your investment strategy change?

In my latest article for BusinessByMoney, I explore how longer life expectancies could reshape retirement planning and what it means for your financial future.

The goal is not just to live longer. It’s to stay healthy, active, and financially secure for longer.

CLICK THE LINK BELOW TO READ THE ARTICLE BY IVELINA NUMEROVA:

Living to 100 and Beyond: Ed Rempel on the Financial Reality of Longer Lives

The idea of living past 100 once felt distant. Today, more and more people are hitting the century mark. For Canadians planning their financial future, that raises a serious question. Will their retirement savings last long enough?

Toronto-based certified financial planner Ed Rempel says this topic needs more attention. In a recent blog post, he discusses how longer, healthier lives could change retirement planning and why many current strategies don’t work as they should.

Rempel suggests the goal is not just to live longer, but to live well for longer, emphasizing the concept of “healthspan” over “lifespan.”

“The important issue is not just how long we live,” he writes. “It is how long we are healthy.”

Public perception has not yet caught up. Many people still associate age 100 with illness and decline. That mindset helps explain why only a small percentage of people say they want to live that long. When good health is part of the picture, attitudes change dramatically.

Longer lives are not a future concept. They are already here. Over the past century, life expectancy has steadily increased, driven by better nutrition, medical advancements, and improved living conditions.

Increased life expectancy is expected to accelerate in the coming decades, with living well past age 100 probably becoming common. The longevity movement has ignited because of AI which has led to a massive tsunami of billions of dollars in research. The movement has existed for decades, but now is advancing exponentially faster. We are likely to start living a decade or 2 longer in 10-20 years with all the medical advances.

Rempel says this trend has largely improved people’s quality of life. Older adults are staying active and engaged for longer. Many people in their 70s and 80s today are healthier than their counterparts of the same age in previous generations.

He also sees greater benefits. A longer, healthier population can contribute to more years in the workforce, supporting family structures across generations, and helping address declining birth rates in developed countries.

Rempel also adds a personal perspective, noting that mindset matters.

“Optimism is realism,” he says. “And optimists live longer.”

Rempel uses a simple example. A 30-year-old earning $100,000 plans to retire at 60 and live until 80. Now, extend that retirement to age 100. That adds 20 extra years without employment income.

The cost of that change is high. Investors would need to save much more during their working years if they have more conservative portfolios. For many, the required savings may not be realistic. Equity investors would probably need to save only modestly more.

Rempel is direct about the challenge: “How much more would you have to save?” he asks.

For many people, working longer may become the more realistic path. Extending a career by several years can help offset the added cost of a longer retirement, though the number of extra working years depends heavily on how investments are structured.

Longer life expectancies also put strain on retirement systems.

Programs like CPP and Old Age Security were not created for decades-long retirements. Rempel suggests that contribution rates may rise, benefits may change, and retirement ages may increase over time.

He is particularly cautious about the long-term sustainability of Old Age Security. With fewer workers supporting each retiree and longer payout periods, the system faces growing pressure.

Employer pensions are also changing. Many companies have already moved away from defined benefit plans toward defined contribution plans, shifting more responsibility to individuals.

The traditional model of retiring at 60 or 65 and living comfortably for a couple of decades may no longer hold. A longer life changes the math.

Rempel believes investment strategy will be a primary factor. Portfolios with long-term growth potential may offer more flexibility, while more conservative methods could limit options later in life.

At the same time, the idea of retirement itself may evolve. More people may choose, or need, to stay active in the workforce longer, whether full-time or in a reduced capacity.

Beyond the numbers, Rempel encourages people to think about purpose. Living longer brings opportunities, but also requires a reason to make the most of those extra years.

“What’s your why?” he asks.

A longer life could mean more time with family, more years of meaningful work, or simply more time to enjoy life. For Rempel, the outlook is positive. The possibility of staying healthy and active for decades beyond traditional expectations is something he welcomes.

Still, one message runs through his analysis: planning for that future cannot wait.

Ed

The post BusinessByMoney article – Living to 100 and Beyond: The Financial Reality of Longer Lives appeared first on Ed Rempel.

Many Canadians with $1 million or more saved for retirement still feel financially insecure.

I see this all the time.

People work hard, save consistently, invest for decades, and build substantial portfolios, yet still aren’t sure they can retire comfortably.

In many cases, the issue is not a lack of money. It’s a lack of clarity.

Most people have never defined what they actually want their retirement lifestyle to look like or created a proper financial plan that shows how their investments, taxes, income, and spending all work together over time.

A financial plan is really a life plan. Once you connect the numbers to the lifestyle you want, retirement often becomes much clearer and less stressful.

In my latest article for Money PIP, I’ll explain:

• Why many Canadians still feel uncertain about retirement, even with significant savings
• The real question you should ask instead of “Do I have enough to retire?”
• Why retirement lifestyle matters more than generic savings targets
• How inflation, taxes, CPP, OAS, and withdrawal strategies affect your long-term income
• Why many people are financially independent earlier than they realize
• How a comprehensive financial plan can help give you confidence in your future

CLICK THE LINK BELOW TO READ THE ARTICLE BY VARSHA:

Why Does Retirement Feel Uncertain – Even with a Large Portfolio?

Canadians have followed traditional retirement advice for years. Work hard. Save consistently. Invest wisely. Pay off debt. Many households have done exactly that. Yet a surprising number still feel uncertain about retiring comfortably. How can you have confidence you will have financial freedom?

Financial planner and blogger Ed Rempel says this disconnect shows up in conversations with clients who appear financially prepared on paper but feel uneasy about the future.

“A lot of people actually have more than enough to retire,” says Rempel. “But they still feel uncertain because they’ve never figured out what their retirement lifestyle looks like or created a proper financial plan that shows the numbers will work.”

In Canada, retirement anxiety is common. A BMO survey from February 2026 found Canadians now believe they need about $1.7 million to retire comfortably, up from $1.54 million in 2025. At the same time, about 36% of Canadians say they are unlikely to reach their retirement savings goal.

Concerns about inflation also change how Canadians view retirement. An earlier survey by the same bank found that nearly 63% of Canadians say rising living costs have increased their worries that retirement savings will not last long enough.

Despite these fears, Rempel says households that seek financial advice are actually in better shape than they realize. The problem is not always a lack of savings. Usually, the issue is uncertainty about what those savings are meant to support.

“People ask, ‘Do I have enough money to retire?’” says Rempel. “The real question should be ‘Enough for what?’”

A financial plan is really a life plan – what is the life you want and will be able to afford? It should let you look at different lifestyles and investing strategies until you find one that is both a reasonable retirement lifestyle and reasonable for you to achieve.

For example, you may find that you are investing too conservatively or in a way that costs too much in tax for your investments to provide for you after inflation. A financial plan should allow you to ask, “What would it take to afford extras we want, such as more travel.”

Retirement numbers can feel abstract without a defined lifestyle attached to them. Some retirees plan to travel frequently, maintain two homes, or spend heavily on hobbies and family experiences. Others want a quieter retirement with lower costs. Without knowing what retirement will look like day to day, many people struggle to determine whether their savings will truly support their future.

Research suggests that this uncertainty is common. Surveys from the Canada Pension Plan Investment Board show that 59% of Canadians worry about outliving their savings. Simultaneously, people who work with a structured financial plan tend to report higher confidence about their long-term savings.

According to Rempel, a comprehensive financial plan is the only way to be confident that you will have enough for the lifestyle you want – and exactly what to do to achieve it.

It changes how people think about retirement by integrating investments, income, taxes, and desired spending into a single long-term plan.

“A strong investment portfolio is important, but confidence usually comes from seeing how everything works together over time,” he says.

Retirement discussions focus heavily on large savings targets. Headlines frequently suggest Canadians need more than $1 million to retire. Those figures can create anxiety, especially for people who feel they are falling short.

Yet these broad estimates rarely reflect the personal part of retirement spending. Someone who plans to travel extensively or support adult children financially may need far more than someone with modest lifestyle goals. Rempel says personalized planning reveals that a person’s actual retirement needs differ significantly from national averages.

“When clients see projections showing their income lasting for life, even after accounting for inflation, the uncertainty often disappears. They finally see how their savings translate into real income,” he explains.

Canada’s retirement system also adds more challenges. Government benefits such as the Canada Pension Plan and Old Age Security form a foundation for many retirees, but the timing of those benefits, tax considerations, and withdrawal strategies from registered accounts can impact long-term income and tax.

A good plan lets retirees model these factors over decades, rather than relying on rough estimates. That process can reveal how different choices affect financial security later in life. It can give you confidence in your future.

Rempel says many clients initially approach retirement planning with significant hesitation. Some believe they must continue working for several more years. Others fear that unexpected expenses or a market downturn could derail their plans.

Yet the results of a thorough analysis often surprise them.

“Once we map out their lifestyle and run the projections, a lot of people find they are already financially independent,” says Rempel. “The money was there all along. They just needed a plan that showed them exactly what to do and how it would last.”

The post Money PIP article: Why Does Retirement Feel Uncertain – Even with a Large Portfolio? appeared first on Ed Rempel.

I was asked by the National Post to review the finances of a 62-year-old deciding whether to defer Canada Pension Plan and Old Age Security to 70, and whether to keep working longer.

Some of the answers go directly against what most people assume.

In this article, you’ll learn:

• How she can retire with only $700K+ and her pension
• Why she should defer Canada Pension Plan and Old Age Security because of her portfolio, and when the answer would be different
• Why she does not need cash for an emergency fund and can use a credit line instead
• Why she should not use investments to pay off her mortgage
• Why she should renew her mortgage as soon as she can
• Why an annuity can make her retirement less secure
• The difference between the yield of an annuity and the rate of return
• How she can provide reliable cash flow with minimal tax using self-made dividends

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

Should Caroline, 62, defer CPP and OAS until age 70, or even delay retirement entirely?

Financial Plan

Caroline wants to retire in 3 years at age 65 with an income of about $88,000/year before tax. This should give her the same after tax cash flow as she is making now with a salary of $102,000, since she won’t have to pay into her company pension, CPP or EI after she retires.

Good news! To do this, she needs a portfolio of $735,000. She is projected to have $737,000. She should have exactly enough so that she should be able to retire when she wants with the lifestyle she wants.

It is generally advisable to have 10-20% extra to give her a margin of safety, and she has no margin of safety. However, she should be okay to maintain her lifestyle for life.

This assumes that her RRSP and TFSA are 100% equities, but her advisor LIRA is more conservative in a balanced portfolio with a lower return. Her current mortgage payments should pay off her mortgage in 21 years.

Caroline needs this type of planning. She has enough to retire with the lifestyle she wants, but does not know it. She is still wondering whether to delay retirement. A financial plan is the only way to be able to retire confident that you will always have enough for the lifestyle you want.

Questions

She is prepared to take on a part-time job after she retires, but would prefer not to have to work at all. She’s just not sure that will be possible. “Should I delay retirement?” she asked, before stating “I’d retire next year if I could.”

She should be able to retire without having to work and not have to delay her retirement.

She plans to supplement her employer pension by drawing down her registered investments and start taking CPP and OAS at age 70. “At that point, there won’t be as much in my Registered Savings Plan, which should help minimize tax. Is this a good strategy?”

In Caroline’s case, deferring CPP & OAS to age 70 is a good strategy, but it won’t save her tax. Deferring to age 70 gives her an implied return of 6.8%/year, which is likely a bit higher than her investment returns, since quite a bit is in the more conservative balanced portfolio. If all her investments were 100% equities, then she would have a 10% margin of safety in her retirement goal and she could then start CPP & OAS at age 65, since her higher return investments should provide more than the pensions.

Her RRSP & LIRA and CPP & OAS are all taxable, so the deferring will not change her taxable income. Her opportunity to save tax is if she takes some of her income every year from her TFSA and less from her RRSP. She should keep some TFSA in case of emergencies, so she should not take too much of her TFSA.

For an emergency source of funds, she should apply for a credit line secured on her home and an unsecured credit line now while she is working. She can keep these through retirement to use for cash emergencies. This can allow her to use more of her TFSA for cash flow and perhaps keep only $25-50,000 in it.

She has about $14,000 in remaining RRSP contribution room and $16,000 in TFSA contribution room. “Should I continue to fund my RSPs? My TFSA? Or should I pay down my mortgage more?” asked Caroline, who would also like to know how soon she should start looking to renew her mortgage, which matures next year. She is concerned interest rates may start to rise because of the war in the Middle East and all of the geopolitical uncertainty.

Caroline brings home about $5,500/month now which is about the same as she is spending, so she probably is not able to save much. She is in a slightly higher tax bracket now while working than she will be in during retirement, so she should maximize her RRSP room first, even if she has to withdraw from her TFSA to do it.

Her mortgage rate is lower than her investment returns over time, so she should only make the minimum mortgage payments and not do any prepayments.

Generally, banks allow you to renew up to 3 months early if you renew with the same bank. Today’s rates are lower than her 5.45% mortgage, so she should renew as soon as the bank allows.

She should not worry about the geopolitical issues in the Middle East, since they are likely to be short term and should be resolved long before her mortgage comes due. She would pay a penalty to renew now instead of next year, so she can wait until next year and renew when she can to avoid the mortgage prepayment penalty.

Caroline also wonders if she should consider putting her investments into an annuity before she retires. She likes the idea of receiving a regular income stream. If not an annuity, she’d like to know the best way to generate dividend income. 

Annuities are invested more conservatively and have an estimated rate of return inside the annuity of about 4%, which is much lower than her investments. They may quote a yield about 6.7% today, but the yield is the cash flow she would get including her principal amount. The yield is not the rate of return. She would have to work part time for a few years if she decides to invest in an annuity.

Annuities would make her retirement less secure because the income is too low to provide for the life she wants.

The best way to get dividend “income” is with “self-made dividends”, which means just selling a bit of her investments every month for her lifestyle. This gives her a mix of capital gains and the return of her capital, which is taxed lower than actual dividends. Actual dividends are fully taxable immediately, unless she invests only in Canada where returns are generally quite a bit lower than global or US equities.

“Self-made dividends” are better than actual dividends in every way. She would pay less tax, be able to decide the exact cash flow and timing she would get, and she could invest globally for the best risk/return, instead of having to invest entirely within Canada.

Caroline actually needs cash flow, not income. Income is taxable cash flow. She needs a reliable source of cash flow with ideally very little tax.

Ed

The post National Post article: Should Caroline, 62, defer CPP and OAS until age 70, or even delay retirement entirely? appeared first on Ed Rempel.

They both have strong, inflation-indexed defined benefit pensions, but they’re not sure they’ll actually have the retirement they want if they stop working now. 

They’re also not confident their retirement cash-flow numbers are right, or whether their spending assumptions will hold for the next 30 years.

They want to know whether it makes sense to defer CPP and OAS to age 70, how to minimize tax if they retire early, and whether they can afford to help their three adult children with $100,000 each toward home down payments without putting their own retirement at risk.

Some of the key questions we explore in the article:

• Whether they can really retire now at ages 56 and 60 and still maintain their desired lifestyle
• How to tell if your retirement cash-flow numbers are realistic, or just assumptions based on current spending
• Why conservative, balanced investments often make deferring CPP to age 70 the better financial decision
• How to know whether helping your children financially is affordable — or creates risk later

Early retirement planning is not only about portfolio size. It’s about cash flow, tax brackets, and understanding when guaranteed income provides a better return than investments.

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

Should Ottawa couple defer CPP and OAS if they retire early next year?

Could retirement really be just a year away? Arnold, 56, and Heather, 60, are hoping the answer is yes.

The Ottawa-based couple have been running the numbers and scenario planning. They anticipate they will need to generate $118,730 after tax annually in retirement to enjoy a lifestyle that funds their love of travel. They currently spend about $15,000 exploring new destinations around the globe and expect this will continue for the next several years. The empty nesters would also like to help their three young adult children save for down payments on their first homes.

Arnold currently earns $125,000 a year (before tax) and Heather earns $100,000. They both have employer-based defined benefit pension plans that are indexed to inflation. If they retire next year, Arnold’s annual after tax pension income will be about $48,000 (with a monthly bridge of $892 until age 65) and Heather’s will be about $40,000 (with a monthly bridge of $170 until 65) – not enough to meet their target retirement income. However, Heather wonders if their target income is an accurate reflection of the cash flow they’ll need to live comfortably for the next 30 years or more and Arnold is wondering if his budget calculations and assumptions are accurate.

The couple’s investment portfolio includes $350,000 in self-directed Registered Retirement Savings Plans invested in a range of Exchange Traded Funds across asset classes. They also have $1,250 in Tax Free Savings Accounts and $5,000 in cash.

Their primary residence is valued at approximately $1 million with a $245,000 mortgage. They have no plans of moving. They also own a self-sustaining rental property valued at $420,000 with a mortgage of $250,000. The couple will receive an inheritance of $150,000 in Spring 2026, at which point they plan to list the rental property for sale. They want to use the inheritance and the proceeds from the sale to pay off the mortgage on their forever home. Additional funds from the sale of the rental property will be invested either in their RRSPs or TFSAs. “What would the experts recommend?” asked Arnold.

The couple is also concerned about how to best minimize tax. At this point, they plan to start withdrawing from their RRSPs before age 65 and defer Canada Pension Plan and Old Age Security benefits until age 70. “Is this a good strategy?” Most importantly, are they on track to retire next year?

Financial Plan

Could retirement really be just a year away? Are they on track to retire next year?

The good news is that if their desired lifestyle is correct (and that may be a big “if”), they are on track to retire next year. With both their large pensions, they would need only about $50,000 in retirement savings and they should have about $350,000.

Note the pension figures they gave must be before tax, not after tax. They are roughly the maximum pension that a government pension should pay after 30 years in the pension plan. They confirmed this in additional information they provided.

Heather wonders if their target income is an accurate reflection of the cash flow they’ll need to live comfortably for the next 30 years or more and Arnold is wondering if his budget calculations and assumptions are accurate.

They think they would need about $95,000/year to spend in retirement, which is their current lifestyle excluding their mortgage payment. There are 2 reasons to question this. First, they question it themselves. Second, it sounds like that is what they are spending now. With their current salaries, after tax and after allowing for 10% of their salaries to go to their pension contributions, they should be bringing home about $140,000/year total. If they are only spending about $120,000/year (including their mortgage payment), then they should have been able to save about $20,000/year the last several years (unless they had unusual expenses). Have they been able to save it? If not, then they might not be happy with $95,000/year for a retirement lifestyle.

Looking at the items in their retirement lifestyle, they all look typical for retirees and there are no obvious monthly expenses missed. Many people add up their current monthly expenses and assume they can retire on that same lifestyle while forgetting unusual expenses, such as buying a car every few years or modest home improvements or large trips or gifts to their kids. They have not included these types of expenses in their retirement lifestyle.

Questions

They want to use the inheritance and the proceeds from the sale to pay off the mortgage on their forever home. Additional funds from the sale of the rental property will be invested either in their RRSPs or TFSAs. “What would the experts recommend?” asked Arnold.

They are both in high brackets now and should retire in the lowest tax bracket, so they should use their inheritance and proceeds of selling their rental property to maximize their RRSP rooms this year before they retire. If they retire sometime during 2027, then 2026 would be the last year with full salaries to get the maximum RRSP contribution refund. Given their large pensions, they probably don’t have a lot of RRSP room, but this year is probably their last chance to maximize it.

They should clear about $145,000 from selling their rental property. With the inheritance of $150,000, they could pay off their mortgage of $250,000.

It is probably worthwhile selling their rental property. The rent covers the expenses, but nothing more, so they do not get any extra cash flow from their $145,000 equity. If they sell and either invest the proceeds or pay off their home mortgage, they would get a significant cash flow benefit.

If they would invest the money for growth, they could get a return significantly higher than their mortgage interest rate, but with their current balanced ETFs invested “across asset classes”, the return is likely to be similar after tax to their mortgage rate. Their mortgage would take about 14 years to pay off with their current payments, so these investments would need a decent return to cover their mortgage payments.

In short, in their situation with their investments, paying off the mortgage is the simplest option and likely their best choice.

The couple is also concerned about how to best minimize tax.

Their plan works out to be quite tax-efficient. Their desired retirement lifestyle without their mortgage of $95,000/year after tax is about $115,000/year before tax. They should be able to keep their taxable incomes about equal with pension sharing and agreeing to share their CPP, so their taxable incomes should be about $57,500/year each. The lowest 23% tax bracket in Ontario is on taxable income up to $58,500/year, so they should be able to pay the lowest tax rate on all their income.

There would be very little they could withdraw from their RRSPs at the lowest 23% tax bracket, so they would likely end up paying 30% tax on RRSP withdrawals up to $35,000 each in future years, but that is still a reasonable tax rate. They should try to not withdraw more than $70,000 RRSP in one year to give to their children for their home down payment, if they decide to do that.

They plan to start withdrawing from their RRSPs before age 65 and defer Canada Pension Plan and Old Age Security benefits until age 70. “Is this a good strategy?”

A good test of their retirement lifestyle could be if they don’t touch their RRSPs and live only on their pensions. If they can do that, then they can afford their desired retirement lifestyle.

It is best for them to start both CPP and OAS at age 70. Deferring CPP from age 60 to 65 gives them an implied return of 10.4%/year on investments they would have to withdraw to provide the same income. Deferring to age 70 gives them an implied return of 6.8%/year. Since their investments are conservative balanced investments “across asset classes”, both of these are likely higher than their investment returns, so it is technically better to use their low return investments and defer CPP & OAS.

Ideally, they should defer both to age 70. This would mean their pensions would be about $20,000/year less than their spending from age 65 to age 69, which is roughly what their investments should make with just over $400,000 investments making a conservative balanced return of about 5%/year.

If they defer only one of the government pensions, then their pensions should essentially cover their lifestyle every year right through retirement, so they would hardly need to touch their investments. There is a bigger benefit to deferring CPP than OAS, so that is a better one to defer.

In short, they would be about $50,000 better off over their life if they defer both CPP and OAS to age 70, but starting OAS at 65 and CPP at 70 makes their cash flow simpler. They would then basically need to only spend their pensions and try not to touch their investments.

The empty nesters would also like to help their three young adult children save for down payments on their first homes.

If they can live essentially off their pensions and government pensions and not touch their investments, then they should have about $300,000 that they can leave for larger additional spending like buying a car or taking a larger trip, potential cost of a retirement home in the future, and to help their adult children with their home down payments.

If they try living only on their pension incomes and find they need $10,000/year more to retire with the lifestyle they want and cover additional larger expenses, then they would need the $300,000 to provide that extra income through their retirement.

It is advisable to keep at least $100,000 or $200,000 for emergencies or for a potential future retirement home. If they give away all their investments to their children and only have pensions, then they would have nothing to fall back on for cash flow emergencies.

The nicer retirement homes can be quite expensive and might be affordable if they keep their investments and allow them to grow and perhaps double over 15 years or so. Their $300,000 could become $600,000-$800,000 over 15-20 years, which could provide a comfortable retirement home.

They have about $700,000 equity in their home now, so they could pay for a retirement home for quite a few years by selling their home at that time. But that would only work if they both move to a retirement home at the same time. Often one person has health issues and is unable to stay in the home while the other prefers to stay in their home. Having separate investments gives them this freedom.

Ed

The post National Post article: Should Ottawa couple defer CPP and OAS if they retire early next year? appeared first on Ed Rempel.

Most of their retirement money is still in U.S. employer plans, and they’ll both receive U.S. Social Security as well as Quebec Pension Plan benefits.

Darcy would like to retire within the next year, Rita plans to continue until 65, and they want to know whether their savings and pensions will comfortably support them.

They’re also wondering about the best way to manage their U.S. accounts, how Social Security will affect their Canadian benefits, and whether the $15,000 fee they were quoted for cross-border tax planning is reasonable, or if they’re overpaying for advice.

Some of the key questions we explore in the article:

• When cross-border planning becomes essential, and when it doesn’t.
• Whether or not it makes sense to transfer U.S. plans to Canada.
• How Social Security affects QPP/CPP and OAS.
• How much life insurance retirees actually need.
• Whether $15,000 is typical for this type of planning.

Cross-border retirement planning is complex, but once you know the rules, the right answer may be clear. This case shows how to simplify things so you can retire with confidence.

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

Is $15,000 for cross-border tax help too much?

Financial snapshot for the expert:

Income (all in Canadian funds)

● Employment income:

○ Darcy $150,000

○ Rita $45,000

● Investment income (dividends): $360 annually

● Pension (current or anticipated):

○ Darcy: $18,000 annually upon retirement

■ Ontario Teachers Pension Plan at 65: $3600

■ QPP at 65: $7200

■ Quebec Principals Pension Fund (PPMP) $7200

○ Rita; $9060 annually upon retirement

■ Ontario Teachers at 65: $4500

■ QPP at 65: $4560

● Other: Social Security How does this harmonize with CPP and QPP?

○ Darcy: $29,000 at age 62

○ Rita: $25,000 at age 62

Assets

● Primary residence approximate value: $700,000 ($230,000 remaining in mortgage at

3.75%)

● Rental property approximate value: nil

● Other: nil

Investment holdings

● Cash: $20,000

● TFSAs: $15,000

● RRSPs:

○ Darcy: $55,000

○ Rita: $43,000

● GICs: nil

● LIRA: nil

● RESPs: nil

● Mutual Funds: nil

● Stocks:

○ Rita: eTrade (US funds): $15,000

○ Rita: SunLife shares (Cdn funds): $9700

● Rental property: nil

● Other:

● USA 403(b) retirement plan for educators:

○ Darcy: $500,000 (USD)

○ Rita $450,000 (USD)

● Life insurance: type (i.e., term, whole) value:

○ Darcy: $500,000 term

○ Darcy: $350,000 while employed

○ Darcy $100,000 whole life

○ Rita: $150,000 term

○ Rita $100,000 whole life

Monthly expenses

$1600 Mortgage or rent payments

$360 Utilities

$1400 Groceries

$680 Transportation costs

$400 car loan

$180 public transit

$100 gasoline

$0 Child care: nil

$845 Insurance premiums

$600 life insurance

$125 auto

$120 home

$700 Home repairs (including plowing and lawn care as well as incidental repairs)

$0 Credit card payments: nil

$300 Property tax

$0 Loans

$900 Dining out/travel/entertainment

$740 Other?

$400 charity

$350 prescriptions and dental

FINANCIAL PLAN

For Darcy to retire next year and Rita at age 65, they need just over $1 million in investments. They are projected to have more than $1.6 million, so they are 44% ahead of their goal. They can confidently retire with a comfortable margin of safety. This assumes that they will be happy maintaining their current lifestyle through their retirement.

Question: 

“We’ve spoken to financial advisors who say we’ll be fine, but we’re worried our financial situation is so complicated we’ll make big mistakes,” said Rita. Part of their worry is that while Rita is a dual citizen, Darcy is not. He is a Canadian citizen. It is their understanding that if Rita pre-deceases Darcy, he would have to live in the US for six weeks a year to qualify for survivor benefits as a non-citizen. “Is this a cause for concern?” asked Rita.

Answer:

No, it is not a concern for them. US Social Security has an Alien Nonpayment Provision that non-US citizens living outside the US have to spend one month (not 6 weeks) in the US every 6 calendar months abroad. There is an exception for Canada in the US-Canada Totalization Agreement. If Darcy outlives Rita, as long as he lives in Canada or the US, he would continue to collect Social Security.

Question: 

“Should we move the U.S. accounts to Canada and put that money into RRSPs? What are the tax implications? Or should we start withdrawing from them? And if so, when and should I draw mine down first as my income is lower than Darcy’s?” asked Rita. “Our investment advisor has recommended a cross-border tax advisor to do an assessment, which will cost $15,000. Is this fee typical for this type of assessment?”

Answer:

Their US 403(b) retirement plan for educators are tax-free until they are withdrawn, but withdrawals or distributions are taxed. The tax-deferral is good. The disadvantage is that they often have fewer investment options, lower returns from annuity-heavy structures, and higher fees than other types of accounts.

They could withdraw some and contribute to an RRSP in Canada. This is probably a good idea, but only if they have RRSP contribution room in Canada. The withdrawal would have a 30% tax withholding, so they would need to find extra cash temporarily if they want to offset the tax. For example, if they withdraw $100,000, they would get $70,000 cash to contribute to RRSP. 

If they can temporarily borrow $30,000 (the amount of tax withheld), they could contribute the full $100,000 to RRSP to offset the tax. They should then get a $30,000 tax refund.

A simpler option to avoid get better investment options & returns with lower fees and not tax issues could be to roll them into an IRA. This is a tax-free transfer and there is no penalty since they are over age 59 ½. This may be the best option.

Fees for cross-border tax advisors vary based on time & complexity, however a basic plan with some retirement planning, RRSP or IRA transfers and dual residency advice is typically closer to $5,000, not $15,000. A quote of $15,000 may be for a complex or high-net worth situation.

Question:

Rita and Darcy also have $650,000 in term life insurance plans ($500,000 for Darcy; $150,000 for Rita), two $100,000 whole life insurance plans and Darcy also has $350,000 of life insurance through his employer but it will stop when he retires. “Are we over-insured?” asked Rita. The premiums cost about $600 a month.

Answer:

When the first one of them passes away, the survivor will lose about half the Social Security, 40% of the QPP and all the OAS for that person. Social Security allows the survivor to continue whichever amount is higher. OAS is likely very small for them. The Social Security and QPP loss would be about $38,000/year of income. To provide this for 30 years, they would need about $650,000 of life insurance on each of them that continues into retirement.

Darcy is close enough, but Rita should ideally have more.

The high premiums are likely from the whole life insurance. They should be able to save quite a bit by cashing them in and replacing them with a term-to-100 policy for Rita or a joint first to die term-to-100 policy to replace the whole life and Darcy’s life insurance.

Question:

Rita and Darcy would also like to know if they should consider cashing in some of their stocks, the cash value of their life insurance or maybe even some of the 403(b) assets to pay off the mortgage. From a peace of mind standpoint, they feel it would be nice to put the mortgage payments towards new savings or simply reduce their cost of living. 

Answer:

Their current mortgage interest rate is low at only 3.75%. Their payment will take about 16 years to pay it off. However, their investments should all get higher returns over time than the mortgage interest rate, especially if they transfer their 402(b) retirement plans for educators to IRAs. They would have to pay tax on withdrawals, other than the small amounts they have in non-registered stocks and TFSA). They would have to cash in about $330,000 in one of the investments to pay off their $230,000 mortgage.

Their best option is to keep the mortgage and just take the lowest possible payments on it. Their security comes from having a large amount of investments growing at faster rates of return.

Ed

The post National Post article: Is $15,000 for cross-border tax help too much? appeared first on Ed Rempel.

Most seniors start their CPP and OAS when they retire or at age 65, without evaluating the options. The truth is that many seniors would benefit from delaying CPP until age 70.

Here is how you can figure out what is best for you.

The government pensions, CPP and OAS, are full of cool opportunities to increase after-tax income, because:

–        Seniors often have flexibility in taking taxable or non-taxable income.

–        OAS is subject to several “clawbacks” in addition to income tax.

To see these opportunities, you need to think creatively about pensions, tax and investments.

After age 65, the single most important factors in deciding whether to delay CPP are:

– Will you withdraw more from your investments if you delay starting?

– Are you a growth investor? This decision is very different for growth investors.

You will learn:

• Why should you ignore “CPP breakeven” calculations?
• Why are life expectancy stats understated?
• What is the best way to estimate your life expectancy?
• What happens if you are still working?
• How does your tax bracket each year affect your CPP & OAS & GIS?
• How can you qualify for the maximum GIS?
• How does your CPP & OAS fit into your overall retirement income?
• Who should take CPP & OAS early and contribute it to RRSP?
• How do CPP & OAS affect the estate you leave for your kids?
• Who should delay their CPP to age 65? Real life examples.

Note that delaying CPP from age 60 to age 65 is a different question with different answers. I discuss this in a recent post: Should I start my CPP early? – Real-Life Examples (Updated)

A quick review of the facts:

Delayed CPP Rules

–        The maximum CPP benefit in 2025 at age 65 is $1,433 per month, or $17,196 per year.

–        You can delay starting up to age 70 and you get 8.4% more for every year after age 65. If you start at age 70, you get 42% more for life, so the maximum is $2,035 per month, or $24,418 per year.

–        You can start CPP even if you are still working.

–        If you are over 65 and still working, you can choose whether or not to pay into CPP.

–        Your 8 lowest earning years since age 18 (plus years when you had kids under age 7) are “dropped out” in calculating how much CPP you get.

Delayed OAS Rules

–        The maximum OAS benefit in 2025 at age 65 is $735 per month, or $8,819 per year. If you are over age 75, you get 10% more.

–        You can delay starting up to age 70 and you get 7.2% more for every year after age 65. If you start at age 70, you get 36% more for life, so the maximum is $1,000 per month, or $11,994 per year.

Clawbacks – Guaranteed Income Supplement (GIS) and OAS Clawback

–        You can get up to $1,098 per month, or $13,173 per year, additional income from GIS if you are single, collecting OAS and have a taxable income less than $22,272 per year (excluding OAS income).

–        For married couples, GIS is up to $1,321.56 per month, or $15,859 per year combined if your combined taxable income is under $29,424 (excluding OAS income).

–        GIS is “clawed back” at 50% of your income (excluding OAS income). Low income seniors are in a 50% tax bracket! This is why strategies for high income people can also work for low income seniors.

–        The OAS clawback is a tax of 15% of your taxable income between $93,454-$151,668 per year. Tax brackets look different when you include the clawback taxes.

The simple breakeven calculations miss many important factors. For example, John starts receiving $17,196 per year of CPP and $8,819 per year of OAS at age 65. Jane starts receiving $24,418 CPP and $11,994 OAS at age 70. It will take Jane 11-13 years to catch up. The simple breakeven is age 81 for CPP and 84 for OAS. John gets more before age 81 and 84, while Jane gets more after.

This implies if you expect to live past 84 (and most people will), you should delay your CPP and OAS. But this is not the complete answer.

The complete answer depends on these 5 main factors. Note that some of these are similar for the decision to start CPP early at age 60 in my recent video, but some of these are very different or even opposite:

1.  How long do you expect to live?

Morbid question, but important for this decision. [I covered this in my recent post on taking CPP early. If you viewed that one, you could skip ahead 2 minutes here.] If you start CPP and OAS at age 70 instead of 65, you collect for 5 less years, but you get more and eventually catch up. The longer you expect to live, the better it is to delay CPP. Today, average life expectancy for people that made it to age 65 is age 86. (Actually, it’s 85 for men and 88 for women.)

But this is understated. Average life expectancy has been rising about .2 years each year. You may think you get a year closer to death every year, but in reality it’s only .8 of a year closer. This is mainly because of advances in medical science being able to cure or prolong life for most diseases, especially heart disease and cancer. About 88% of all deaths in Canada are from diseases. By the time today’s 65-year-olds get there (in 25 years), they are expected to live to age 90 (actually, it’s 89 for men and 91 for women).

If you are married, it is best to use your combined life expectancy. The one of you that lives the longest should get 60% of the CPP of the other. For married 65-year-olds today, the one that lives the longest is projected to live to age 94.

Most people underestimate their life expectancy. They may focus on how old their parents or other older family members were when they passed away, but every generation lives longer than the last.

Your specific life expectancy might be lower if you have significant health issues. You can get an estimate with either Project Big Life’s Life Expectancy Calculator that targets Canadians or Living to 100 Calculator with more in-depth lifestyle questions.

Without major health issues, it is probably best to use average life expectancy, especially if you are married so you can plan for the one of you that lives the longest. Bad genes mostly affect life expectancy for people under age 50, while life expectancy above age 50 is mostly based on lifestyle. Your combined life expectancy based on whoever of you or your spouse lives the longest is probably the best age to use.

Summary: Life expectancy suggests most people should wait to age 70.

2.  Can you qualify for GIS?

The Guaranteed Income Supplement (GIS) is significant, being up to $15,859 per year tax-free for a couple. You can only get GIS if you are getting OAS. You may be able to qualify with some creative planning, such as deferring taxable income and living only on OAS, GIS and non-registered investments. There are all kinds of creative strategies. It’s a topic that fascinates creative planners. To get the most total pension, you need to plan at least a few years early and often do the opposite of what you would otherwise do. I have post specifically about this called, “Make Your Retirement Comfortable with the 8-Year GIS Strategy”. See the story of Gloria below for an example. The 50% clawback is a huge factor.

Summary: If you qualify for GIS with or without creative planning, you should almost definitely start your OAS at age 65. GIS is part of OAS, so you cannot get GIS unless you are getting OAS. 

3.  How do you invest?

This is where it looks different for growth investors. The investing factor for delaying CPP to age 70 is also different from the CPP early at 60 decision because the implied returns are different. Starting your CPP early might mean you can take less income from your RRSPs or other investments, leaving them to grow. Then you can take more income from your investments later. If you start CPP 5 years sooner at age 65, you can leave that amount of your investments to grow. To have the same lifetime income as someone starting at age 70 with a life expectancy of age 90 with 2% inflation, your investments would have to earn an average return of 6.8% per year. In other words, the formula for deferring CPP from age 65 to 70 has an implied return of 6.8% per year. (It was 10.4% for delaying from 60 to 65.)

Investing says that if you expect your investments to average more than 6.8% per year, you should take your CPP earlier. For growth investors, that is lower than the long-term return of the stock market. Investors should generally diversify globally or in the US. The average return of the S&P500 from 1950 to today is 10.8% per year. For financial planning purposes, a more conservative return about 8% per year is more prudent, but for estimating which start date for CPP is likely to provide the most lifetime income for you, using actual average past returns is more likely closer to future returns.

In short, growth investors should start CPP earlier at age 65 (or possibly age 60) to let their higher-return investments grow longer.

For people with more conservative investments, it is unlikely that their investments would average 6.8% per year. You may expect only 5% for a balanced portfolio or 3% for a fixed income or GIC portfolio.

In short, moderate or conservative investors should delay CPP to age 70 and live on some of their lower-return investments until then.

Summary: Investing suggests that most people should wait until age 70, but growth investors should start CPP at age 65 or sooner.

4.  Are you still working?

How can you plan to pay the least tax on your CPP? If your tax bracket is different at age 65 than it would be at age 70, that is a major factor in determining when to start CPP. Let’s look at some examples.

If you are still working, CPP income will be added to your work income and will probably be taxed at a higher rate. Most retirees pay 20% tax on their CPP, based on taxable income below $53,000 per person in 2025. If you are still working and end up paying 40% tax on your CPP, but expect to only pay 20% in a few years, it is probably better to wait for a year when you make little or nothing from work.

Some people have no other income, at least not taxable income. You might think they could then take their CPP with no tax – but that is not a good idea. With no other taxable income, you can start OAS and collect full GIS. If you start your CPP, your GIS is reduced by 50% of your CPP pension.

If you delay CPP, it is larger and more likely to be affected by the OAS clawback for people with moderately high income. This requires planning, but if you think you will be more affected by the OAS clawback in the future with the higher CPP, then it may be better to start CPP earlier. Many articles say that the OAS clawback is a factor. However, I found that in every example I looked at, the OAS clawback did not change my advice.

Work suggests people working earning over $40,000 should delay CPP until the first full year after you stop working. This is because some or all of their CPP will likely be taxed at a higher rate than after they stop working. People with no other taxable income should delay their CPP to age 70 and start OAS & GIS at age 65.

Summary: Knowing your expected income and tax bracket for each year from age 65 to 70, including clawbacks of other programs, can be very helpful in paying the least tax on your CPP. 

5.  When do you need the money?

It is nice to get more CPP or pay less tax on it, but you need a Plan to have the money you need for your lifestyle. Some people don’t have enough other income and have no choice on when to start CPP. However, CPP is just one piece of your retirement income. When you look at how to provide your overall retirement income most effectively, you might decide differently about your CPP.

Your retirement plan should include figuring out how much income you want and when. Your Financial Plan should figure out the desired retirement lifestyle you want that is sustainable for you. Most people want to be confident they can maintain their lifestyle as long as their money and health allow and not worry about having to cut back sometime during their retirement.

Your retirement plan should also include how to structure your retirement income in the most effective way with the lowest lifetime tax, which involves deciding how much to take from which account. CPP is just one piece. You may also have OAS, RRSP, TFSA, pensions, investments in your corporation or trust, non-registered investments, leveraged investments such as the Smith Manoeuvre, or other accounts. Deciding how much to withdraw from where affects how much retirement income you receive and how much tax you pay. Structuring your overall retirement income can make your decision about when to start CPP clear. See my video for details: How to Design Your Retirement Income: An Overview .

A common belief is that retirees spend less as they age, but that is generally not our experience with actual Canadians. People in their 80s with money and health generally travel as much as they did in their 60s. They likely do more luxury travel and less active travel. The entertainment you enjoy probably costs as much in your 80s as it did in your 60s.

If you have major expenses for a few years, it might make sense to start CPP earlier. For example, if you are still supporting kids that are at home or in school, or with a wedding or home down payment. You might have major home expenses from moving to or personalizing your retirement home. You might be planning on one or 2 huge trips.

Many people have high value uses for money, such as lots of RRSP room. Taking CPP early and requesting no tax withholding so you can contribute the full amount to your RRSP can be an effective strategy for growth investors, but not more conservative investors. Note this works for RRSP or other tax-deductible investments, but not for TFSA.

CPP does not leave an estate for your children or for charity, but investments do. If leaving a legacy with your estate is a major factor for you, it may be helpful to take CPP earlier to invest it and let it grow. Any investments left can be passed on to your desired beneficiaries.

People have different values. Some value freedom and being able to live the way they want, while others value security from a higher regular income. If you value freedom, you might consider starting CPP earlier. The extra money gives you more freedom to do what you want. If you value security, you should probably delay CPP to get the higher, guaranteed income.

Summary: Contributing CPP to your RRSP can make it worthwhile taking CPP early for growth equity investors, but not more conservative investors. Specific spending plans in your retirement plan mean there might be exceptions where starting CPP earlier makes sense. Being able to leave a larger estate can be a reason to take CPP early and invest it. People who value freedom might also want to start CPP earlier. 

Best Advice

My advice is based on all the pension, tax and investment factors. Which choice is most likely to give you the highest after-tax income throughout your life?

My best advice is:

1.  OAS – If you are retired, take it at age 65. If you can qualify to receive GIS (even with creative planning), definitely start at age 65.

2.  CPP – If you are retired and will withdraw the same amount from your investments either way, delay starting until age 70. If delaying means you will need more income from your investments, then it depends on how you invest.

3.  Balanced investor or conservative GIC investor – Probably delay CPP to age 70 and live off your lower return investments until then.

4.  Equity growth investor – Always start CPP and OAS at 65, unless you could qualify for GIS, to let your higher return investments grow more. If you are still working, invest your extra income if you can.

Let’s look at some real-life stories from my clients. Should they delay CPP and OAS to age 70?

1.  Angela is 65 and retired. She has no investments and only a fixed pension (not integrated with CPP). Her breakeven age is 79 for CPP and 80 for OAS. She is of average health. Should she delay CPP and OAS until age 70? Yes for CPP (to get maximum GIS). No for OAS.

2.  Brian is 65 and retired. He has significant retirement investments, is a growth investor, and plans for a steady retirement income. If he delays CPP or OAS, he would withdraw from investments instead. His breakeven age is never for both CPP and OAS. Should he delay CPP and OAS until age 70? No. (Investment reasons.)

3.  Chris is 65 and still working part time earning $20,000 per year. She has a small RRSP and TFSA. She is conservative and only invests in GICs at 3% per year. Her breakeven age is 82 for CPP and 83 for OAS. Should she delay CPP and OAS until age 70? Yes. (Investment reasons.)

4.  Dave is 65 and still working earning $50,000 per year. He is a moderate, balanced fund investor. A reasonable expected return is 5% per year. His breakeven age is 83 for CPP and 84 for OAS. Should he delay CPP and OAS until age 70? Yes. (Tax reasons are more important than investment reasons.)

5.  Erin is 65 and still working earning $50,000 per year. She is a confident equity fund investor. A reasonable expected return is 8% per year long term. Her breakeven age is 91 for CPP and 92 for OAS. Should she delay CPP and OAS until age 70? No. (Investment reasons are more important than tax reasons.)

6.  Fred is the same as Erin, 65 and still working earning $50,000 per year. He is a growth equity investor. A reasonable expected return is 8% per year. His CPP and OAS will be taxed on top of his salary in a 30% tax bracket. Fred has lots of RRSP room. He plans to collect CPP and OAS and invest the full amounts into his RRSP. His breakeven age is never for both CPP and OAS. Should he delay CPP and OAS until age 70? No. (Investment reasons.)

7.  Gloria is 65 and retired. She has significant investments in RRSP, TFSA and non-registered because she is a growth investor. She can qualify for $13,173 GIS income if she avoids any taxable income other than OAS. She plans to delay CPP and withdraw only from her TFSA and non-registered investments to avoid any other taxable income. Her breakeven age is age 81 for CPP and never for OAS. Should she delay CPP and OAS until age 70? Yes for CPP. No for OAS. (To get maximum GIS.)

You can see in the image summary of these stories, that the answer with CPP & OAS is complex and these government pensions are only one piece of your retirement income.

There are often creative opportunities for seniors to get a higher after-tax income for the rest of their life. Fred and Gloria are 2 examples.

The best advice is to look at this as part of a professional Retirement Income Plan.

Ed

The post Should I Delay CPP & OAS Until Age 70? – Complete Answer with Real-Life Examples (Updated) appeared first on Ed Rempel.

They hope to retire within the next two to four years with $90,000 per year before tax to support their lifestyle, which includes $4,700 in monthly expenses and $18,000 annually for travel.

With $2.1 million in assets, they’ve built a strong financial foundation, but they’re wondering if they really need to wait that long.

In this article, I’ll answer their key retirement questions:

• Is retiring in four years—or even sooner—possible?
• When can they tap into their LIRA, and what happens to their RPP and DCPP if they retire early?
• When should they start QPP and OAS?
• Should Gerard start drawing from the Quebec Pension Plan at 60, or defer it to 65 for higher benefits?
• How will their rental income affect their taxes in retirement?
• Does it make sense to sell their duplex and downsize to a condo once their children move out?
• Which investments should they draw down first to keep taxes low?
• What’s the smartest way to structure their finances for the retirement they truly want?

Here’s how they can maximize their wealth and design a retirement that gives them more freedom, flexibility, and financial security than they thought possible.

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

Can Gerard and Penelope afford to leave the corporate grind before reaching 60?

FINANCIAL PLAN

Questions:

Is retiring in four years – or, even better in two to three years – possible? 

Good news for Gerard & Penelope! With their goal of retiring with $90,000/year before tax, they can retire now! They don’t have to wait 4 years. They need about $1.35 million for this retirement and they have $2.1 million, so they are 58% ahead of their goal.

They may be setting their goal too low. Their combined income and rent today is $336,000/year. Can they really be comfortable with only $90,000/year? That would cover their expenses of $4,700/month plus $18,000/year for travel in after tax cash flow, so it appears that they have put some thought into it.

They can afford to retire on $110,000/year now or $130,000/year in 4 years, including their QPP and rent. The effect of this on their lifestyle is that they want $18,000/year for travel, but they can afford $33,000/year if they retire now or $48,000/year if they retire in 4 years.

They have many options in how they choose to live. A Financial Plan is really a life plan. It would help them think through exactly what lifestyle they want in their life and what to do with their extra money.

“When can I tap into the LIRA? And what happens to the RPP and DCPP if we retire early?” He also wonders if he should start drawing from the Quebec Pension Plan at 60, versus waiting until age 65 when he can receive full benefits. 

They can tap into their LIRA starting at age 55, so Gerard could start now and Penelope next year.

It is best for them to start both QPP and OAS at age 65. Deferring QPP from age 60 to 65 gives them an implied return of 10.4%/year on investments they would have to withdraw to provide the same income. This is likely more than their investments would make in that period. Deferring to age 70 gives them an implied return of 6.8%/year, which is likely less than their investment returns.

Which investments would we draw down first?

The lowest tax bracket in Quebec is 26.5% on incomes up to $53,000. This means they can have taxable income of $106,000 between them all at the lowest tax bracket. They only want $90,000/year, which is $45,000/year each if they split it properly.

For some people, it is better to try to defer tax as long as possible, even if they will be in a higher tax bracket decades from now. In their case, they will likely be pushed into the 36% bracket that starts at only $57,000 each relatively quickly, especially if they decide to retire with the higher income that they are on track for. Therefore, their best strategy is to withdraw what they need entirely from taxable investments as long as they can stay in the lowest tax bracket.

75% of their investments are RRSPs & pension, so it is probably best to try to hold onto their TFSAs and cash & GICs to draw on when their lifestyle would push them into the next tax bracket or for lump sum expenses like a large trip or a car.

Gerard is concerned about the tax implications of the rental income once they retire. “The extra income is nice, but if it puts us in a higher tax bracket, is it worth it?” The couple are also open to downsizing once their children leave home over the next few years. “A condo in our area costs about $400,000 in today’s dollars. Does it make sense to sell the house when the children leave?”

The tax on the rental income is not an issue as long as they are comfortable with only $90,000/year income before tax, including the rent and their QPP. It should all still be at the lowest tax bracket.

However, they are missing out on a large opportunity to live more comfortably. If they sell their home for $950,000 and buy a condo for $400,000, after closing costs they should clear $500,000. With only a conservative 4% withdrawal on $500,000 (based on the 4% Rule), they could get $20,000/year of income, instead of only $10,000 in net rent they get now. The $20,000 invested in growth mutual funds, like they are doing, should trigger hardly any capital gains by selling only 4% of it every year. Selling a bit of an equity (stock market) investment every month is known as “self-made dividends”. With this method, they would pay a lot less tax on $20,000/year cash flow from their $500,000 investments than they do on their $10,000/year net rent. Their investments in equities are likely to grow significantly faster in value than their home, as well.

Ed

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How do we draw income from our investments in the most tax-efficient way—so we can maintain our lifestyle without running out of money?

They’ve built a strong financial foundation, with over $2 million in investments, a mortgage-free home, and a solid travel budget. But despite working with a stock broker and tax accountant, they still don’t have a clear drawdown strategy. 

They’re unsure how to structure withdrawals, when to start OAS, and whether to start passing wealth to their children now.

Their biggest questions:

• How should they draw down their investments in the most tax-efficient way to ensure their savings last?
• Can they afford to increase their RIF withdrawals to $8,000 per month without worrying about running out of money?
• Should they keep their term life insurance or redirect those funds elsewhere?
• Is it smarter to start passing wealth to their children now rather than waiting? If so, what’s the best way to do it?
• Why are their stockbroker or accountant not able to plan a tax-efficient income for life for them?
• How do they balance investment growth, tax efficiency, and estate planning to secure their financial future?

CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:

Now retired, how do we withdraw funds without running out of money?

Financial Plan

Walter & Joanne are spending $8,600/month, or $103,000/year after tax – $126,000/year before tax. To provide this income for life with a 7%/year return they would need about $1.8 million in investments. They have just over $2 million. They are 15% ahead of their goal, which is a reasonable margin of safety.

Good news! They have enough to support their lifestyle plus inflation for life.

They should both start their OAS now. Deferring it to age 70 gives them an implied return of 6.8%/year, which is likely a bit lower than their investment returns.

Q & A

A/ “Now that we’re retired, how should we be drawing income from our investments in the most tax effective way that will ensure we can maintain the lifestyle we want throughout retirement?” “We cannot get a clear understanding of which accounts we should be drawing down from and in what order from our financial advisors,” said Walter.

A/ They are paying about $23,000/year in income tax now. This will rise to about $30,000/year once they start their OAS.

There are 2 main issues for them to focus on to minimize tax in their situation – income splitting and trying to stay in the lowest tax bracket.

For income splitting, they should be able to split all their RRIF & LRIF income on their tax returns. They can’t split their CPP that easily, but they could call Income Security and request splitting their CPP.

Splitting their taxable income should allow them to avoid having one of them have taxable income high enough to have their OAS clawed back (once they start it).

Their income up to $57,000/year is taxed at 28% (Alberta tax including clawback of Age credit) and the amount over $57,000 is taxed at 34%. The high effective tax bracket (including government clawbacks) that they should avoid starts at $91,000/year with an effective tax rate of 44%, including clawbacks of their OAS and Age credit.

In their case, the best strategy is to try to keep their taxable incomes below $57,000/year each. They can save about $10,000/year in income tax if they can do this. This would mean they only pay 28% tax or less on all their income.

Their strategy should be to take enough from their RRIFs or LRIF to bring their taxable incomes to $57,000, including their OAS & CPP. Then take the rest of what they need for their lifestyle from their non-registered investments or TFSAs.

Their lifestyle goal is $126,000/year, which would be $123,000/year with this tax strategy. They can have OAS, CPP & RRIFs of $57,000/year each, or $114,000/year total. That means they need about $10,000/year from their non-registered investments with a minimum of tax.

Their non-registered investments should be invested more tax-efficiently than a REIT, so they can take more from their RRIFs and keep their taxable income below the target $57,000/year. They should withdraw the $10,000/year for their lifestyle from their non-registered investments, plus use them to contribute $14,000/year to keep their TFSAs maximized. This should deplete them in about 5 years. At that point, they can start withdrawing the $10,000/year from their TFSAs. They may need less at that point, since their RRIFs will then have a higher minimum withdrawal after they convert all their RRSP to RRIF.

Q/ They own two term life insurance policies valued at a combined $1 million that will mature in a few years. “Should we renegotiate at that time? Is it a good idea to have life insurance to cover death taxes and the capital gains implications of passing our estate on to our two adult children?” asked Joanne. “Or should we be giving our children their inheritance sooner rather than later? Why wait for death and taxes? And how do we do that? Where should the money come from?

A/ The answer to this depends on how much inheritance they want to leave for their kids. They will already get their home and cottage that could be an inheritance of $750,000 for each child based on today’s values, plus whatever is left from their investments.

There is a conventional wisdom that you should have insurance to pay for taxes on death, however it is usually not necessary. Today, they would leave an estate of $3.6 million without insurance. In a worst-case scenario, they may pay $1 million tax on the death of the 2^nd one of them, but that still leaves an estate of $2.6 million.

Their policies will be quite expensive to renew now that they are older. You still pay the same tax on death when you have insurance. It just means you leave a larger estate. Is it important to them to leave a larger estate?

Their one possible reason for having life insurance is their cottage, if their kids would want to keep it. If they sell it, then they can easily pay the capital gains tax. However, if they want to keep it, they will have to pay the capital gains tax from other resources. However, they are highly likely to have enough investments to pay for it.

Giving their kids an inheritance sooner is a challenge for them, since they are only 15% ahead of their goal. That is a decent margin of safety, but not much excess.

Their investments are almost all RRSP or RRIF, so they would have to pay a lot of tax to give them away now. If they want to give the kids an early inheritance, the best choice is probably to give them the cottage sooner. There would be capital gains tax to pay, but that should be far less than amounts from their RRIFs.

They may have personal wishes about how much they want to leave for their kids. However, the best advice is probably to make sure they have enough for themselves and the lifestyle they want, so that they never need anything from their kids.

Their own financial independence is a gift for their kids. Many people today need to help their aging parents financially and it can be a burden. Financially independent parents are a gift.

Q/ “Sometimes we think we should be drawing $8,000 (net) a month from our RIF but worry we might run out of money,” said Walter. “Can we afford to do this?

A/ They can afford it and provide for their retirement, but withdrawing $8,000/month (net) from their RRIF would cost a lot more tax.

Their OAS and CPP would be about $21,000/year each, assuming they have their CPP split. That means they should withdraw $36,000/year each from their RRIFs and LRIF. That is $6,000/month total (before tax). Their minimum RRIF withdrawal would be about $6,500/year if they converted all their RRSP to RRIF, so they are doing the right thing by keeping almost as much in their RRSP as their RRIF. That keeps the minimum withdrawal lower, so they can withdraw only $6,000/year until they turn 72.

At age 71, they will have to convert the rest of their RRSP to RRIF, so then they should take the minimum required withdrawal, and then top it up with a bit from their non-registered or TFSA to get to their desired lifestyle.

Q/ Right now we’re working with a stock broker and tax accountant but neither one has been able to give us a clear strategy and we don’t have a financial plan that shows us how to best move forward.

A/ Investment people may be good at investing and tax accountants are good for minimizing your current year taxes, but neither typically gives you a proper financial plan. Free financial plans from banks or advisors are usually worth what you paid. Paying an unbiased fee-for-service financial planner for a quality financial plan can give you clear insight on exactly what to do, which can minimize your risk of running out of money and minimize your tax. Your financial plan is the GPS for your life. It gives you peace of mind that you are doing everything right and confidence that you can enjoy your life knowing exactly what you can afford for life.

Ed

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Canadian Affairs asked me to review the financial situation of James and Valerie, a retired couple in Montreal. 

They dream of traveling twice a year, upgrading to a nicer neighbourhood, and replacing their car in a few years—all while maintaining a comfortable retirement with $64,000 a year in spending for the next decade.

Currently, their income comes from CPP, QPP, OAS, and GIS, and they have $500,000 in retirement investments. Their home is worth $525,000, with an $82,000 mortgage. But with James now required to convert his RRSP to a RRIF, they’re reassessing their long-term financial plan.

In the article, you’ll learn:

• Do James & Valerie have enough to fund their desired retirement lifestyle?
• What investment strategy could put them on track?
• How could a GIS strategy impact their financial plan?
• Should they adjust their spending, investment mix, or mortgage plans?
• What’s the best way to balance their goals while securing long-term financial stability?

CLICK THE LINK BELOW TO READ THE ARTICLE BY CHETAN RAINA:

Can James, 71, and Valerie, 63, afford to move to a nicer neighbourhood?

Financial Snapshot

James, 71

Valerie, 63

Pre-tax assets:

James’s RRIF: $184,000

Valerie’s RRSP: $221,000

Post tax assets:

James’s TFSA: $53,000

Valerie’s TFSA: $42,000

House: $525,000

(All invested assets in 60/40 ETF XBAL)

Liabilities:

Mortgage: $82,000 (5-year fixed at 2.79%. March 2027 renewal. Balance at maturity $75,214)

Income:

Employment income $0.

James OAS 2023: $8,354.52

Valerie OAS 2023: $0.

Valerie has not started OAS

James CPP/QPP 2023: $12,129.60

Valerie CPP/QPP 2023: $8,013.00

(Both have started CPP/QPP)

James 2023 Net Federal Supplements (line 14600): $5,367.66

Valerie 2023 Net Federal Supplements (line 14600): $5,367.66

Expenses:

Monthly mortgage: $411.25

Estimated other expenses: $4,600

Other:

James RRSP contribution room: $96,094

Valerie RRSP contribution room: $91,968

James TFSA contribution room: $39,221.27 + $20,000 withdrawn in 2024

Valerie TFSA contribution room: $70,282.97

Financial Plan

For the lifestyle that James & Valerie said they want, they need $74,000/year before tax for 10 years, then $56,000/year for 10 more years when they spend less, and then $51,000/year after their mortgage is paid off in 20 years. Their investments are 60% equities & 40% bonds, which should conservatively give them a long-term return of about 5.6%/year.

For this lifestyle, they need about $550,000 of investments. They have $500,000 in retirement investments. They are 8% short of their goal.

A retirement plan is a long-term projection. Since they are close, they could try it and they may well be fine, but it is advisable to be at least 10-20% ahead of your goal, not 8% behind.

This does not leave them the money they want to replace their car for $35,000 and move closer to their kids for $100,000.

Part of their issue is that they have been receiving $10,700/year tax-free of Guaranteed Income Supplement (GIS), which will stop next year after James starts the mandatory withdrawals from his RRIF. GIS is clawed back based on 50% income.

They have several options that could put them on track or at least help them:

Planning Options for James & Valerie:

1.       Reduce their retirement lifestyle:

Reducing their retirement lifestyle by just $4,000/year would put them on track for the lifestyle they want. For example, they could reduce their travel from $14,000/year to $10,000/year.

To be able to also afford both a $35,000 car and $100,000 to move close to their kids, they would have to reduce their lifestyle by $20,000/year before tax, or $15,000/year after tax for 10 years. For example, they could buy the car and move closer to their kids, but not do any travel – other than travel with little or not cost, such as visiting family.

Financial planning is actually life planning. With specific examples of different lifestyle options, they can choose which is more important to them.

2.       Invest for more growth:

They are invested 60% in equities and 40% in bonds, which conventional wisdom says is good for most people. However, studies have shown that a higher allocation to equities has been more reliable in providing for a 30-year retirement. This assumes it is within their risk tolerance, meaning that they could stay invested when their investments fall.

They could get educated on the expected long-term returns, size & length of market declines, and long-term reliability of returns of various investment options.

In their case, investing 80% in equities and 20% in bonds would put them on track for their desired lifestyle.

Investing 100% in equities would also allow them to either buy their car or give them $50,000 towards moving close to their kids.

3.       GIS Strategy:

It is possible to plan to get a higher GIS pension. With the GIS Strategy, you often have to do the opposite of what you would otherwise do. This is because seniors that get GIS are in the highest tax bracket in Canada, but if they don’t get GIS, they are usually in the lowest tax bracket.

The maximum GIS for a couple is about $15,700/year tax-free. They would have to have no taxable income other than OAS & GIS. In their case, they would need tax deductions to offset their CPP and RRIF income.

Valerie can defer all her RRIF income by keeping her RRSP and not converting to a RRIF. Valerie could have deferred her CPP, as well, but she has started it.

Together they get about $20,000/year from CPP and James’s minimum RRIF will be about $10,000/year. They need about $30,000/year in tax deductions to get the maximum GIS.

Being retired, they have limited opportunities for tax deductions. Their most obvious deduction is by contributing to their RRSPs. James has an RRSP contribution room of $96,094 and Valerie has $91,968.

If they contributed the maximum to both their RRSPs and then claimed the deductions optimally, they could get a total of $188,000 tax-free GIS income over the next 7 years. They could carry forward their deductions every year and only deduct the optimal amount. They should claim about $30,000/year in RRSP deductions to fully offset their CPP and RRIF income.

This $188,000 tax-free income over 7 years would allow them to live their desired lifestyle, and also buy their car and move closer to their kids. They could then afford everything they wanted.

They could make these contributions by cashing in both of their TFSAs to contribute to James’s RRSP before he converts it to a RRIF. This is the last year they can do this. They could then increase their mortgage by about $95,000 when it comes due in 2 years to contribute Valerie’s maximum RRSP.

It may seem odd to increase their mortgage at their age, but they would save more than 50% of a $95,000 RRSP contribution in higher GIS income and lower tax, while paying only a modest interest rate on it.

4.       Increase mortgage:

James & Valerie’s mortgage comes due in March 2027. They have a great mortgage rate of 2.79% now. It will be significantly higher after they renew it.

They may be thinking about paying it off sooner, either from their TFSAs or a higher mortgage payment. However, it is probably best for them to pay their mortgage as slowly as they can for 2 possible reasons:

–          They would have to withdraw from their investments to pay more on their mortgage. Their investments would probably be expected to earn more than their mortgage interest rate long-term, even after tax. Their current allocation should conservatively give them long-term returns about 5.6%/year. Without the GIS Strategy, they are in a 20% marginal tax bracket, so their after-tax return on their RRIFs should be at least 4.5%/year. Their mortgage rate is likely to average less than this long term.

–          They can defer tax by withdrawing less from their RRIFs and paying less onto their mortgage. If they do the GIS Strategy, they need their TFSAs entirely to contribute to RRSP. Their only investments left would all be RRSP or RRIF, and 50% of every withdrawal would reduce their GIS plus possibly cost them income tax. As long as they get GIS, it is worthwhile for them to withdraw as little as possible from their RRIFs. A minimum mortgage payment and no mortgage prepayments helps them defer tax.

Ed

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