A recent poll by CIBC found that while most Canadians hope to retire by age 61, more than half (57 per cent) worry whether “they’ll actually be able to achieve that ambition.”

As well, a very high percentage — 66 per cent — of pre-retirees surveyed worry “about running out of money in retirement.”

Save with SPP reached out to CIBC to follow up on these results, and got some comments from Carissa Lucreziano, Vice-President, Financial and Investment Advice, CIBC.

Q. Quite an eye-opener to see that two-thirds of people worry they might run out of money in retirement. We wondered if you got any information on the causes of this worry – maybe more people are drawing down a lump sum of money in a registered retirement income fund (RRIF) versus receiving monthly workplace pension cheques? Or is it worry they’ll lose money in the markets? 

A. The rising cost of living is increasing faster than people expected which in turn is impacting many Canadians’ ability to save for retirement and other goals, which has them feeling less prepared for the future and worried about their retirement savings. A recent CIBC poll found that inflation is the top financial concern for 65 per cent of Canadians right now. While inflation is cyclical, many people are thinking, if inflation keeps going up at this rate, it’s going to affect my retirement plan. 

Another reason people may be worried is because they don’t know how much they will need in retirement. One third of Canadians simply hope they have enough to retire, 20 per cent have sat down to run the numbers on their own and only 14 per cent have enlisted the help of an advisor. It’s like going on a road trip without planning a route, of course you’ll be worried about getting lost. 

Given all the factors you need to consider in a retirement plan, it’s best to sit down with an experienced advisor who can map out a strategy that aligns with your goals, your current situation and how you expect your circumstances to change in the future. 

Q. We were interested in the quote in the release about the importance of having a financial plan. Wondered if you could expand (briefly) on what sorts of things should be in a plan – probably it is looking at what future retirement income will be versus expected expenses, and then including the great things listed in the release like travelling? 

A. A financial plan is your big picture, giving you a detailed look at your current financial situation to help you prioritize and manage your short- and long-term goals – like travel, renovations, and retirement. 

The key items that should be included in every financial plan are your income, expenses, net worth, investment strategy, retirement, and estate plan.  

Many advisors use a goal planning tool to build a personalized plan that addresses all your needs, while taking into consideration any “what if” scenarios to see how any major changes might affect your overall plan. What if you buy a cottage at age 55 or gift money to your children at age 75? It is important to understand the financial implications of any big moves before you make them.  

The most important thing to remember though, is that your plan should grow and change as you do. Ideally, you should be reviewing it every year or whenever there is a material change like employment, divorce, marriage or having a child. 
 

Q. It’s interesting that many people are saving for retirement more via Tax-Free Savings Accounts (TFSAs) than by traditional registered retirement savings plans (RRSPs). Wondered if you learned any of the reasons why they preferred the TFSA – tax free income when you withdraw the money? Accessible for emergency spending en route to retirement? Maybe it is not impactful on one’s Old Age Security (OAS) qualification? 

A. Right now, Canadians are prioritizing day-to-day needs over long-term planning. This means, for many, that they are saving more in their TFSA over their RRSP.   

Contributing to a TFSA is a terrific way to save for both short- and long-term goals. A TFSA gives you the flexibility to access money easily and any interest, dividends, and capital gains earned are tax-free. The funds you withdraw from your TFSA also do not count as income, so it will not affect the amount of OAS you qualify for when you are over the age of 65.  

You don’t have to choose between an RRSP or a TFSA.  However, one could give you more benefits than the other depending on your situation. An advisor can help you understand your options and how it fits into your plan.

Q. Finally, what was the one thing that surprised you the most about these results? 

What stood out to me is that most Canadians polled are relying on their best guess for how much they will need to fund their retirement. Only 14 per cent have met with an advisor to run the numbers.  

An advisor can help you get a better understanding of your big picture and put an actionable plan in place, setting you up for success! It may seem overwhelming, but you can get there with the right support. Plus, you will be able to enjoy your next chapter, knowing that you are in a good place financially. Financial wellbeing is so important. 

Our thanks to Carissa Lucreziano and CIBC for taking the time to respond to us!

The Saskatchewan Pension Plan has been helping Canadians save for retirement for more than 35 years. Now, saving for retirement is simpler than ever before. There’s no longer a dollar limit on how much you can contribute to SPP during the limit — you can contribute any amount up to the total of your available RRSP room. And if you are making a transfer into SPP from another RRSP, you can transfer any or all of it — no limit applies. It’s a limitless opportunity for retirement saving! Check out SPP today!

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RRSPs are still the best way to save for retirement: Golombek

At a time when many observers are saying the venerable registered retirement savings plan (RRSP) has been surpassed by other, newer savings products, noted financial writer Jamie Golombek begs to differ.

Writing in the Strathroy Age Dispatch, Golombek notes that some retirement commentators are asking if the RRSP “still has merit.”

“Let me try to un-muddy the waters by suggesting that RRSPs are likely the best way for many Canadians to save for retirement. After all, an RRSP, just like a tax-free savings account (TFSA), allows us to earn effectively tax-free investment income. And that’s not a typo: tax free, not merely tax deferred,” he writes.

So how is an RRSP tax-free? Golombek explains.

“If you go back to basics, and really think about what’s happening with an RRSP contribution, you will soon realize the investment return on your net RRSP contribution is mathematically equivalent to the tax-free return you could achieve with a TFSA, ignoring, for now, changes in tax rates. And, provided the time horizon is long enough, RRSPs can beat non-registered investing even if your marginal tax rate is higher in the year of withdrawal than it was when you contributed,” he writes.

He gives the example of Sarah, who has a marginal tax rate of 30 per cent and puts $1,000 into an RRSP.

“Applying (an) … annual rate of return of five per cent over the next 20 years, with no annual taxation, Sarah will be able to accumulate an RRSP worth $2,653. But, alas, not all the RRSP funds are hers to spend. The piper must be paid. When Sarah withdraws the $2,653 from her RRSP, and assuming her marginal tax rate is still 30 per cent, she will pay $796 in tax, netting her $1,857 after tax from her RRSP. This is equivalent to a five-per-cent annual after-tax rate of return on her $700 net initial investment ($1,000 contribution less $300 in deferred taxes on that initial investment),” he writes.

“In other words, Sarah’s after-tax rate of return of five per cent is exactly equal to her pre-tax rate of return, meaning she essentially has paid no tax whatsoever on the growth of her initial $700 net RRSP investment for 20 years. The RRSP allowed her to save for retirement on an effectively tax-free basis,” he explains.

If your marginal tax rate when you retire is lower than it was when you put the money in, you get an additional tax advantage, Golombek concludes. Did you know that the Saskatchewan Pension Plan operates very much like an RRSP? The contributions you make are tax-deductible, so you may get a nice little tax refund as a pat on the back for making regular SPP contributions. Check out SPP today!

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Aim for two-thirds of your retirement income to be guaranteed

There’s a new rule of thumb for retirement planners, reports Nicole Spector, writing for Yahoo! Finance.

While you would need a lot of hands to cover off all the various retirement rules of thumb out there, this one is refreshingly simple. It’s called the “two-thirds retirement plan.”

“With the two-thirds retirement plan, guaranteed retirement income (i.e., Social Security, pensions and annuities) is used to pay for two-thirds of living expenses during retirement. The additional third of living expenses is funded via non-fixed income (e.g., investments and retirement savings),” she writes.

Let’s Canadianize this. With this plan, your guaranteed income, such as money from the Canada Pension Plan (CPP), Old Age Security (OAS) or other government benefits — along with workplace pension income and any annuities you buy — is used to pay two-thirds of your retirement living expenses. The rest comes from other retirement savings, such as money from a registered retirement income fund (RRIF), your Tax Free Savings Account (TFSA) or non-registered investments and savings.

The article encourages readers to “do the math” to see how this idea would work for them.

“Add up the total amount of guaranteed income you expect to receive in a month,” suggests financial coach Michael Ryan in the article. “Next, estimate your monthly living expenses, including everything from housing to food… (and) leisure activities. Multiply your total monthly expenses by two-thirds.”

This sort of estimate, the article explains, is relatively easy to do if you are already retired, but harder to estimate if your golden handshake is years or decades away.

“I tell every person I work with to pretend that tomorrow is their retirement day,” Robert Massa of Qualified Plan Advisors tells Yahoo! Finance.

“If they want to live just like they are living now, they need to pay themselves at least 80 per cent of their regular paycheque in order to maintain their standard of living,” he states.

“From there, they have a basis to work with and then they can start to ask themselves what else they want from retirement and add those costs in. Then you can project forward using inflation and come up with a monthly and annual income goal and work from there,” he adds.

If, after doing the math, you don’t think government benefits will cover off two-thirds of your retirement living expenses, you need to consider finding other sources of guaranteed retirement income, the article adds. This can be done, the article notes, through converting some of your retirement savings to a lifetime annuity when you retire.

The article concludes by recommending that everyone have a good financial plan in the present — this will make us more aware of how and where our income is being spent and what we will need in the future, when we retire. And while two-thirds is a target, the closer you can get to a plan where guaranteed income covers off all of your expenses, the better, the article concludes.

An additional benefit of guaranteed fixed income — you can never run out of it, as it is paid to you for as long as you live.

Having fixed retirement income is an option for any member of the Saskatchewan Pension Plan. When it comes time to convert your savings into income, SPP’s stable of annuities is among your options. You can convert some or all of your savings to an annuity, which will land in your bank account on the first of every month for the rest of your life. Check out SPP today!

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Which is best for retirement savers — an RRSP or a TFSA?

Writing in the Toronto Star, Ghada Alsharif takes a look at the question of choosing the right vehicle for you when it comes to retirement savings.

She says both a registered retirement savings plan (RRSP) and tax-free savings account (TFSA) can help you save on taxes while you save for retirement, but that they work differently.

“RRSPs offer a tax deduction when you contribute but you pay tax when money is withdrawn. On the other hand, TFSAs offer no upfront tax break but you don’t have to pay tax on withdrawals. Both accounts help you reach your savings goals faster than a regular savings account because both grow tax-sheltered,” Alsharif explains.

Her article quotes Jason Heath of Objective Financial Partners as saying that choosing between the two options may be decided by how much you make.

If, Heath states in the article, you have “high income it’s a good time to contribute to a RRSP if you expect to pull the money out at a lower tax rate in the future. That’s not often the case for a young person who’s just getting started at their first job or is working part time, doing schooling and getting established in their career.”

A TFSA is better for lower income earners, who are taxed less on their income. Funds within the TFSA grow tax-free and aren’t reported as taxable income when they come out, the article explains.

A chart in the article shows the correlation between income and which savings vehicle people choose. The TFSA is preferred by the vast majority of those earning $49,999 or less, the Star reports. It’s more of a 50-50 choice for those earning between $60,000 to $89,999, but RRSPs predominate among those earning $90,000 and above.

“The drawback to contributing to a RRSP is someday you’re going to pay a tax on those withdrawals. That’s why it’s important to make sure when you’re putting money in, you’re getting a large tax refund to make it worth paying tax on the withdrawals someday,” Heath states in the article.

Our late father-in-law had an interesting use for his TFSA. When he was required to make withdrawals from his registered retirement income fund (RRIF), he would pay the taxes on the withdrawal, and then reinvest the balance in the TFSA. The income from the TFSA would gradually increase and is of course tax free.

A problem with both the TFSA and the RRSP is that you can tap into the money before it’s time to withdraw it as retirement income. There are tax consequences for raiding your RRSP piggy bank, but none with the TFSA. A nice way to avoid dipping into your savings is by opening a Saskatchewan Pension Plan account. SPP is locked-in, meaning you can’t help yourself to your savings until you’ve reached retirement age. Your future you will appreciate that!

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Students should take advantage of retirement saving and its tax advantages: The Varsity

We all look back fondly at our days as students, whether in regular or post-secondary school. At no time does this writer ever remember any friend or classmate talking seriously about the need to save for retirement. There were many other things to worry about, including passing courses and looking for a job.

But an article in the University of Toronto’s The Varsity newspaper says even students should be thinking about life after the jobs they are about to find.

“As a student, investing in a (registered) retirement savings plan early can prove to have long-term benefits like tax-deductible contributions,” the article begins. “This means that the amount you put into your RRSP for the year is deducted from your taxable yearly income. Further, investments are tax-deferred, which means that taxes on the growth of your investments are not paid until you withdraw the funds from your RRSP account,” the article explains.

The article makes the point that while the tax-free savings account (TFSA) allows money to grow without taxation, contributions made to it are not tax-deductible like RRSP contributions. As well – and a key point if you are thinking of the money being like a piggy bank for the future – is that withdrawing money from an RRSP is more difficult. The RRSP piggy bank is much harder to raid than a TFSA, the article explains.

“The idea of saving for retirement while having to pay outstanding debts like credit card statements or mortgages can be overwhelming,” The Varsity notes. “Everyone has a different financial scenario and students must evaluate what works best for them, even if it means only putting small amounts of money aside in their RRSP every month,” the newspaper adds.

The article also looked at the idea of starting retirement savings early.

Citing a recent study, The Varsity reports that folks in the Gen Z cohort start saving at 19; millennials at age 25 and Gen Xers at 30.

And some great news from The Varsity article is that younger people are getting the message about the importance of getting a head start on retirement savings.

“It appears that starting to save at a younger age has been a message that has trickled down across generations, since the oldest members of Gen Z are only 24 years old. Gen X and baby boomers have been found to contribute an average of 14 to 15 per cent of their income into their retirement fund, while Gen Z and millennials invest, on average, 16 per cent of their income in their retirement savings,” The Varsity reports.

Other points made in the article include the idea that as living costs continue to rise, many households “will need to continue working past the age of 65 in order to afford retirement.” Citing recent research from the Healthcare of Ontario Pension Plan, the Varsity notes that 67 per cent of Canadians “think that Canada will be facing a retirement crisis;” that same study found that 77 per cent of workers liked the idea of their employers offering retirement savings plans.

The Varsity article concludes by saying that if you are young, you should be asking and talking about getting an early start on retirement saving.

If your employer does offer a retirement program, be sure to join it and contribute as much as you can. If you don’t, you need a do-it-yourself retirement plan. The Saskatchewan Pension Plan provides exactly what you need to get rolling. You can contribute up to $6,600 per year to SPP, and like an RRSP, SPP contributions are tax-deductible. Check out SPP, celebrating 35 years of operations, today!

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By now, practically all of us have heard about “pay yourself first” as a savings strategy.

The general idea is to put away some percentage of your earnings, and then live on the rest. It sounds simple in theory, but in practice, less so. To that end, Save with SPP took a look around the Interweb to get some ideas about how to actually get going on a “pay yourself first” plan.

The folks at MoneySense see several simple steps you need to take to put your plan into action.

First, they suggest, “zero in on your savings goals.” What are you paying yourself first for – to build an emergency fund, or save up for a down payment, or a wedding or (our favourite) retirement, the article asks.

There has to be a reason why you are directing money away from your normal, bill-paying chequing account, MoneySense tells us.

Next, they recommend, take pen to paper and figure out how much you actually can pay yourself first. Make a list of your monthly “must spends,” like “shelter, food, electricity/heat, phone, transportation, etc.,” the article says. What’s left over is “discretionary” money, which can be spent or saved, the article adds.

If you are saving for more than one thing, you need to figure out how much each month to put away for each category. Then comes the actual “doing” part – automating your savings plan.

MoneySense recommends setting up an automatic transfer each month that moves money from chequing into savings. This amount can be increased when you get a raise, the article notes. Savings should be directed to either a tax-free savings account (TFSA), a registered retirement savings plan (RRSP), or a combination of both, the article concludes.

The Oaken Financial blog notes that guaranteed investment certificates (GICs) can be a good place to stash savings. GICs are locked in for a time, but pay a set amount of interest for a fixed term, the blog notes. High-interest savings accounts pay good interest but allow you to make withdrawals at any time, the blog notes.

The Golden Girl Finance blog says there are apps that take the difficult thinking part out of the saving equation. Wealthsimple, the blog notes, allows you to round up your credit card purchases, so you are actually paying a little extra, with that money being directed to your savings account. So you save a little as you spend, the blog notes.

Save with SPP notes that similar arrangements – where you pay a little extra on debit card purchases, or where a money-back credit card deposits the cashback directly to your savings account – exist at other Canadian banks.

Other ideas that have flashed across the screen of late:

• Banking your raise. You were paying off the bills OK before you got the raise, so why not stick the difference between your former pay and your new pay into savings, and live off the rest? You were the day before the raise!
• Banking your cost of living adjustment. Same concept, but for us lucky pensioners who get cost of living increases, why not direct the increase to savings and continue to live on what you were getting prior to the increase?
• Starting small. You may not stick with a pay yourself first plan if it is overly ambitious. Uncle Joe always said bank 10 per cent and live on the 90 per cent; he did, and he did well, but Joe was a very disciplined spender. Better to start smaller, maybe two or three per cent, and phase it up.

So to recap – you either need to know how much you spend each month to figure out how much you save, or you need to just pick an affordable percentage of your earnings and set it aside. Once you have automated the process, you won’t miss the saved amount, which will grow happily in a savings account, a retirement account, or perhaps the Saskatchewan Pension Plan.

Celebrating 35 years of operations, the SPP permits automatic contributions. They can set it up for you, or you can set up SPP as a bill on your bank website and set up the automation yourself. Either way, the money you direct to SPP will be put away for your future, invested professionally, and – grown – will await you after you get home from the retirement party!

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How to hang on to any “pandemic cash” that may be pilling up

While some of us have had to struggle to make ends meet during the pandemic, others have – somewhat ironically – seen their personal savings shoot to new heights.

A report by CTV News looks at how some of us may have to adjust our budgets as COVID-19 restrictions begin to taper off.

The article notes that by the second quarter of 2021, Canada’s savings rate rocketed up to 13.1 per cent, more than double the previous year’s savings rate.

“Even Canadians’ credit card debts have been dropping, with rates hitting a six-year-low in June due to reduced spending,” the article informs us, citing data from Equifax.

You read that right. Credit card debt is dropping.

“Across the board in all age groups, we’re starting to see people pay more than they actually spend on a credit card, which is a real positive behaviour change in terms of consumers,” Rebecca Oakes of Equifax tells The Canadian Press in the article.

That’s great, but when things return to “normal,” will we still be saving and paying off debt?

CTV suggests a few things to do with any extra cash you may have accumulated as normality begins – and there are more tempting things to spend your money on than during the locked-down pandemic.

Finance expert David Lester is quoted in the article as suggesting one destination for extra bucks would be an emergency fund, which should be enough to cover “six to nine months of expenses.”

Next, Lester tells CTV that your retirement piggy bank should not be neglected in the rush to spend, spend, spend.

“It could go into your tax-free savings account (TFSA) or registered retirement savings plan (RRSP), but we should just get used to saving 10 to 15 per cent” for retirement, he states.

If you spend with a credit card, Lester says it’s important to pay off the card each month, and to avoid letting a credit balance begin to grow.

He recommends that you pay off credit card balances first, as soon as you get paid, “and then going to zero (balance).”

If you are setting a budget for the world after the pandemic, be realistic, adds Lester.

There were a lot of things we couldn’t do – many of them expensive – that we may not want to spend as much on post pandemic, he explains. We lived without them for a long period of time, Lester tells CTV.

“Maybe it was travel, maybe it was movies, maybe it was having coffee at home, or not buying expensive clothing,” he says in the article. “So see what you really don’t miss and go back through that budget line-by-line and see what you don’t have to add back on now that things are opening up. We don’t want to go back to that bad spending that we were doing before.”

Our late Uncle Joe frequently would pull us aside and recommend the 10 per cent rule – bank 10 per cent of your money off the top, and live on the remaining 90 per cent. “You will never have any problems,” he said. It’s very sensible advice.

Pay yourself first, the old adage goes. And if you are putting away that cash in a retirement account, you are paying your future self first. You’ll be making life easier down the road, because you’ll be entering retirement with money in the bank and at the ready. A great way to pay your future self first is to set up an account with the Saskatchewan Pension Plan. They’ll invest your savings, at a low cost and a historically strong rate of return, and at the appropriate time, will help you convert those savings into retirement income. After all, they’ve been delivering retirement security for an impressive 35 years!

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Knowing what you really need as retirement income is key: My Own Advisor

Poll after poll seems to confirm the idea that Canadians think saving for retirement is a good thing – whether or not they are actually doing it.

But the My Own Advisor blog notes that unless you really understand what your retirement income needs are, you could actually be saving too much for retirement.

The blog starts by rolling out the party line on retirement saving – “live within your means; maximize savings to registered accounts like the registered retirement savings plan (RRSP) and tax-free savings account (TFSA) – then consider taxable investing;” then keep investment costs low.

“Rinse and repeat for 30 years,” the blog notes, and “retire with money in the bank.”

All good. However, the blog warns, there is an important question you must know the answer to before you begin drawing down your retirement income – “how much is enough?”

“When it comes to you, only you know what you need or want from retirement,” the blog explains. And figuring this out is not easy – the blog says it is akin to “putting together a 10,000-piece jigsaw puzzle.”

The blog says you need to thinking about the overall picture – your income from all possible source. If you have a pension at work, will you take it as soon as you can? When should you draw down your RRSP assets? Or should they be kept intact and rolled into a RRIF? Should you consider an annuity?

The blog then asks when you should start accessing any TFSA funds, the Canada Pension Plan, and Old Age Security. “Dozens more questions abound,” the blog says.

Some people, the blog says, “don’t know any of these answers, and err on the very conservative side.” The blog then publishes a nice exchange between the blogger and a retired reader in Germany, who makes two key points – “you don’t need as much as you think,” and “your cost of living steadily decreases as time wears on.” The reader also states that “every senior I’ve spoken with reminds me they are living on substantially reduced incomes, but with no differences in their standards of living.”

These are all great points, and very accurate, based on what we’ve observed since leaving the full time workforce nearly seven years ago. None of our friends and neighbours have had to make radical changes in their lifestyles due to retiring, but we all certainly spend a lot more time talking about taxes than we used to! So you do tend to just adjust to the reality of living on less, and after a while, it’s OK.

The article mentions annuities as an option – and if you’re a Saskatchewan Pension Plan member, they are an option for you as well. There are a couple of great things about annuities. First, you know exactly what you’ll get each month – and can provide for survivors if you wish. Second, you don’t have to worry about the markets – whether they are up or way down, you get the same income. Third, it’s a lot simpler for tax planning – your income is known in advance, not based on some percentage of your declining assets. Check out SPP today.

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“Mind shift” on taxation needed when you enter retirement

Writing in the Sarnia Observer, financial writer Christine Ibbotson notes that taxation – fairly straightforward before you retire – gets a lot more complicated after you retire.

“Managing your taxes during your working years is relatively generic,” she writes. “You maximize your registered retirement savings plan (RRSP) contributions, purchase investments that attract the least tax possible on investment income or buy real estate to increase your net worth.”  The goal with taxes is get them as low as possible, she explains.

It’s a different ball game in retirement, Ibbotson notes.

“As you transition into retirement, the tax planning process shifts onto withdrawing assets, and doing so in the most tax-efficient manner,” she explains. This requires what she calls a minor “mind shift” for most people, the article notes.

“Most are preoccupied with minimizing current taxes each year. But this cannot be at the expense of your long-term objective for maximizing after tax income for your entire retirement (often estimated at 25 to 40 years),” she notes.

For that reason, Ibbotson says retirees need to get a handle on how the various types of income they may receive are taxed.

“There are three main types of taxation to consider: interest income, dividend income, and capital gains. All are taxed differently, so this makes it easier to structure your portfolio more efficiently when you are creating your plan with your advisor,” Ibbotson writes.

“As a general rule you want to place income that is going to be unfavourably taxed, (interest income) into tax-sheltered products such as tax-free savings accounts (TFSAs) or RRSPs. Investment income that generates returns that receive more favourable tax treatments (dividends or capital gains) should be placed in non-registered accounts.”

If you are retiring, it’s critical that you know what your income is from all sources – government retirement benefits, a workplace pension, and “anticipated income” from your own savings. This knowledge can help you to “avoid clawbacks as much as possible,” she explains.

Other tax-saving suggestions from Ibbotson include the ideas of Canada Pension Plan/Quebec Pension Plan “sharing,” splitting employer pension plans for tax purposes with your spouse, and holding on to RRSPs, registered retirement income funds (RRIFs) or locked-in retirement accounts (LIRAs) to maturity. Those age 65 and older in receipt of a pension (including an SPP annuity) will qualify for the federal Pension Income Tax Credit, another little way to save a bit on the tax bill.

“Simply put, paying less tax translates into keeping more money in your pocket, allowing you to enjoy a better quality of life,” she concludes.

This is great advice. Save with SPP can attest to the unexpected complexity of having multiple sources of income in retirement after many years of having only one paycheque. You also have fewer levers to address taxes – while you might be able to contribute to an RRSP or your SPP account, it’s probably only on your earnings from part-time work or consulting. You can ask your pension plan to deduct additional taxes from your monthly cheque if you find you are paying the Canada Revenue Agency every year.

The older you get, the more you talk about taxes with friends and neighbours, and many a decumulation strategy has been mapped out on the back of a golf scorecard after input from the other players!

Wondering how much your Saskatchewan Pension Plan account will total when it’s time to retire? Have a look at SPP’s Wealth Calculator. Plug in your current account balance, your expected annual contributions, years to retirement and the interest rate you expect, and voila – there’s an estimate for you. It’s just another feature for members developed by SPP, who have been building retirement security for 35 years.

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Retirement income will come from many different buckets – so be aware of tax rules

When we are working full time, taxes are fairly straightforward. Our one source of income is the only one that gets taxed. Very straightforward.

It’s a far different story, writes Dale Jackson for BNN Bloomberg, once you’re retired. Income may come from multiple sources, he explains.

“Think of your retirement savings as several buckets with different tax consequences: registered retirement savings plan (RRSP), spousal RRSP, workplace pension or annuity, part-time work income, tax-free savings account (TFSA), non-registered savings, Canada Pension Plan (CPP) and Old Age Security benefits (OAS), and home equity lines of credit (HELOC),” he explains. 

“The trick is to take money from the buckets with the highest tax implications at the lowest possible tax rate and top it off with money from the buckets with little or no tax consequences.” Jackson points out.

A company pension plan is a great thing, he writes, but income from it is taxable. “If you are fortunate enough to have had a company-sponsored pension plan – whether it is defined contribution or defined benefit – or an annuity, you have the misfortune of being fully taxed on withdrawals in retirement,” he explains.

It’s the same story for your RRSP – it’s fully taxable. Both pension income and RRSP income may be eligible for income splitting if you qualify, Jackson notes.

He explains how a spousal RRSP can save you taxes. “If one spouse contributes much more than the other during their working life, they can split their contributions with the lower-income spouse through a spousal RRSP. The contribution can be claimed by the higher-income spouse and gives the spouse under 65 a bucket of money that will be taxed at their lower rate,” Jackson writes.

CPP and OAS benefits are also fully taxed, and the latter can be clawed back in whole or in part depending on your other income, he notes.

Other buckets to consider include part-time work. “More seniors are working in retirement than ever,” Jackson writes. While income is taxable, he recommends that you talk to your financial adviser – there may be work-related expenses that are tax-deductible. And you can always work less if you find your other sources of income are increasing!

Interest from non-registered investments like Guaranteed Investment Certificates (GICs) or bonds is taxable. Dividends on non-registered investments are also taxable, but dividend tax credits are available. You will be taxed on half of the gains you make on investments like stocks (again, if they are non-registered) when you sell, Jackson explains. There’s no tax on interest, dividends or growth for investments that are in a RRSP, a Registered Retirement Income Fund, or a TFSA, Jackson notes.

Tax-free income can come from TFSAs or reverse mortgages and HELOCs, but Jackson warns that “a HELOC is a loan against your own home… you will pay interest when the house is sold or the owner dies.”

The takeaway from all this great advice is this – be sure you’re aware of all your sources of post-work income and the tax rules for each. That knowledge will making managing the taxes on all these buckets a little less stressful.

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