What a Professional Will Tell You About Your Retirement Choices
Investing for retirement and investing in retirement are fundamentally different in their planning and approach. They have different tax strategies, investment instruments, retirement goals, and investment tenures. Every person retires at some point. Most depend on government benefits and a Registered Retirement Savings Plan (RRSP) for retirement. While they are important retirement planning instruments, they only scratch the surface.
The conventional retirement guidance of investing in low-risk instruments as retirement nears and delaying distribution of government benefits may not always be the best retirement advice. Having an accountant by your side can help you achieve your retirement goals and maximize your retirement savings and retirement income by reducing your tax liability.
What a Professional Will Tell You About Your Retirement Choices
A professional accountant is well-versed in the contribution limits, tax credits, and government benefits. You will be surprised to see how a small tweak in your retirement savings can make a huge difference. Each individual has different retirement goals, income brackets, expenses, and assets. Some may want to continue working even after retirement; some may have a significant inheritance; some may enter retirement with debt; or some may want to leave behind a sizeable estate for their dependents.
While investing for retirement, an accountant will consider when you start saving for retirement, your financial situation, lifestyle needs, retirement goals, tax bracket, asset type, and monthly income. When investing in retirement, an accountant will determine how much retirement income to draw from which source in a tax-efficient manner and protect your retirement savings.
How Much Should You Save For Your Retirement Plan?
Many Canadians believe they need $1- $2 million to retire. But the answer is different for each individual. While it may feel like the right amount today, it might seem less for those retiring 20-30 years from now. Factors that will significantly influence your retirement amount would be:
- When do you want to retire?
- What kind of retirement do you seek: minimalist or luxurious?
- Will you retire debt-free?
- How long will your retirement be?
Apart from answering these questions, consider the skyrocketing healthcare and long-term care costs. Moreover, your government benefits and tax credits will also change with age and time. So instead of defining a fixed amount that you need to retire comfortably, the accountant will define the percentage of income you should save for retirement depending on when you start saving, your lifestyle, assets, and inheritance.
Which Investments to Include?
When investing for retirement, the objective is to boost retirement savings and generate wealth since you have an active source of income from business or employment and don’t need investment income. A financial advisor could focus more on a growth portfolio to generate wealth. This means more investments will be directed towards stocks, ETFs, and mutual funds. Ideally, the earlier you start retirement savings, the better, as the power of compounding can grow your savings significantly. The more you delay, the higher portion of your income you will have to invest to catch up on lost time.
When investing in retirement, the objective shifts from growing a portfolio to protecting retirement savings. A market downturn could significantly reduce the value of your investments, and if you retire at that time, you will be forced to sell shares at a loss, eroding a large part of your retirement savings. To prevent that, a financial advisor could gradually create a portfolio of passive income to support pensions and a significant cash reserve for emergencies and market downturns. Instead of selling equity, the cash reserve and passive income portfolio will cater to retirement income, giving you the flexibility to sell shares at a good profit when the market recovers.
Tax Strategies to Maximize Retirement Savings and Income
Apart from investment returns, an accountant will also balance the taxes. RRSP and Tax-Free Savings Account (TFSA) both allow investments to grow tax-free.
RRSP: RRSP contributions are tax-deductible, and withdrawals are taxable, which makes it ideal for tax planning of working income. RRSP contribution is 18% of your previous year’s taxable income up to a maximum limit. It keeps accumulating in your contribution room every year. If you are expecting an inheritance or bonus, or a windfall gain from the sale of a property, you could use your accumulated RRSP contribution room to reduce tax liability.
Suppose your 2026 taxable income is $200,000, which puts you in a 29% tax bracket. You can contribute $80,000 to the RRSP, provided you have the contribution room, and reduce your tax bracket to 20.5%. This will give a twofold benefit: significant tax savings and a large investment that grows tax-free. However, RRSP withdrawals are taxable, which makes it best to withdraw in a low-income year.
TFSA: TFSA allows you to contribute after-tax income and makes withdrawals tax-free, making it ideal for tax planning of retirement income. So if you have a higher retirement income, consider building a TFSA portfolio as it will not affect income-sensitive government benefits like Old Age Security (OAS) and Guaranteed Income Supplement (GIS).
Apart from individual RRSP and TFSA accounts, accountants can help you use more complex tax strategies, like a Trust, income splitting, and spousal loans for a couple. We won’t go into details of this, but a tax advisor can guide you better on which of these tax strategies will give you the best tax savings.
How to Draw Retirement Savings
The retirement portfolio you built throughout your lifetime needs to serve you for as long as you live. The retirement you seek and the savings you have in the registered accounts and investment securities will help the accountant sequence your withdrawals.
The decision to take Canada Pension Plan (CPP) and OAS payout at 65 or delay it till 70 can make a significant difference. The CPP payout more than doubles if you delay the payout till age 70 than prepone it to age 60. It is because of the 36% permanent reduction in CPP at 60 and 42% permanent increment at age 70.
| Age | Average CPP Payout (2026) | OAS payout (2026) |
| 60 | $561.28 | |
| 65 | $877.01 | $751.97 |
| 70 | $1245.35 | $1,022.68 |
Delaying these benefits may not always be the best solution if you need the money to pay living expenses, have a shorter life expectancy, or have been unemployed for the last five years. The accountant knows how CPP payout is calculated and taxed. In fact, delaying payouts makes sense only for those who can afford them, as they have sufficient retirement income or are working even after 65 and want to draw taxable payouts when they are in a lower tax bracket.
Remember, CPP and OAS are taxable, and your OAS starts reducing if your annual taxable income is above a threshold.
An accountant will look at all variables and determine the sequence of retirement income, such as CPP, OAS, taxable brokerage account, RRSP, and TFSA, for low-income earners. Note that this is just an illustration. An accountant who has studied your finances will tell you the tax-efficient sequence that can maximize your retirement income while preserving savings.
Contact KSSP Partners LLP in Markham to Help You with Retirement and Estate Planning
A professional accountant can add significant value to your retirement savings by finding the right account mix, investment mix, and payout mix that minimizes tax and maximizes retirement savings and income. At KSSP Partners LLP, our accountants and business advisors can provide services such as retirement planning and tax planning. To learn more about how KSSP Partners LLP can provide you with the best accounting and estate planning services, contact us online or by telephone at 289-554-5997.
