For most of your working life, the playbook was clear: earn, save, invest, and don’t touch. That discipline is a big part of why you’re in a strong position today.
But retirement asks something different of you. The accounts you spent decades filling are now the ones you need to start drawing from, and that shift is bigger than most people expect!
The instinct to defer taxes as long as possible made complete sense while you were working. But can backfire when taken too deep into retirement. In many cases when you pass away, any remaining RRSP or RRIF balance becomes fully taxable income all at once, often pushing your estate into the highest tax bracket at the worst possible time for your family.
The better approach is what we call “smoothing income.”
This approach draws from your accounts strategically throughout retirement to stay in a moderate tax bracket rather than facing one large, unavoidable bill later.
In practice, this often means:
- Starting RRSP withdrawals earlier than feels natural. Your lowest-income years are your lowest-tax years.
- Realizing non-registered gains gradually across multiple years when appropriate.
- Keeping income below the OAS claw back threshold (~$95,000) where possible, since exceeding it adds an effective 15% in hidden tax.
- Consider if delaying CPP to age 70 suits your circumstances as it can increase your benefit by up to 42% and creates valuable room for tax-efficient withdrawals in the meantime.
- Preserving your TFSA for flexibility to fill income gaps without affecting OAS or pushing you into a higher bracket.
One thing we hear often: a tax bill feels like something went wrong.
It shouldn’t. A tax bill on investment gains means your investments made money! The goal isn’t to avoid tax forever, it’s to pay it on your terms, at the right time, at the right rate.
Saving got you here. An effective strategy gets you through.
If you’re approaching retirement or already in it, this is a conversation worth having now. Don’t hesitate to reach out for guidance on your current situation.
Authors:
Matt Vanderlaan, Relationships & Investment Associate
Patrick Wilson, Client Relationship Manager
The information provided on this website or through any other communications from the Steward Group Advisory Inc is for informational purposes only and does not constitute advice, an offer to buy or sell any financial products, insurance products, or services. Clients are encouraged to seek independent advice before making any decisions. We recommend talking to someone on our team.
