7 tips for planning your retirement withdrawals

To have a retirement that meets your expectations, it’s not enough to save and grow your money.  It's also important to plan how you'll withdraw funds from your savings.

The challenge is to plan your retirement income to minimize your taxes.  Tax optimization is the goal here, even if there are other aspects to consider.

Discover our 7 tips to help you set up your withdrawal plan and make the most of the money available for your retirement. 

A well-planned, customized strategy will help you determine the best withdrawal order for your situation, taking into account all your sources of income and a number of other factors.

It’s important to plan how you’ll withdraw your retirement savings over time. This involves taking various factors into account, including the age at which you will begin to draw on your savings, your other sources of retirement income (such as public and private pensions, as well as your own investments) and your retirement budget with your expected cost of living.

Your tax rate, along with the specific tax regulations that apply to each of your savings plans, should also be considered.

One thing you can use your withdrawal plan for is to allocate withdrawals between your registered plans and your other investments, based on the tax impact of each. For example, you should consider that:

• Withdrawals from a registered retirement savings plan (RRSP) or other tax-deferred account, such as a voluntary retirement savings plan (VRSP), life income fund (LIF) or registered retirement income fund (RRIF), are taxable.

• Some forms of income, such as dividends and capital gains or proceeds from the sale of securities in non-registered investment vehicles, are taxed differently.

• Investments in non-registered accounts are taxed differently depending on how they generate income—through interest, dividends or capital gains.

It’s also important to be aware that all taxable amounts are added to your income and may affect your eligibility for certain income-based tax credits or programs (like the GST credit, solidarity credit or Guaranteed Income Supplement). They may even trigger the partial or total clawback of Old Age Security if your taxable income exceeds a certain threshold. 

Are you thinking about renovating your home, buying a new car or spending a few months in another country? Remember to factor any major expenses into your withdrawal strategy. Remember to factor any major expenses into your withdrawal strategy to avoid large withdrawals that could result in a higher tax bill and impact your investments or long-term retirement plan.

Since life can be full of surprises, your withdrawal plan should make room for unplanned expenses. Make sure you build some wiggle room into your plan, and make sure you also have an emergency fund.

You can still invest and generate returns, even after your withdrawal plan has been set up or you’ve started to withdraw money from your retirement savings.

Review your investor profile to help ensure your savings portfolio reflects your risk tolerance, objectives and financial situation.By updating your investor profile, you can be sure that your investments are always tailored to your situation and your needs.

No one is safe from unexpected events like accidents or early death. That’s why you need to make sure your finances are in order and that you’ve clearly identified who will get your assets and how.

To learn about the basic principles and advantages of careful estate planning, see Planning your estate – Desjardins.

You can then set up the right strategies for your situation and use them effectively in your withdrawal plan.

It’s important to think now about how your assets will be distributed. This will allow you to implement strategies to reduce or defer the taxes payable upon your death and incorporate these strategies into your withdrawal plan. 

Following your withdrawal plan is essential to its effectiveness, but it's also important to review it periodically. In the event of an unforeseen event, a change in situation or market turbulence, you'll be able to adjust the amount to be withdrawn or review your strategy to successfully maintain the planned withdrawal period. This will help make it possible for you to reach your retirement goals and make your retirement savings last as long as possible.

When setting up the withdrawal plan for your savings, make sure you build in some flexibility that would allow you to adjust withdrawals. There are various stages of retired life: some are more active and others less so, and expenses usually follow accordingly!

Your advisor can help you prepare, implement and review your customized withdrawal plan. Don't hesitate to ask for help, wherever you may be in your retirement planning.