Now what?

March 17, 2020

He had always worked.

Even when work was scarce at home, he made the trek up along and always managed to snag a paycheck somewhere, doing something. Once – on a job hunting trip to Ontario – his brother in law hooked him up with a decent union job at one of the car plants. Great pay. Pension plan. The works. He walked a little taller when he came home that year.

He was no journeymen or apprentice of any specific skill per se, but he could turn his hand at just about anything and somehow, he always managed to keep a roof over their heads and food on the table.

But lately his bones ached. The work felt harder. It was time for a rest.

The kids were finally out of the house and the mortgage was nearly paid off. It was time for him and the missus to enjoy the fruits of all that labor. It was time to retire. But how much would they need and where would it come from?

“Can we afford this?” they asked.

The decision about how to structure an income from your retirement nest egg can be as difficult as trying to scrape those dollars together in the first place. Taxable versus non-taxable. Guaranteed or not. Claw backs and income thresholds. This stuff isn’t for the faint of heart. I see clients like this all the time who have done the best they could with what they had and who have no idea where to start when it comes to creating a retirement income for themselves.

Here are a few things to consider when it’s time to convert your lifetime of work (and savings) into an income stream that you can live with (and live on):


When tallying up your various sources of income, don’t forget to factor in what will be lost to CRA. Determining what you will have to live on should be done using “after tax” estimates. Very few retirement income sources are tax free. Pension income, RRSP withdrawals, CPP and OAS income will all be taxed at your marginal tax rate. Your gross and net are two very different numbers.

Some exceptions apply. If you are using a TFSA to top up your retirement income, you can withdraw from it tax free. Similarly, if you have saved via any non-registered means, you can deem some of the money you withdraw as a return of capital (i.e.; money that would have been taxed before it was invested) and avoid tax on most of the withdrawal.

It’s always wise to consult an accountant to review your personal tax situation and options long before it’s time to retire.


Employer pensions and government sources of income typically have an early, normal and late retirement option built in. As expected, the longer you wait to access the funds, the higher the benefit will normally be. But you have to ask yourself if it makes sense for you to wait. As advisors, we get this question all the time. There is no “one size fits all” answer. It really depends on several unique factors, including but not limited to:

  • Do you need the money now?
  • Do you plan to continue working?
  • How is your health?
  • How will the income affect your other benefits, including CPP, OAS, GIS, etc.?

A qualified financial advisor will run the various scenarios and help you make the best decision about when to retire and when to flick the switch on your various income sources. Transitions are always scary, but now is not the time for panic. Rather, it is a time to get very clear about your needs and wants and to ensure your investment strategy and other resources will support them.


If you have a spouse (common law or married), it may be wise to split your income to reduce your overall tax bill. While we are all taxed personally, up to 50% of eligible retirement income – including employer pensions and CPP pension benefits – can be split with a spouse. Transferring some income to a lower earning spouse will reduce your own personal tax rate and could mean more cash in hand for you as a couple.

Guarantees versus Flexibility

Taking income via a Registered Retirement Income Fund (i.e.; RRIF) provides the convenience of regular income with the added flexibility to make lump sum withdrawals as needed. However, this flexibility often means people use up their registered savings long before the income need has ended.

Annuities, on the other hand, can be structured to provide a guaranteed, stable income for life. However, with that peace of mind you lose the ability to make any withdrawals over and above the income you have set. Once you have used your retirement funds to purchase an annuity, your access to those funds beyond the income stream has ended.

Ideally, your retirement income strategy should have some guarantees with a contingency built in for emergencies and unexpected bumps in the road.

Automatic or Application

A retiree (or soon to be retiree) should not expect that his or her benefits will automatically kick in when they become eligible. I recommend you start looking into the various streams of income available – including any and all applications and eligibility criteria – at least 5-10 years before you plan to retire. This way you have time to survey your options, assess your needs and make adjustments if they are required.