Retirement drawdown strategies6/16/2023 Studies have shown that, for most Canadians who live an average lifespan, it would be financially beneficial to wait until age 70 to take CPP/QPP (so long as they are in good health and have the means to delay receiving CPP/QPP). This retirement withdrawal strategy would not only increase your income from CPP/QPP, it would also delay some of your taxable income. If, however, you delay taking CPP/QPP, the amount increases every year by 8.4%, to a maximum of an extra 42% by the age of 70 and every year afterwards (there is no benefit of delaying it any longer). If you start taking it at age 60, it will be 36% less than if you’d waited until you were 65. The downside of taking CPP/QPP early is that you lose 7.2% of its value for every year you draw from it before the age of 65. ![]() You can start as early as age 60 or as late as 70. One important aspect of CPP/QPP to consider is when you start to draw from it. Here’s what you need to know about the various retirement income sources and the kind of retirement withdrawal strategies you should consider when withdrawing from them.Ĭanada Pension Plan/Quebec Pension Plan (CPP/QPP): You’ll have to pay tax on this income, with the actual amount dependent on your tax bracket (which in turn depends on your total taxable gross income in retirement). Retirees often have several sources of income now, which can be fully taxable, partially taxable (such as capital gains) or tax free. The time when many Canadians could rely on just their company and government pension for retirement income is long gone. Let’s take a look at all the potential retirement income available to you and the most tax-efficient way to withdraw it. This involves juggling your income from taxable and non-taxable sources so as to avoid going from one extreme to the other (where you might pay zero tax one year and a high rate of tax in another). One of the key retirement withdrawal strategies is to maintain a consistent income level, in the lowest tax bracket possible. ![]() It’s important to be aware of your potential tax rate in retirement in Canada. Many retirees have several sources of income in retirement, but often don’t realize that the sequence of withdrawals - which sources you withdraw from first - can have major tax implications. You suddenly have to change your mindset from making money and saving it, to drawing from your savings to provide income. The move into retirement can be a challenging one for many Canadian retirees. Withdrawing the right retirement income at the right time could help save you thousands How to plan a tax-efficient retirement withdrawal strategy
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