The game of chess and retirement planning have a lot in common. Chess masters have a strategy before they move their first piece, but what makes them superior is their ability to pivot as the game changes. Similarly, when it comes to retirement, your planning should be about more than how to get there, you should prepare for what lies ahead and be ready to adjust.
One of the most important conversations you’ll have with your Financial Advisor is about switching from building savings to drawing from them. The most common sources of retirement savings, which this advice focuses on, are RRSP/RRIF (including locked-in versions), TFSA and non-registered investments (the draw from each of these sources is taxable, non-taxable, and partially taxable, respectively). You may also need to consider Canada Pension Plan and old age security payments, downsizing your home, selling rental properties, and winding down a business.
Understanding how best to draw down from these sources is key to minimizing taxes. The likely approach is to deplete each source before moving on to the next to maximize net wealth. Using the 3 most common savings sources, you’ll have six different paths to choose from. The impact of each will change over time, so you should be prepared to change your approach too.
Consider again the game of chess. White chooses among 20 opening moves, as does Black to follow, leading to 400 possible board layouts after just one round. By round 5 there are over 119 million possibilities. But this pales in comparison to real life, which has far more variables and more actions that can be taken, including the drawing from multiple sources to tactically exploit tax opportunities rather than fully liquidating each source in succession.
In both retirement planning and chess there are aspects we control and others we don’t. The best chess players anticipate, act, observe and adapt, and they’re always looking a few moves ahead. Similarly, as life unfolds in retirement, you should adjust based on personal circumstances, available wealth (as a whole and across savings sources) and the world we live in (particularly new or modified tax rules).
Like chess, retirement planning is dynamic, anchored by ongoing reviews with your Advisor. At each turn, you and your Financial Advisor will plot the best course at that point in time, with the full knowledge and intention that you will repeat the process from year to year. Contact an Advisor today to make your next move.
*Mutual Funds are offered through Aviso Wealth, a division of Aviso Financial Inc. Financial planning services are available only from advisors who hold financial planning accreditation from applicable regulatory authorities. Aviso Financial Inc. and Northwest & Ethical Investments L.P. are all wholly owned subsidiaries of Aviso Wealth Inc.
NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. Northwest & Ethical Investments Inc., is a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is a wholly-owned subsidiary of Aviso Wealth Limited Partnership (“Aviso Wealth LP”), which in turn is owned 50% by Desjardins Financial Holdings Inc. (“Desjardins”) and 50% by a limited partnership owned by the five Provincial Credit Union Centrals (the “Centrals”) and the CUMIS Group Limited.
