Now retired, how do we withdraw funds without running out of money?
“Now that we’re retired, how should we be drawing income from our investments in the most tax effective way that will ensure we can maintain the lifestyle we want throughout retirement?” This is the question Walter*, 68, and Joanne, 67, have been grappling with for the past three years.
“We cannot get a clear understanding of which accounts we should be drawing down from and in what order from our financial advisors,” said Walter.
The Alberta-based couple started drawing Canada Pension Plan (CPP) benefits when they each turned 60. After tax, Walter receives $1,060 a month in CPP payments and Joanne receives $812 a month, as well as $206 a month from a locked-in retirement account (LIRA) currently worth $40,000. They are also drawing down $6,500 a month (after tax) from a retirement income fund (RIF) worth $836,000. They have another $686,000 in a spousal registered retirement savings plan (RRSP) that has not yet been converted to a RIF, as well as $322,000 in tax-free savings accounts (TFSAs) largely invested in a diversified mix of more than 50 stocks across sectors and geographies managed by a broker with their bank. They continue to maximize contributions each year. They also have $150,000 invested in a real estate investment trust (REIT).
They plan to defer receiving Old Age Security (OAS) payments as long as possible to prevent any clawback.
In addition to their investments, Walter and Joanne have downsized and own a home valued at $850,000, a $700,000 stake in a shared family cottage and two term life insurance policies valued at a combined $1 million that will mature in a few years. “Should we renegotiate at that time? Is it a good idea to have life insurance to cover death taxes and the capital gains implications
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