Three Must-Dos to Prepare Savings for Retirement

It’s tax filing season but smart taxpayers will turn this into tax planning season, too. The key question for couples working with tax specialists: how do we maximize our retirement income potential? There are three specific goals to consider.

  1. Make sure you receive adequate pension and investment income – to increase and then sustain your required cash flow in retirement be precise on exactly how much money is needed – after accounting for inflation and taxes to cover budgeted costs. These may be the increased cost of medical expenses, heating or gasoline costs, or tax hikes, for example. Use Knowledge Bureau’s financial assessment calculators to help with this task.
  2. Continue to grow asset pools -  exactly how much will need to be saved to meet those budgeted needs? Socking money away now, preferably on a tax exempt, tax-reduced or tax-deferred basis, will help you to meet planned and unanticipated spending needs adequately, without too much interference by increasing taxation. Tax time is a good time to “pay it forward” into the right savings accounts. Advisors can help to make that task more relevant by simulating the retirement income results today’s savings would bring. To do so, ensure pre-retiree clients understand what today’s personal net worth is – and what it needs to be – to meet their goals.
  3. Dodge expensive fees – It’s always important to reduce the costs related to borrowing or investing in order to increase returns on capital. Debt servicing costs, financial management and investment fees, legal fees and accounting fees require annual review and projection over the retirement savings period to make the right investment decisions.

These are the three secrets to success in saving enough money – after taxes, inflation and fees – to fund an adequate retirement. The annual tax filing visit with advisors can be so much more than a compliance exercise, when highly motivated clients and advisors join forces. 

The success of the process, however, is also very much dependent upon behavioral finance. Younger clients must have the discipline to actually save the money, and older clients must make it their business to withdraw funds knowledgeably. That is, with their after-tax results in mind.
For them, there are a few additional tax tips to consider in order to minimize tax and maximize cash flow. The federal government has provided several tax breaks that help today’s retirees increase their after-tax receipts from retirement savings. Advisors and clients should be sure to discuss them this tax filing season:

  • Pension splitting: Pension income splitting with your spouse which was introduced in 2007, allows you to save income tax due when one spouse is in a lower tax bracket than the other.  Essentially, income that qualifies for the $2,000 federal pension income amount qualifies for pension income splitting. Up to one-half of such pension income received can be reported by the recipient’s spouse by making an annual election to do so on form T1032.
  • Tax-Free Savings Account (TFSA):  Introduced in 2009, the TFSA provide retirees with the opportunities to develop winning tax exempt strategies for their capital. Since the biggest single expense in retirement is usually tax, high-income retirees should strive to use TFSA’s to their maximum potential every year. Currently a maximum of $63,500 in unused TFSA room is available to each adult resident of Canada. This account also works well for retirees in general because unlike RRIF’s, TFSA’s generate no taxable income on withdrawals nor re-investment. As well, income accumulating in TFSAs do not trigger clawbacks of Old Age Security or Guaranteed Income Supplement. 

Excerpted from Essential Tax Facts by Evelyn Jacks, 2018 edition. Evelyn Jacks is a best-selling author of 54 books on personal tax filing and planning and President of Knowledge Bureau. Please follow her on twitter @evelynjacks

Additional educational resources:

For Taxpayers: The 2018 version of Essential Tax Facts is sold out, but you can reserve the new 2019 version now. It will be released in early April to encompass the 2019 federal budget details and is available for pre-order by calling 1.866.953.4769 now. Or send an email with your request to

For Advisors: All of the tools and professional methodologies required to prepare your clients for a worry-free retirement are taught in an excellent professional certification program exclusively available from Knowledge Bureau. Sign up now for a free trial of the Elements of Real Wealth Management course and differentiate your practice this year by earning the RWM™ designation.

Another option: Advisors and clients alike may wish to consider taking the newly updated Tax Efficient Retirement Income Planning Course. It’s the featured course this week, with a special tuition offer that’s available to Knowledge Bureau Report readers (see your newsletter for details). It is one of six courses required to earn the prestigious MFA™ – Retirement Services Specialist designation.  


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