Excerpts from the Book – Preserving Wealth – written by Jack Lumsden, MBA, CFP®
The following is an excerpt that describes retirement tax strategies.
Tax and Withdrawal Strategies
“This all sounds very complicated,” Mark commented. “How do you review the various tax strategies?”
“First of all, you need a great accountant and CFP, and there are some great financial planning software packages that good financial planners can use to model the different options.”
Uncle Wayne then added, “Many retirees like me will develop a plan where they may utilize a combination of the above options to create their lifelong income and cash-flow plan. For example, retirees may decide to cover some of their essential expenses with an annuity or a guaranteed income product and then invest the balance in a total return portfolio, perhaps using a bucketing approach.
“A key part of this approach is the coordination from a timing, sequencing, and tax standpoint, as retirees may have numerous income sources, such as:
- Old Age Security and Canada Pension Plan.
- company pension plans.
- RRSPs, RRIFs, locked in RRSPs.
- tax free savings accounts (TFSAs).
- annuities and guaranteed income products; and
- non-registered investment accounts.
“So, there’s a great need to develop an optimal de-accumulation strategy, and this is where a great financial planner can help.”
“Awesome stuff, Wayner, as Jack would say,” commented Mark. “This helps to explain the analogy of the difference between climbing up Blueberry Hill and climbing down. I can see that once you retire, decisions become more difficult and important.”
“I don’t think I can remember all this, Uncle Wayne,” Sandra said, sounding a bit perplexed. “I can see why we need a good accountant and financial planner for the times when we can’t get hold of you.”
“You bet. Remember, I am away most of the winter. In one of our later sessions, we will talk about building your own team of financial advisors,” he replied. “But as long as you have a handle on the general principles we’re discussing, you’ll be more comfortable later with the decisions you’ll have to make.”
“Oh! I just remembered something else,” exclaimed Sally.
There was more than one audible groan.
“C’mon, you guys,” she said, “this could be important. My insurance pal mentioned something called segregated funds, and you mentioned them briefly. What are they, Uncle Wayne?”
“Segregated funds are similar to mutual funds except they’re regulated by the Insurance Act. They offer three unique features. First, they usually guarantee 75% to 100% of your original investment for a certain period, usually ten years, or upon death. In addition, you can name a beneficiary for your segregated funds, so they don’t become part of your estate, which means you’ll save money on any estate costs, such as probate. And yes, Sally, we will go over the total estate costs in a later session. A bonus for people like Mark, who owns a business, is that segregated funds may be considered creditor-proof. This means that if Mark gets sued or goes bankrupt, his creditors may not have access to his investments in segregated funds. Segregated funds can also be utilized within an RRSP to provide creditor protection.
“I just thought of a joke,” Sally said as she started to laugh. “What is the difference between bonds and men? Eventually, bonds mature! Get it?”
“Ha ha, Sally. So how do our RRSPs and TFSAs fit into the picture?” asked David.
“You’re going to have to bribe me for the answer to that one,” laughed Uncle Wayne. “I’m starving. Jack, do you think you could do some Cajun hot dogs and get your thirsty old uncle another pop?”
For more information on the retirement income and cash-flow planning you can refer to Chapter 3: Protecting and Preserving your Wealth from the book Preserving Wealth The Next Generation – The definitive guide to protecting, investing and transferring wealth by Jack Lumsden, MBA, CFP®
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This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see me for individual financial advice based on your personal circumstances. The information provided is for illustrative purposes only. Commissions, trailing commissions, management fees and expenses, may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. Please read the Fund Facts and consult your Assante Advisor before investing. Insurance products and services are provided through Assante Estate and Insurance Services Inc.