Retirement

Retirement comes with real complexities and changing needs. That’s why we’re focused on providing real answers to the real questions you have around retirement, addressing the complexity that comes with planning for this new life stage.

Getting Real about Retirement

Real Retirement Questions + Real Retirement Answers

  • 1. Will my client’s savings last through retirement?

    For investors entering retirement, high portfolio returns are important, but they are only one factor influencing how long their savings will last. Another factor is the order or sequence of returns. There is a simple mathematical reason for this: regular withdrawals progressively diminish a portfolio’s dollar value and that dollar value is the base on which future returns compound.

    When negative returns occur near the outset, the investor is left with a smaller base on which future positive returns can compound. Over time that base continues to decline with each additional income withdrawal. This could result in retirement savings running out much sooner than if the portfolio experienced positive returns at the start of the withdrawal period.

    Click here to learn more

  • 2. Should my client make one last RRSP contribution before converting to a RRIF?

    If you are 71 years of age and have RRSP contribution room, consider making one final RRSP contribution – particularly if you expect to be in a lower tax bracket in future years. RRSP contributions are generally not permitted for RRSP account holders who are older than 71, so this may be your last opportunity for a large tax deduction in one year. If you’re younger than 71, you can continue to contribute to your RRSP until the end of the year you reach age 71. The earlier contributions are made, the longer RRSP assets can grow tax-deferred.

    If you are older than 71, have unused RRSP contribution room and have a spouse or common-law partner who is 71 years of age or younger, consider contributing to a spousal RRSP. Contributions to a spousal RRSP will create a tax deduction on your tax return. As long as withdrawals occur three years after your contribution is made, you can reduce your household tax bill through this income-splitting vehicle.

  • 3. Should my client name a beneficiary on their RRIF application?

    Beneficiaries named on RRSP applications do not automatically carry over to RRIFs. If you’d like to transfer your RRIF assets to beneficiaries directly without flowing through your estate, be sure to name your beneficiaries on your new RRIF application*. Failure to do so may result in complex estate settlement matters or unintended distributions. Estate administration fees may also apply. Where a spouse or common-law partner (CLP) will inherit your RRIF, you have the option to name your spouse or CLP “successor annuitant” or “beneficiary”. The successor annuitant designation allows your spouse or CLP to receive your RRIF based on the plan’s original terms and conditions.

    For example, if your RRIF minimum payments were calculated based on your age, the payments will continue based on your age when received by your spouse or CLP. Alternatively, the beneficiary designation generally requires your spouse or CLP to set up a new RRIF based on new terms and conditions. If your spouse or CLP is older, this can lead to higher minimum payments and less tax-sheltering. 

    In Quebec, when an RRSP or RRIF annuitant dies, their RRSP/RRIF flows through their estate and is subject to the terms of their will regardless of designations made on the RRSP/RRIF application.

  • 4. Whose age should my client use to calculate RRIF minimums?

    When setting up a RRIF, you have the option to calculate payments based on your own age or the age of your spouse or common-law partner. If your goal is to maximize the tax-deferral opportunity of a RRIF, it is generally best to calculate your annual RRIF payments based on the younger person’s age. This results in smaller mandatory withdrawals and allows for a longer period of tax-deferral.

    If you don’t require the cash received from mandatory RRIF payments, consider reinvesting the proceeds in a Tax-Free Savings Account (TFSA) or non-registered investment account. Subject to available TFSA contribution room, TFSA contributions allow for tax-free growth. Non-registered investment accounts have the potential for dividend income and capital gains, both of which are tax-efficient.

  • 5. Has my client considered requesting increased withholding tax on RRIF payments?

    Withdrawals from RRIFs are generally subject to a withholding tax of between 0 and 31% depending on the amount redeemed. If you regularly receive other forms of taxable income that are not subject to withholding tax at source (for example, capital gains from the sale of investments, interest or dividend payments), you may wish to increase the withholding tax taken from your RRIF payments. By doing so, you can offset taxes payable on your other income sources and reduce the balance owing when you file your income tax return at year end. Contact your RRIF carrier to determine how to request increased withholdings, if desired.

  • 6. Is my client entitled to the pension credit for RRIF income?

    If you are 65 or older and receiving (or about to receive) RRIF income, consider claiming the pension credit on your federal tax return for up to $2,000 of RRIF income. A similar credit is also available provincially, although there are some differences across the provinces. The federal credit is worth $300, and can be used to offset tax payable on any form of income. The credit cannot be carried forward to a future year, so be sure to claim the credit when available. If you are under the age of 65, the pension credit is available for your RRIF income only if received as a consequence of the death of a spouse or common-law partner (CLP).

    If you are eligible to claim the pension credit for RRIF income, consider splitting the income with your spouse or CLP. Since 2007, income eligible for the pension credit is also eligible for pension income splitting. If your spouse or CLP is in a lower tax bracket, an effective income-split will be achieved. Also, by transferring the RRIF income to your spouse or CLP (which is achieved simply by noting the split on your respective tax returns), you may be able to double the pension credit for your family, provided your spouse or CLP is 65 or older.

    Note: When splitting pension income, be mindful of Old Age Security (OAS) clawback thresholds to ensure that income-sensitive OAS benefits are not reduced. For 2019, OAS benefits are reduced once an individual’s net income exceeds $77,580.

  • 7. My client owns a business. What should they know about planning for retirement?

    Traditionally, owners of incorporated businesses have been advised to pay enough salary each year to maximize RRSP contributions. Historically, this strategy has been viewed as the best opportunity to maximize retirement savings. However, with decreasing corporate tax rates, changes to the taxation of dividends and the advancement of tax-efficient investment vehicles, many business owners are rethinking their retirement savings strategies with a view toward corporate investing.

  • 8. What are the rules around pension income splitting?

    Individuals who are 65 years of age or older can allocate for tax purposes up to a maximum of 50% of their eligible pension income received from a lifetime annuity (purchased with registered, non-registered, superannuation pension, registered pension plan, or deferred profit sharing plan funds), registered pension plan, registered retirement income fund, life income fund or deferred profit sharing plan income. The individual continues to receive the entire amount of income but can allocate up to 50% of the amount to a spouse or common-law partner, who will include this amount on his or her annual tax return. The receiving spouse or common-law partner is not required to be 65 years of age or older to receive an allocation, and the amount allocated can be changed each year for the benefit of the couple.

    For individuals not resident in Quebec and under 65, eligible pension income can include a registered pension plan. Income from a deferred profit sharing plan or annuity (registered and non-registered) received as a result of the death of a spouse are also sources of eligible pension income. Individuals can also allocate up to 50% of annual income received from these sources to a spouse. RRIF or LIF income however cannot be split while the annuitant is under age 65, unless the individual is receiving the RRIF or LIF income due to the death of his or her spouse or common-law partner.

  • 9. How do low interest rates affect retirement income?

    In the past, investors used to shift their allocation towards investment-grade bonds as they aged. However, government bond yields have been declined to very low levels, making risk-free income generation more difficult. Yields on GICs and government bonds in many cases aren’t even sufficient to offset inflation – creating an automatic loss of purchasing power that grows with each passing year. The price of safety has become very high, creating a widening income gap for many retirees.

    Click here to learn more

  • 10. Can my client transfer a retirement plan from the US to Canada before converting to a RRIF?

    Canadian resident investors who were previously residents of the U.S. may want to transfer benefits from their existing retirement plan to a Canadian Registered Retirement Savings Plan (RRSP). In most cases this can be accomplished on a tax-deferred basis. Under the right conditions this can simplify retirement planning and reduce or eliminate the need for duplicate tax reporting.

    Click here to learn more

     

Planning for Retirement

RIF/LIF Illustrator

Estimate how much income your clients’ Registered Savings plan will generate in retirement.

Try it out >

RRSP Calculator

Estimate how much your client will need to save between now and the day they retire.

Calculate >

Investment & Regular Withdrawal

Estimate the regular income stream generated by your client’s non-registered investments.

Try it out >

More Retirement Insights

Tax & Estate Planning

Monthly Income Portfolios

Fixed Income

Exchange Traded Funds

Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. The content of this webpage (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the fund or returns on investment in the fund. This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of August 2019. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

The indicated rates of return are the historical annual compounded total returns as of October  31, 2019 including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Morningstar Star Ratings reflect performance of Series F as of October 31, 2019 and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3, 5, and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. If a fund scores in the top 10% of its fund category, it gets 5 stars; if it falls in the next 22.5%, it receives 4 stars; a place in the middle 35% earns a fund 3 stars; those in the next 22.5% receive 2 stars; and the lowest 10% receive 1 star. For more details on the calculation of Morningstar Star Ratings, see www.morningstar.ca. Quartile rankings and peers beaten are calculated by Mackenzie Investments based on the fund series-level data Morningstar provides. The CIFSC categories, Star Ratings, number of funds in each category, and annual compounded performance for the standard periods are: Mackenzie Monthly Income Conservative Portfolio Series F, Global Fixed Income Balanced category: 1 year - 5 stars 8.2%, 3 years - 5 stars (522 funds) 4.9%. This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor.

Retirement comes with real complexities and changing needs. That’s why we’re focused on providing real answers to the real questions you have around retirement, addressing the complexity that comes with planning for this new life stage

Getting Real about Retirement

Real Retirement Questions + Real Retirement Answers

  • 1. Will my savings last through retirement?

    For investors entering retirement, high portfolio returns are important, but they are only one factor influencing how long their savings will last. Another factor is the order or sequence of returns. There is a simple mathematical reason for this: regular withdrawals progressively diminish a portfolio’s dollar value and that dollar value is the base on which future returns compound.

    When negative returns occur near the outset, the investor is left with a smaller base on which future positive returns can compound. Over time that base continues to decline with each additional income withdrawal. This could result in retirement savings running out much sooner than if the portfolio experienced positive returns at the start of the withdrawal period.

    Click here to learn more

  • 2. Should I make one last RRSP contribution before converting to a RRIF?

    If you are 71 years of age and have RRSP contribution room, consider making one final RRSP contribution – particularly if you expect to be in a lower tax bracket in future years. RRSP contributions are generally not permitted for RRSP account holders who are older than 71, so this may be your last opportunity for a large tax deduction in one year. If you’re younger than 71, you can continue to contribute to your RRSP until the end of the year you reach age 71. The earlier contributions are made, the longer RRSP assets can grow tax-deferred.

    If you are older than 71, have unused RRSP contribution room and have a spouse or common-law partner who is 71 years of age or younger, consider contributing to a spousal RRSP. Contributions to a spousal RRSP will create a tax deduction on your tax return. As long as withdrawals occur three years after your contribution is made, you can reduce your household tax bill through this income-splitting vehicle.

  • 3. Should I name a beneficiary on their RRIF application?

    Beneficiaries named on RRSP applications do not automatically carry over to RRIFs. If you’d like to transfer your RRIF assets to beneficiaries directly without flowing through your estate, be sure to name your beneficiaries on your new RRIF application*. Failure to do so may result in complex estate settlement matters or unintended distributions. Estate administration fees may also apply. Where a spouse or common-law partner (CLP) will inherit your RRIF, you have the option to name your spouse or CLP “successor annuitant” or “beneficiary”. The successor annuitant designation allows your spouse or CLP to receive your RRIF based on the plan’s original terms and conditions.

    For example, if your RRIF minimum payments were calculated based on your age, the payments will continue based on your age when received by your spouse or CLP. Alternatively, the beneficiary designation generally requires your spouse or CLP to set up a new RRIF based on new terms and conditions. If your spouse or CLP is older, this can lead to higher minimum payments and less tax-sheltering. 

    In Quebec, when an RRSP or RRIF annuitant dies, their RRSP/RRIF flows through their estate and is subject to the terms of their will regardless of designations made on the RRSP/RRIF application.

  • 4. Whose age should I use to calculate RRIF minimums?

    When setting up a RRIF, you have the option to calculate payments based on your own age or the age of your spouse or common-law partner. If your goal is to maximize the tax-deferral opportunity of a RRIF, it is generally best to calculate your annual RRIF payments based on the younger person’s age. This results in smaller mandatory withdrawals and allows for a longer period of tax-deferral.

    If you don’t require the cash received from mandatory RRIF payments, consider reinvesting the proceeds in a Tax-Free Savings Account (TFSA) or non-registered investment account. Subject to available TFSA contribution room, TFSA contributions allow for tax-free growth. Non-registered investment accounts have the potential for dividend income and capital gains, both of which are tax-efficient.

  • 5. Have I considered requesting increased withholding tax on RRIF payments?

    Withdrawals from RRIFs are generally subject to a withholding tax of between 0 and 31% depending on the amount redeemed. If you regularly receive other forms of taxable income that are not subject to withholding tax at source (for example, capital gains from the sale of investments, interest or dividend payments), you may wish to increase the withholding tax taken from your RRIF payments. By doing so, you can offset taxes payable on your other income sources and reduce the balance owing when you file your income tax return at year end. Contact your RRIF carrier to determine how to request increased withholdings, if desired.

  • 6. Am I entitled to the pension credit for RRIF income?

    If you are 65 or older and receiving (or about to receive) RRIF income, consider claiming the pension credit on your federal tax return for up to $2,000 of RRIF income. A similar credit is also available provincially, although there are some differences across the provinces. The federal credit is worth $300, and can be used to offset tax payable on any form of income. The credit cannot be carried forward to a future year, so be sure to claim the credit when available. If you are under the age of 65, the pension credit is available for your RRIF income only if received as a consequence of the death of a spouse or common-law partner (CLP).

    If you are eligible to claim the pension credit for RRIF income, consider splitting the income with your spouse or CLP. Since 2007, income eligible for the pension credit is also eligible for pension income splitting. If your spouse or CLP is in a lower tax bracket, an effective income-split will be achieved. Also, by transferring the RRIF income to your spouse or CLP (which is achieved simply by noting the split on your respective tax returns), you may be able to double the pension credit for your family, provided your spouse or CLP is 65 or older.

    Note: When splitting pension income, be mindful of Old Age Security (OAS) clawback thresholds to ensure that income-sensitive OAS benefits are not reduced. For 2019, OAS benefits are reduced once an individual’s net income exceeds $77,580.

  • 7. I’m a business owner. What should I know about planning for retirement?

    Traditionally, owners of incorporated businesses have been advised to pay enough salary each year to maximize RRSP contributions. Historically, this strategy has been viewed as the best opportunity to maximize retirement savings. However, with decreasing corporate tax rates, changes to the taxation of dividends and the advancement of tax-efficient investment vehicles, many business owners are rethinking their retirement savings strategies with a view toward corporate investing.

  • 8. What are the rules around pension income splitting?

    Individuals who are 65 years of age or older can allocate for tax purposes up to a maximum of 50% of their eligible pension income received from a lifetime annuity (purchased with registered, non-registered, superannuation pension, registered pension plan, or deferred profit sharing plan funds), registered pension plan, registered retirement income fund, life income fund or deferred profit sharing plan income. The individual continues to receive the entire amount of income but can allocate up to 50% of the amount to a spouse or common-law partner, who will include this amount on his or her annual tax return. The receiving spouse or common-law partner is not required to be 65 years of age or older to receive an allocation, and the amount allocated can be changed each year for the benefit of the couple.

    For individuals not resident in Quebec and under 65, eligible pension income can include a registered pension plan. Income from a deferred profit sharing plan or annuity (registered and non-registered) received as a result of the death of a spouse are also sources of eligible pension income. Individuals can also allocate up to 50% of annual income received from these sources to a spouse. RRIF or LIF income however cannot be split while the annuitant is under age 65, unless the individual is receiving the RRIF or LIF income due to the death of his or her spouse or common-law partner.

  • 9. How do low interest rates affect retirement income?

    In the past, investors used to shift their allocation towards investment-grade bonds as they aged. However, government bond yields have been declined to very low levels, making risk-free income generation more difficult. Yields on GICs and government bonds in many cases aren’t even sufficient to offset inflation – creating an automatic loss of purchasing power that grows with each passing year. The price of safety has become very high, creating a widening income gap for many retirees.

    Click here to learn more

  • 10. Can I transfer a retirement plan from the US to Canada before converting to a RRIF?

    Canadian resident investors who were previously residents of the U.S. may want to transfer benefits from their existing retirement plan to a Canadian Registered Retirement Savings Plan (RRSP). In most cases this can be accomplished on a tax-deferred basis. Under the right conditions this can simplify retirement planning and reduce or eliminate the need for duplicate tax reporting.

    Click here to learn more

     

Planning for Retirement

RIF/LIF Illustrator

Find out how much income your client's Registered Savings plan will generate in retirement.

Try it out >

RRSP Calculator

Estimate how much your client will need to save between now and the day they retire.

Calculate >

Investment & Regular Withdrawal

Estimate the regular income stream generated by your client’s non-registered investments.

Try it out >

More Retirement Insights

Tax & Estate Planning

Monthly Income Portfolios

Fixed Income

Exchange Traded Funds

Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. The content of this webpage (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the fund or returns on investment in the fund. This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of August 2019. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

The indicated rates of return are the historical annual compounded total returns as of August 31, 2019 including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Morningstar Star Ratings reflect performance of Series F as of August 31, 2019 and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3, 5, and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. If a fund scores in the top 10% of its fund category, it gets 5 stars; if it falls in the next 22.5%, it receives 4 stars; a place in the middle 35% earns a fund 3 stars; those in the next 22.5% receive 2 stars; and the lowest 10% receive 1 star. For more details on the calculation of Morningstar Star Ratings, see www.morningstar.ca. Quartile rankings and peers beaten are calculated by Mackenzie Investments based on the fund series-level data Morningstar provides. The CIFSC categories, Star Ratings, number of funds in each category, and annual compounded performance for the standard periods are: Mackenzie Monthly Income Conservative Portfolio Series F, Global Fixed Income Balanced category: 1 year - 5 stars 5.4%, 3 years - 5 stars (504 funds) 4.9%. This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor.