Retirement Returns Get Boost with Tax Focus

Retirees can and should use the tax system to their advantage in structuring income to fund current needs, while preserving capital to fund future needs.  An important way to do is to plan to generate an income mix that is tax efficient.
 
Retirees face many tax obstacles when the income mix is wrong.  Most middle income Canadians are subject to clawbacks on tax preferences such as the age amount, or on social benefits like the Old Age Security, and suffer "time value of money" problems when they unnecessarily "pay forward" taxes on compounding annual interest returns and possibly, quarterly tax instalments. 
 
Further, the "off-return" taxes—user fees—can often increase dramatically when income structure is not carefully planned and monitored.  For example, per diem fees at nursing homes can spike dramatically when net income levels are too high; and public pharmacy care plan deductibles can wipe out assistance for expensive drugs like anti-cancer medication.
 
Therefore, tax efficient retirement income planning is critical to the financial health of the 55 Plus crowd in particular, and as this group must withdraw taxable pension accumulations from both public and private sources, reinvestments of disposable income must include a careful selection of tax efficient investments.  When it comes investing for income solutions, income taxes do matter and in fact, tax efficiency is material in getting the desired results in retirement wealth planning.  
 
It’s Your Money.  Your Life.  It makes sense to think about tax efficient retirement planning early in life; and then make it an explicit focus late in life.  


Posted under: Income Tax

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