This is a familiar situation: a couple with a primary home in the city, a place near the ski hill, an investment portfolio built over decades, and a corporation that did what it was meant to do during the working years. By any measure, this couple has done a lot right.

 

The problem is rarely any single decision. It’s that the decisions were made independently—and never designed to work together once the salary stops. That’s where the hidden costs can arise.

 

As finances get more complex, tax can become one of the largest lifetime expenses in retirement—not because you’ve done something wrong, but possibly in part because the moving parts were never coordinated into one plan. If you have an RRSP/RRIF, non-registered savings, and either corporate income or a second property, it is worth having a closer look at your situation.

 

Most “accidental” tax overpayments show up in three places.

 

First, in forced income. RRSPs feel like a solid option while they’re growing. But left untouched into your seventies, they convert into RRIFs with mandatory withdrawals—on top of Canada Pension Plan, Old Age Security (OAS), and any pension. That can push you into higher brackets and, in some cases, trigger an OAS claw back. Even an extra $20,000 of taxable income in the wrong year can mean more tax and reduced benefits.

 

Second, one-time events. A chalet, a rental property, a business transition, or a concentrated stock position often gets sold when life dictates, not when the tax impact is most favourable. With planning, the same decision can often be timed or structured to reduce after-tax cost—by spreading gains across years and coordinating with other income.

 

Third, system design. Most retirees don’t have one “retirement account”—they have a system: registered accounts, TFSAs, non-registered investments, and sometimes corporate assets. Each piece may be managed well on its own, but without a designed withdrawal plan, the total result can be inefficient.

The solution is sequencing: which account to draw from first, when to realize gains, and how dividends, pensions, and RRIF withdrawals layer together year over year. When done well, an integrated plan can help reduce unnecessary tax over the long run.

 

If you’d like a coordinated retirement plan built around your accounts, assets, and goals, please reach out using my contact information below.

 

I’m also hosting an educational session, Planning a Tax-Efficient Retirement, on March 25 at 2 p.m. Contact me to register.

 

Fraser Willson, CFP, CIM | Senior Wealth Advisor | CIBC Wood Gundy | Collingwood | Fraser.Willson@cibc.com | (647) 588-4344

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc. Fraser is an Investment Advisor with CIBC Wood Gundy in Collingwood. The views of Fraser do not necessarily reflect those of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

 

This commentary is intended to provide general information and should not be construed as financial, legal, tax or other advice. Individual circumstances and current events are critical to sound planning; anyone wishing to act on the information presented should consult with his or her financial advisor, legal or tax advisor.