You have sacrificed and set aside savings over the decades for your retirement. However, as you appreciate your hard work and dedication in accumulating your wealth, there’s are obstacles ahead; income tax and pension claw back.
As a result, taxes play a significant role in your overall plan. The tax impact of retirement accounts and portfolio holdings should be reviewed often.
It is important to determine the amount of income you will be taxed on once you retire. You can decide your taxable income as this can be very different from the cash you receive. Income is taxable and cash flow may or may not be taxable.
You can have a lower taxable income by having the right mix of fully taxable, low tax and tax-free incomes.
If you have non-registered investments, the type of investment affects your ability to stay in a low tax bracket. You can receive income from your non-registered investments as interest, dividends, capital gains, or deferred capital gains, depending on how you invest.
For higher-income seniors, their Old Age Security (OAS) is clawed back at 15% of their income from $75,000-$121,000. Therefore, the timing of investment withdrawals is key to cash flow planning.