Retirement withdrawal order can save thousands
—
When you get closer to retirement, you will be realizing that building the portfolio was only half the journey. The next challenge would be deciding which account to withdraw from first.
The withdrawal order matters because it can affect your taxes, government benefits, portfolio longevity, and ultimately how much money you keep in retirement.
Drawing strategically from:
1. non-registered accounts,
2. RRSPs/RRIFs,
3. LIRAs/LIFs, and
4. TFSAs
The above order could potentially save tens of thousands of dollars over a lifetime; however, this is a general rule of thumb and not a one-size-fits-all strategy.
The best strategy depends on the size of your TFSA, RRSP, LIRA, non-registered accounts, tax bracket, government benefits, and estate goals.
In some cases, it may make sense to draw down RRSPs and LIRAs earlier while you're in a lower tax bracket, reduce future RRIF/LIF withdrawals, and use available TFSA contribution room to shelter future growth.
Non-registered accounts can also provide flexibility for larger one-time expenses such as travel, a vehicle purchase, or home renovations. The key is minimizing lifetime taxes, not necessarily this year's taxes.
Many investors spend decades focused on accumulation, but not enough time planning decumulation.
I'm curious: what's your strategy?
Use taxable accounts first, draw down registered accounts early, or preserve the TFSA for as long as possible?
—
I saw this on BNN by Christopher Liew.
This is for educational purposes only and it is not a financial advice.
