Assess the level of the before-tax income requirement (if greater than $80,000, more complex)<\/div><\/div>\n
2. Tax brackets<\/span><\/p>\n02<\/b>Determine each spouse’s current and future tax bracket based on fixed pension income (DBPP, CPP, OAS, RRIF, and LIF\/LRIF minimum withdrawals).<\/span><\/div>\n 3. Registered and non-registered investment assets<\/span><\/p>\n03<\/b>Determine the total dollar value of each spouse’s registered assets (including commuted value of DBPP) and non-registered investment assets.<\/span><\/div>\n\n
Determine the couple’s income\/asset ratio (excluding fixed pension income)<\/div>\n
Calculate the dollar value of each spouse’s registered assets relative to non-registered assets<\/div>\n
Project future RRIF and LIF\/LRIF minimum withdrawals to assess the future tax bracket<\/div>\n
Identify additional assets that can provide retirement income (sale of cottage, universal life policy, business assets)<\/div><\/div>\n
4. Strategic asset allocation and portfolio tax efficiency<\/span><\/p>\n04<\/b>Assess the strategic asset allocation of the couple’s joint, integrated investment portfolio and ensure the tax efficiency of non-registered investment assets.<\/span><\/div>\n 5. Estate planning goals<\/span><\/p>\n05<\/b>Determine the couple’s estate planning goals.<\/span><\/div>\n\n
Assess the sufficiency of retirement assets for the surviving spouse<\/div>\n
Determine if there is a requirement for a fixed estate (specific amounts for bequests)<\/div><\/div><\/div>\n
\n
\n
Cash flow management and tax planning<\/h2>\n
SECTION 02<\/span>\n <\/div>\nDevelop an optimized cash flow projection and detailed investment plan. The optimal drawdown of retirement income options is an iterative process and includes tax deferral and income-splitting strategies.<\/p>\n
Annual cash flow projections<\/span><\/p>\n06<\/b>Assess the timing and amount of current and future monthly, quarterly, and annual cash inflows and outflows (in nominal dollars).<\/span><\/div>\n\n
Project cash flow for 1 year (detailed)<\/div>\n
Project cash flow for 5 to 10 years (including the first few RRIF and\/or LIF\/LRIF drawdowns)<\/div><\/div>\n
Pro-forma tax returns<\/span><\/p>\n07<\/b>Assess annual after-tax retirement income for the 5- to 10-year period above.<\/span><\/div>\n\n
Determine each spouse’s average tax rate (ATR), the couple’s ATR, and potential changes in the ATR<\/div>\n
Determine each spouse’s marginal tax rate (MTR) and potential changes to the MTR<\/div>\n
Assess tax strategies to maximize after-tax income and minimize the risk of outliving assets<\/div><\/div><\/div>\n
\n
\n
Tax deferral strategies<\/h2>\n
SECTION 03<\/span>\n <\/div>\n Timing of pension income<\/span><\/p>\n08<\/b>Determine the optimal timing to receive an employer pension and CPP, including deferral options if there is significant pension income.<\/span><\/div>\n Tax bracket for each spouse<\/span><\/p>\n09<\/b>Assess the optimal drawdown of registered and non-registered assets based on each spouse’s current and future tax bracket.<\/span><\/div>\n\n
Determine the present value of after-tax income and future taxes over the entire retirement period<\/div><\/div>\n
Sequence for optimal drawdown of assets<\/span><\/p>\n10<\/b>Analyze whether the following “conventional” sequence provides the optimal drawdown strategy.<\/span><\/div>\n\n
Higher-income spouse’s non-registered assets<\/div>\n
Lower-income spouse’s non-registered assets<\/div>\n
Lower-income spouse’s registered assets<\/div>\n
Higher-income spouse’s registered assets<\/div><\/div>\n
Tax-efficient investment portfolio<\/span><\/p>\n11<\/b>Develop a strategic asset allocation for the couple’s joint, integrated portfolio, focused on the tax efficiency of non-registered assets.<\/span><\/div>\n\n
Growth: hold non-registered equities and equity funds for long-term growth and tax deferral<\/div>\n
Income: set up a systematic withdrawal plan (SWP) on equity funds and\/or invest in preferred shares or dividend funds if income is required from non-registered assets<\/div><\/div>\n
At death of the first spouse<\/span><\/p>\n12<\/b>Implement tax deferral strategies at the death of the first spouse.<\/span><\/div>\n\n
Use the deceased spouse’s unused RRSP contribution room (spousal contribution)<\/div>\n
Offset the deceased spouse’s capital losses against any capital gains<\/div>\n
Roll over the deceased spouse’s assets to the surviving spouse at the adjusted cost base (ACB)<\/div><\/div><\/div>\n
\n
\n
Income-splitting strategies<\/h2>\n
SECTION 04<\/span>\n <\/div>\n CPP retirement benefit<\/span><\/p>\n13<\/b>Split CPP benefits, especially if the spouses are in different tax brackets.<\/span><\/div>\n RRIF and LIF\/LRIF setup<\/span><\/p>\n14<\/b>Base the RRIF and LIF\/LRIF (provincial rules may differ) on the younger spouse’s age, and assess the optimal drawdown strategy for maximum flexibility.<\/span><\/div>\n Lower-income spouse’s registered and non-registered assets<\/span><\/p>\n15<\/b>Assess the following strategies to build up the lower-income spouse’s investment assets, considering all tax issues.<\/span><\/div>\n\n
Draw down first on the higher-income spouse’s non-registered assets to meet expenses, and invest the lower-income spouse’s income to increase non-registered investment assets<\/div>\n
Invest the lower-income spouse’s RRSP\/RRIF and non-registered assets in aggressive equities to equalize retirement income and minimize taxes<\/div>\n
Sell the lower-income spouse’s non-income producing assets to the higher-income spouse at fair market value<\/div><\/div>\n
Principal residence<\/span><\/p>\n16<\/b>Release equity from the principal residence by selling, downsizing, or through a reverse mortgage, to provide each spouse with non-registered investment assets.<\/span><\/div>\n