Sources of Income in Retirement

Non-Registered Assets

The main difference between registered (RRSPs and RRIFs for example) and non-registered funds is taxation. All income received from a registered plan is fully taxed as income at your marginal tax rate. The taxation of non-registered investments depends on the type of income earned. Capital gains, dividends and interest are all taxed differently and will have implications for your income and investment decisions.

Which investments should I use first?

You and your spouse may both have registered and non-registered investments to fund your retirement. It does make a difference what money is used first and you should consult with your advisor to determine which is the most tax efficient approach for your circumstances.

Other income options:

Reverse Mortgage

When you take out a mortgage you are receiving a loan from the bank that you pay back over time while your home provides the collateral for the loan. As the name implies, the Reverse Mortgage works the other way around, it is a way to withdraw some of the value of your home allowing you to receive funds today while still living in your home. The proceeds can be paid back when the home is sold or along the way. You should speak to your advisor to learn the pros and cons of Reverse Mortgages and whether it is the right strategy for you.

Leveraging a Universal Life Insurance Policy

Using a Universal Life Insurance policy can also be a tax effective way of receiving funds in retirement while still being able to leave an inheritance on your death. This approach needs to be carefully structured and you should contact a qualified insurance professional to determine if this is right for you.

Tax-Free Savings Accounts (TFSA)

As of January 1, 2009, the Federal government provided a new tax efficient savings vehicle for Canadians called the Tax-Free Savings Account (TFSA). The TFSA allows taxpayers 18 and over to contribute up to $6,000 per year (in 2019) into the account where any income earned grows tax free, and funds may be withdrawn with no tax implications. The range of investments available is essentially the same as provided with an RRSP. The major difference between the TFSA and an RRSP is that there is no deduction allowed for TFSA.

Your advisor can provide you with more information about the TFSA as well as assist you in establishing an account.