What to consider when planning retirement income

Retirement results in major changes to lifestyle and income.

People planning for retirement should consider all income sources that they will have. These range from renting out land, selling land or assets (like inventory) over a period of time, or potentially payments from succession agreements to pass along the farm to the next generation.

Other sources of income to consider are Registered Retirement Savings Plans, Canada Pension Plan and Old Age Security.


RRSPs are closed the year you turn 71. You must select one of the options below regarding your investment:

  • The proceeds can be drawn as a lump sum, which yields the highest taxes because the entire withdrawal is considered ordinary income in one year.
  • An annuity can be purchased, which provides you with a steady stream of income over the life of the annuity. Proceeds are taxed only as they are received.
  • You can transfer funds to a Registered Retirement Income Fund, which will invest your funds into various securities similar to an RRSP. With this fund, a minimum amount is required to be withdrawn each year and is taxed as withdrawn.


The maximum monthly CPP pension is $1,134 for 2018 if taken at the age of 65. This can vary depending on the number of years and amounts you have contributed to the pension, as well as the age you started withdrawing. A statement of contributions can be requested from Service Canada to determine the amount you will receive. Some contemplate early withdrawal at the age of 60, but this results in reduced pension benefits received per month.

Consider if you need the additional income along with your life expectancy when considering whether you want early withdrawal.

The Canadian Government also offers CPP disability benefits to individuals younger than 65 that have been contributing to CPP and are unable to work regularly because of a disability. The monthly maximum of $1,335 can be obtained by qualified applicants.


Old Age Security pension is available starting at age 65 and the amount received depends on how many years you have lived in Canada. To receive the current monthly maximum of $586, you must have lived in Canada for 40 years or more since the age of 18.

Retirees with income over $74,788 in 2017 will have their OAS gradually clawed back. All of the income will be clawed back if you have income of $121,314 or higher. To avoid this claw-back, consider methods to keep other sources of income low.

There are a number of factors to consider to fully maximize income in retirement. Working together with your tax adviser can be a great way to find a suitable plan that will allow you to retire comfortably.

I would like to thank Riley Honess and Richard Reimer of KPMG for their assistance with writing this article.

Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: colinmiller@kpmg.ca.

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