While investment outcomes are certainly an important part of achieving your income targets, the essence of retirement income planning is to get a dollar to spend in the most efficient way possible. In doing so, you can reduce the strain on your savings by minimizing the number of pretax dollars you have to withdraw to deliver the required after-tax (spendable) income. Here are some of the ways you can do just that:
- Combine fully-taxable income sources -- pensions, CPP, OAS, RRIF or LIF income, interest -- with tax-favoured cash flows -- capital gains, return of capital (ROC) distributions, dividends (in some cases), TFSA income -- to control taxation and preserve savings.
- Take advantage of the lowest marginal tax rates (MTRs) and use federal/provincial tax credits in the most effective way to minimize taxes - as a family, couple or single.
- Use fixed-distribution income funds to maintain the capital base of your income-producing assets.
- Pay attention to the long-term income continuum -- structure your income today so that it will achieve future efficiencies e.g. when RRSPs or LIRAs mature, when a spouse passes, when transitioning your estate to the next generation.
- Insure against future contingencies so you can have confidence in spending today.