Retirement Accumulation

Unless we are fortunate to be in the public service or have access to defined benefit pensions through our employer, most of us are left to ourselves to design and manage our own retirement accumulation strategies.

In this very uncertain world, there are two certainties – death and taxes. That may be cynical, but it is true.

The most common retirement accumulation strategy is the RRSP. For taxpayers who are employed, they may contribute up to 18% of their earned income to an RRSP, subject to maximums which increase every year ($26,230 for 2018).

Some advantages are:

• Contributions are fully tax-deductible from T4 income in the tax year;
• Asset growth in the RRSP is fully sheltered until withdrawal;
• Depending on income, contributions generally result in a tax “refund,” which is really the taxpayer getting his or her payroll deductions back.

Then there is the TFSA. Launched in 2009, it is, in my opinion, a significant and productive tool for comfortable retirement income. Taxpayers may contribute a total of $57,500 for each of the years since 2009 (if 18 or older in 2009).

Features include:

• The contribution room is never lost
• No tax deduction for contributions
• No gains are taxable in the plan
• Withdrawals are NOT taxable
• Withdrawals cannot be re-invested in the calendar year they were withdrawn

Investors should focus on these two strategies from the time they start to earn income. Ideally, they should try to contribute to both.

My team at Pathwise has evolved retirement strategies, incorporating these and other plans over many years. We have provided tailor-made solutions to investors of all demographics, including senior citizens who are now enjoying a comfortable and rewarding retirement. We provide detailed analyses of your personal financial status, retirement goals and risk tolerance.