A strategy for non-registered and TFSA accounts in retirement

You will receive a T5, T3, or T5013 slip for the annual dividends and interest earned, regardless of whether you withdraw from the account. As a result, I am not sure that withdrawing from your TFSA instead of your non-registered account is the best approach. 

Withdrawal strategy in retirement—and an exception

I would generally advise someone to contribute to their TFSA and not take withdrawals, as long as they have non-registered investments to do so. Ideally, you would do this each January to put the funds to work on a tax-free basis as soon as possible.

One exception to this rule may be if you have non-registered investments with significant capital gains, Steve. Selling the investments to fund your withdrawals or transferring them in kind to your TFSA could result in a large capital gain. 

There may be a scenario when taking a TFSA withdrawal or not contributing to your TFSA despite having non-registered funds is preferable. But this would be the exception to the rule.  

If you have a registered retirement savings plan or similar tax sheltered account, you may want to consider the benefit of taking withdrawals at 65, rather than waiting until age 72. You may be able to use up low tax brackets early and pay less lifetime tax by doing so.

You should consider the timing of your Canada Pension Plan (CPP) and Old Age Security (OAS) pensions, Steve, as well as any potential means-tested federal or provincial government benefits to which you may be entitled.

Retirement planning strategy is often tax-driven in part, so it is important to understand the different tax implications related to retirement. Investment income, account withdrawals, and pensions all trigger different types of tax consequences. Minimizing lifetime tax while considering current year tax is an important way to spend more in retirement or leave a larger estate for your beneficiaries.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

Sumber: www.moneysense.ca

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