The 6 Best Strategies to Minimize Tax on Your Retirement Income (as seen in Canadian MoneySaver)
You will have a lot more tax saving opportunities after you retire than before.
If you get a salary, you may have limited tax deductions or tax saving strategies. When you retire, it is completely different.
You can essentially determine the amount of income you will be taxed on once you retire. You can decide:
- How much you withdraw from your investments.
- How much you withdraw from your RRSP vs. TFSA vs. non-registered.
- How tax-efficient your investments are.
- When you start your RRIF, work pension and government pensions (CPP and OAS).
These 6 best strategies will give you an idea of the flexibility you have to minimize your tax with effective tax planning.
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[…] you want to learn more about these strategies, check out the following article and video from Rempel’s […]
Appreciating the dedication you put into your website and detailed
information you present. It’s nice to come across a blog every once in a
while that isn’t the same out of date rehashed
information. Excellent read! I’ve saved your site.
Thanks for the kind words, Maria. Yes, it takes care and planning to minimize tax on your retirement income.
Minimizing taxes on your retirement income always need a special care and attention at your end. You need to withdraw less from your retirement savings plans and also delay in taking your benefits before retirement. Thanks for sharing these wonderful strategies..
I emailed this post to all my contacts. If I like to read it, my friends will too.
Gail’s question was on a post about the “8-Year GIS Strategy”. You can see it here if you scroll down to the comments and look for Gail: https://edrempel.com/make-your-retirement-comfortable-with-the-8-year-gis-strategy/ .
Ed, what were Gail’s figures/comments/question(s)?
Your figures are correct.
However, there may be opportunities for you if you have tax deductions. The GIS clawback tax is based on family net income, which is after tax deductions.
For example, here is an easy way for you to make a 30% profit. You and your husband could each contribute $12,150 every year to an RRSP (if you have room) to offset the CPP. That would give each of you the maximum GIS. When you are 72 and withdrawing from your RRIFs, you would be in the lowest tax bracket.
This is worth doing for you, even if you have to borrow the money for the RRSP contributions. You get 50% of the contributions back (possibly plus a bit of income tax you might pay), but then you only pay 20% tax on regular withdrawals on it after age 71.
If you and your husband have $100,000 in unused RRSP room together, you gain $30,000 from this strategy.
No, don’t worry. The dividend gross-up does not apply to registered funds. Only if you hold them non-registered.
Whether they are a good investment or suitable for you is another question. Dividend stocks, in general, are more conservative and tend to have lower long-term returns than the broad markets.
I realize that when you withdraw funds from an RSP, the money is 100% taxable. However, do I pay more tax when withdrawing from dividend funds compared to equity funds. In other words, does the ‘dividend gross-up’ also apply to registered funds?