Retirement Income Planning Guide

Sources of Retirement Income

Government Programs

• CPP/QPP: Based on contributions, starts 60-70
• OAS: Based on residency, starts 65-70
• GIS: For low-income seniors

Personal Savings

• RRSP/RRIF: Tax-deferred, taxable when withdrawn
• TFSA: Tax-free growth and withdrawals
• Non-registered: Taxed on income annually

Employer Pensions

• Defined Benefit: Guaranteed payments
• Defined Contribution: Depends on returns
• Group RRSP: Similar to personal RRSP

The Retirement Income Puzzle

Typical Phases

• Age 60-64: Bridge period, may need more from savings
• Age 65-71: Government benefits start, plan RRSP meltdown
• Age 71+: Mandatory RRIF withdrawals, manage clawbacks

Key Tax Brackets (2024 Federal)

RRSP/RRIF Meltdown Strategy

The Problem

• Large RRSP = large mandatory RRIF withdrawals
• Combined with CPP/OAS = high income
• Potential OAS clawback
• Higher tax brackets

The Solution

• Withdraw from RRSP before age 65
• Fill up lower tax brackets
• Reduce RRSP balance before RRIF conversion
• Move funds to TFSA after tax

TFSA vs RRIF Withdrawals

TFSA Advantages

• No tax on withdrawals
• Doesn't affect OAS/GIS
• No mandatory minimums
• Flexible timing

RRIF Advantages

• May be larger balance
• Qualifies for pension income splitting
• Pension income amount credit

Optimal Strategy

• Use RRIF to fill lower brackets
• Top up with TFSA to avoid higher brackets
• TFSA for large one-time expenses

CPP Timing Decision

Start at 60

• 36% permanent reduction
• More total payments if shorter life expectancy
• Good if high other income until 65

Start at 65

• Standard benefit
• Middle ground approach

Delay to 70

• 42% permanent increase
• Better if expect longevity
• Higher guaranteed income

OAS Timing Decision

Start at 65

• If income below clawback threshold
• If uncertain about longevity
• If need the income

Delay to 70

• 36% increase
• If income would be clawed back anyway
• Good health, expect longevity

Managing OAS Clawback

Key Strategies

• Pension income splitting with spouse
• RRSP meltdown before 65
• TFSA withdrawals don't count
• Timing capital gains

What Counts for Clawback

• All taxable income (Line 23400)
• Including capital gains (50%)
• Including dividend gross-up
• NOT TFSA withdrawals

Order of Withdrawals

General Framework

1. CPP/OAS when eligible (or delayed strategically)
2. RRIF minimum (mandatory after 71)
3. Additional RRSP/RRIF to fill lower brackets
4. Non-registered accounts
5. TFSA for large expenses or to avoid high brackets

Adjust Based On

• Your specific income sources
• Spouse's income
• Expected expenses
• Tax bracket goals

Pension Income Splitting

What Can Be Split

• RPP pension (any age)
• RRIF/annuity income (age 65+)
• Up to 50% to spouse

Benefits

• Lower combined tax
• Both can claim pension credit
• May eliminate OAS clawback

Income Layering Example

Couple, Both 70

Goal: $100,000 total income, minimize tax

Result: Both stay under $50,000 taxable, minimal OAS clawback, lower brackets.

Estate Considerations

RRIF at Death

• Full value taxed on final return (unless to spouse)
• Can be significant tax bill
• Consider drawing down strategically

TFSA at Death

• Transfers tax-free to spouse
• To others: FMV tax-free, growth after death taxable

Annual Review Checklist

• Review income vs OAS clawback threshold
• Optimize pension splitting election
• Plan RRIF withdrawals
• Consider TFSA vs taxable sources
• Review investment allocation
• Update beneficiary designations