Retirement Financial Planning: How to Optimize Income and Taxes at 63

Retiree Nathalie, 63, holds nearly $980,000 in total financial assets alongside a debt-free condo valued at $330,000, according to a financial analysis published by La Presse. David Paré, a financial planner and investment advisor at Desjardins Wealth Management in Quebec City, evaluated her portfolio and determined she maintains a strong financial cushion to support increased travel and future retirement residence costs.

Asset Breakdown and Income Sources

Nathalie’s financial assets comprise $266,000 in registered retirement savings plans (RRSPs), $156,000 in tax-free savings accounts (TFSAs), $484,000 in non-registered investments, and $73,500 in a high-interest savings account. Her current lifestyle expenses total $37,000 annually, including $10,000 for housing and $27,000 for living costs, which encompasses $15,000 per year dedicated to travel.

Annual revenues total $42,400, drawn from non-registered investments and high-interest savings yielding $22,800, a Quebec public sector pension of $10,700, and provincial Quebec Pension Plan (QPP) benefits of $8,900. Nathalie started her public pension and QPP early, reducing those payouts, while her federal Old Age Security (OAS) pension is deferred until age 65 to secure an annual amount of approximately $9,100.

Tax Optimization and Travel Spending Plans

Nathalie aims to raise her annual travel budget to $25,000 until her early seventies, pushing her total lifestyle spending to roughly $47,000 per year. David Paré notes that her primary challenge involves tax optimization across her various retirement income streams rather than basic solvency. He advises delaying her federal OAS pension until age 71 to boost that lifetime annuity by 36% to around $12,000 annually.

To fund her increased travel and maintain full TFSA contributions, Paré recommends drawing first from her high-interest savings account surplus of $73,500, followed by the gradual sale of non-registered investments to maximize the 50% capital gains tax exemption. Paré stated that Nathalie can reap the rewards of her budgeting and retirement savings habits, noting her net worth approaches 1.3 million dollars when factoring in the condo resale value.

Retirement Residence Transition and Future Expenses

Nathalie anticipates a net gain of about $330,000 from selling her condo in six or seven years before moving into a seniors’ residence (RPA). Upon that relocation, housing and assistance service costs are expected to triple to approximately $36,000 annually, offsetting the planned reduction in her travel expenditures.

By age 71, mandatory RRIF minimum withdrawals from converted RRSPs and her bonified federal OAS will begin alongside existing pensions and investment income. To manage higher tax brackets during those years, Paré suggests utilizing non-taxable withdrawals from her high-interest savings—boosted by the condo sale proceeds—while continuing to draw down non-registered assets and using TFSA withdrawals as tax-free supplemental income.

Nathalie peut récolter le fruit de ses bonnes habitudes de gestion de son budget et de son épargne-retraite. En comptant la valeur de revente de son condo, son bilan financier affiche une valeur nette d’actif approchant 1,3 million, ce qui est très bien pour la suite de sa vie d’aînée.

David Paré