2022 EDITION

THE 8
RRSP
& TFSA
RETIREMENT
MISTAKES
By David Quon
The 8 RRSP & TFSA
Retirement Mistakes
By David Quon
© 2022 David Quon

The information in this book is for educational purposes.

Always consult with your nancial and legal professional
before taking any action. The information provided in this
book is not intended as tax or legal advice, and should not
be used for the purpose of avoiding any individual or
corporate tax liabilities. David Quon, his employees, or
representatives are not authorized to give tax or legal
advice in Canada.
fi
This book is dedicated to my wife, Tia,
and my daughter, Veda.
 Prologue
My name is David Quon, and I was born and raised in
Swan River, Manitoba. I’m very grateful to come from
humble beginnings.

I have owned education companies for the last 15 years of

my life and now run Joyous Retirement. We aim to help
people retire through educational workshops, and it's what
gets me out of bed in the morning. I love it when I can
impact someone in a way that will provide them with years
of bene ts to come.

I also have a great passion for writing. I have written 16

books covering topics like:

• Corporate Finance

• Economics

• Managerial Accounting

• Financial Accounting

• Biolo y

One of the primary things I do is teach people how to

retire with signi cant savings. I have taught calculus, taxes,
retirement, and debt restructuring seminars. I also have a
history in the insurance industry.

Winnipeg is now where I call home. I’m blessed to have a

beautiful family, my wife, Tia, and my daughter, Veda. I’m a
family man, and they’re my world. I only want the best for
all families, and that is to live a happy, comfortable life.
This requires a signi cant amount of nancial literacy.
g
fi
fi
fi
fi
 Every day, I see mistakes made by friends, family, and
retirees that were easily preventable. I want every family to
be well-advised and protected. I’ve been so concerned
about many Canadian retirees that I had to write this book
to help those around me get to a better place nancially. I
have now helped over 20,000 retirees get the information
they need to retire with peace of mind.

There are tremendously powerful ways to protect

yourself from nancial mistakes or pay more taxes than
required. Doing so means you could retire sooner, spend
more time with family, or go on a well-deserved vacation. I
know I can help you, and this book is a gateway to get you
there. It’s designed to bust myths about investing and get
people where they truly need to be. I hope you enjoy it!
fi
fi
Foreword

R
etirement should be easy and fun. You deserve for
all your dreams to come true and be able to do all
the things you want to do. But this dream isn’t a
reality for many retirees since they didn’t follow the right
plan. They may have thought their nancial goals were on
autopilot for success, but unfortunately for some, this
couldn’t be further from the truth.

ALWAYS GET A 2ND OPINION!

This isn’t scaremongering; it’s simply common sense and
mathematics. If you look at the typical retiree and go
through all the mistakes listed below, you most likely nd
money on the table for them. Simply because they didn’t
have a second set of eyes to look at their plans or strategies.
fi
fi
 Typical retiree mistakes:

• If you have to re ect or have a nagging feeling about your

plan, there is an issue. More likely than not, you don't
have a real plan that addresses your key nancial issues.
Listen to your gut!

• If you don't have a plan at all, then to quote Benjamin

Franklin, “You are planning to fail.”

• If you have to wonder or guess at answers, chances are

you will end up with the government plan of CPP/OAS/
GIS. Let us pray that’s not the case for you, and if it is,
I’m here to help you.

After speaking to hundreds of retirees, I can tell you

de nitively; the default government plan is not the plan
you want.

For many responsible people who have saved and

planned for their retirement, they may be surprised to
realize that a large portion of their nest egg actually belongs
to Canada Revenue Agency (CRA). In fact, the biggest
nancial bene ciary in your lifetime is the CRA. Most
retirees assume the money they’ve accumulated is for
them; however, a large chunk goes to taxes. Even after that,
to make things worse, another big chunk is usually lost due
to poor planning.

You must take the lead and craft the ideal plan for your
speci c situation. You must seek out the assistance of a
professional who knows what they’re doing and puts your
best interests rst. Only then can you achieve your hopes
and dreams.
fi
fi
fi
fi
fi
fl
fi
 I can’t say this enough, and I repeat:

YOUR BIGGEST EXPENSE IN LIFE IS TAXES CAUSED

BY POOR PLANNING!
I have great news for you! There are fantastic strategies
available to mitigate your upcoming taxes. You have now
taken the rst step of your nancial peace of mind by
reading this book. Right now is the perfect time to achieve
your optimal, tax-bene cial nest egg. Your family and
friends can bene t from the nancial planning you do
today, and not just in terms of taxes, but in terms of speed,
control, and e ciency of your wealth. Setting things up for
your family now provides great peace of mind for the
future.

The best time to plant a tree was 20 years ago ... the
second-best time is now!

This book will take you through a road map to help you
achieve the most tax-optimized nest egg possible. You will
learn to avoid common Canadian retiree mistakes that
could consume a large portion of your retirement.

Disclaimer: This book is NOT tax advice. Always consult

with your advisor and accountant before making
important inancial decisions. You will need
personalized advice to see if certain strategies or
products are right for you. If you have any questions,
please contact the advisor who gave you this book.
fi
f
ffi
fi
fi
fi
fi
 The eight mistakes outlined in this book are entirely
preventable, and they can add up to thousands or
hundreds of thousands of dollars throughout your lifetime.
So let’s get to it and address each one.
 Mistake #1: Starting CPP and OAS at
Age 65

S
o why, exactly, is this a mistake? Simply because
delaying CPP and OAS yields more money from the
government. Usually, pre-retirees and retirees receive
the applications when they’re 64, which means that many
people ASSUME they should ll it out and get their
cheques coming early.

However, a great planner will tell you to consider a few

factors:

• How is your health? (If poor, then it will be best to get the
bene ts right away!)

• Are you withdrawing investments or any other income?

(This information could be signi cant to save on taxes!)
fi
fi
fi
• What is your partner doing? What is their age? These are
all factors in your retirement plan.

So how much more money do you get when you delay

your CPP and OAS until 70 years old, for example? You can
receive up to 8.4 and 7.2 percent annual increases for CPP
and OAS, respectively, which is fantastic! Who wouldn’t
want that?

If you and your partner expect to live well into your 80’s,
there's some serious calculation and planning to do. You
will need to maximize your retirement nest egg from the
government. If you want to have your CPP and OAS
paycheque maximized, please contact the advisor who gave
you this information.
Mistake #2: Relying on the
Government to Help You Retire

Y
ou've worked hard your whole life, and now you
deserve retirement. Like most of us, we've been
counting down the clock until retirement. We look
forward to all the government bene ts, and the overall
freedom retirement can give us.

What are the three main bene its?

• CPP/QPP: Canadian Pension Plan

• OAS: Old Age Security

• GIS: Guaranteed Income Supplement

So what do all of these bene ts actually add up to in the

end? $24,000 per person. Which isn’t a lot in retirement.
fi
f
fi
You want to maximize these bene ts and have a full look at
all your options to have a comfortable golden egg in
retirement.

For retirement readiness, ask these questions:

• How much CPP/OAS are you going to get? And at what

age?

• How much will you get taxed?

• How will GIS apply to you?

• What is the total amount of those three bene ts you will

receive in retirement? Have you budgeted for this?

Do you want professional help maximizing your

government retirement paycheque? Please contact the
advisor who sent you this material.
fi
fi
Mistake #3: Counting on Inheritance /
Poor Estate Planning

Y
our parents needed a plan, and so do you.
Unfortunately, a good chunk of Canadians are
counting on their parents to pass down wealth.
Your parents may live a lot longer than you realize, which
means your inheritance might be delayed. It’s an oversight
that can trigger major nancial distress.

The best idea is to start estate planning right now! Why is

that, you ask?

• Let’s say you have a 2nd cottage or property. This is a

huge tax liability for your family. You can save a lot of
taxes for pennies on the dollar by planning ahead.

• Let’s say you have a primary residence. How does that

get split up between children? If one child wants the
fi
 home when you are gone, how do the other kids get
equally reimbursed?

• Another great question to ask yourself is, “What are the

major considerations when deciding to give wealth
during your lifetime, versus through your Will after
death?”

Unexpected things can happen when you get into

retirement. When deaths happen in the family and estate
plans aren’t already in place, this generally causes a lot of
strife between family members. The last thing a parent
wants to do is cause stress and ghting within their family
when they are gone. Planning now can prevent a lot of
heartache for your family.

You should also get a power of attorney for not just your
property but also for healthcare. More questions to ask
yourself:

• If I’m in the hospital and in a minimally conscious state

(MCS), or unresponsive wakefulness syndrome (when
someone shows no sign of awareness), do I allow my
children to take me o life support?

• Who will be my executor? (The executor collects and

oversees estate assets, pays the deceased's debts, and
divides what remains of the estate among the
bene ciaries.) This could be a trust company or one of
your children.

• Do I have a will? Does it outline who gets what in proper

legalese?
fi
ff
fi
 There are so many questions, and this is not an
exhaustive list. Instead, this is meant to provoke you into
taking action and getting a full plan. Remember,
unexpected things happen, and you want your children to
be as prepared as possible.
 Mistake #4: Not Following Asset
Allocation and the 4% Rule

D
i erent investors need di erent asset allocations,
depending on their needs. What is asset
allocation, you ask?

You have certain investments that might have capital

gains vs. interest income. You might also have more
aggressive investments in nature vs. being conservative
(which is important to know!).

Many retirees don’t realize this, but you get taxed

di erently based on the type of income you get from that
asset. Putting the wrong investments in the wrong buckets
(or pulling them out wrong) can cause you to pay
unnecessary taxes.

For instance, in a non-registered account:

ff
ff
ff
 • If you earn interest income, you’ll get taxed based on
100% of that income at your marginal tax rate.

• If you earn capital gains, you’ll typically get taxed at 50%

of the gain at your marginal tax rate.

So at irst glance, interest income looks bad. (paying

full price)

While capital gains look great! (paying 50%)

But there are other complications. If the interest income

is in your RRSP, you don’t pay taxes on that until you pull it
out. But typically, interest-bearing investments are more
conservative (predictable), which is sometimes good in
retirement. So what should you do?

To add even further to the complication, you know you

have a TFSA with money in it, and you don’t get taxed on
the interest you earn here even if you pull it out!

Now it’s getting really complicated, so what should you

do? Where should you put your investments, and how
should you pull them out?

It is important to look at which accounts you will be

drawing from when determining where to hold more
conservative investments versus more aggressive ones.
Investment income is taxed di erently depending on its
type, so tax e ciency is important when determining
where to hold what.

The quick answer is: There is no quick answer.

f
ffi
ff
 Making one mistake here can demolish your wealth-
building e orts. Make sure that you get a second opinion
on ALL of your investments.

Here is a checklist to see if your nancial professional did

a thorough job:

• Did they tell you which order you should pull out your
money? (TFSA vs. RRSP vs. Non-Registered)

• Did they tell you WHY they invested speci c amounts in

each of the 3 buckets? (Which investments are more
conservative?)

• Did they go over the 4% Rule? This is a rule developed by

William Bengen. Basically if you have a 30-year time
horizon, you should be only pulling out 4% of your
investments, adjusting for in ation so that you can
stretch out your investments as much as possible.
ff
fl
fi
fi
 Mistake #5: Not Being Realistic; Not
Projecting What You Can Afford

I
always ask pre-retirees and retirees alike: What does
a successful retirement look like for you? Since it’s
so di erent for each person, it’s important to take the
time and really think about what your true goals are, and
then determine what is realistic.

Are you:

• Staying at home each day and playing crib (my

favourite!). I did this all the time with my grandma.

• Traveling to see your family? Maybe to new countries you

never explored before.

• Finally getting that car you deserve?

• Renovating the kitchen?

ff
 The list goes on and on.

I see pre-retirees make a common mistake nding a

retirement income calculator online and punching in
numbers based on what they think is correct.

The big mistake here isn’t the calculator; it’s that they
usually aren’t factoring in all the costs. They end up with a
monthly income number LOWER than what they need in
reality.

They didn’t take into account the two trips a year they
wanted. They didn’t consider that in ation would eat away
their purchasing power (so groceries are more expensive!).
It also means your golf passes will be more and more
UNAFFORDABLE in the future.

Questions to ask yourself:

• Have you mapped out all of your expenses in retirement?

• Have you considered in ation (2 to 3% per year)?

• Have you made up your Dream Retirement List of

Activities?
fl
fl
fi
 Mistake #6: Not Implementing the Top
7 Retirement Tax Strategies

I
n this mega-chapter, we will cover the top 7 retirement
tax strategies. This is a long but very important section,
as I will break down each strate y for you as simply as
possible.

Remember, you worked hard for your money; make sure

to pay the minimum taxes required by law.

Here Are Each of the Strategies:

1. CPP/QPP sharing

2. Spousal loans

3. E ective use of surplus assets

4. Minimum RRIF withdrawal planning

ff
g
5. Tax bracket management

6. Order of withdrawal

7. Three types of taxes for investment income

Why Am I Going Over These Strategies?

Reason #1: If you aren’t using these strategies, you leave

thousands and sometimes hundreds of thousands of dollars
on the table in terms of overpaid taxes.

Reason #2: I want you to be able to think mathematically

(and simply!) on whether it’s worth it for you to implement
these strategies. I want to share how I think about these
things.

Essentially, when I look at these strategies and ask

myself, “Is it worth it to implement this strate y? Is it worth
pursuing with an expert?” I ask the following question:

If I make this change, how much do I save today and in

years going forward?

I’ll give you a simple example, let’s say you do the CPP
sharing strate y (I’ll explain the strate y details in a bit) and
you only save $300 in taxes this year. That doesn’t sound
like much, right? But if you ask the nancial advisor:

Question: If I make this change with CPP sharing, how

much do I save today (this year plus going forward) and if I
invested the savings at a 5% return, how much is it worth to
me today to make this change?
g
fi
g
g
 Answer: If you started saving $300 in taxes each year for
25 years, with 5% annual returns, you’ll make $15,334.04!

Please note that I’m assuming you earn 5% per year on

the taxes saved! Everyone’s results will be di erent,
though, and you need to consult with an expert.

Here is how the advisor does the calculations:

Starting Amount $300.00

Total Contributions (25 years at $300 per year) $7,500.00

Total Interest ($300 savings per year @ 5%) $7,534.04

Ending Balance $15,334.04

So by making a 30 60 min. consultation on a small thing

such as CPP sharing, you could have saved up to $15,000.

Is $15,000 worth one hour of your time?

I bet it is! A good nancial planner or advisor is worth

their weight in gold, but only if they implement strategies
for you that yield results. The key point is to always ask
about the true nancial bene t of implementing the
strate y!

Keep in mind that this is just one example (CPP sharing)

and this particular one is usually the least impactful. I know
what you are thinking - if CPP is the least impactful, and in
our ctitious example, it saved me $15,000 … how much
fi
g
fi
fi
-
fi
ff
will the other strategies save me? The answer is much,
much more.

You need someone to go through each strate y and

calculate how much money each one will end up saving
you.

Let’s get into each of the strategies. I’ve provided a table

to help you summarize the ndings and action items for
each one. Here’s a step-by-step process to use as we go
through each:

1. Make note of the strategies that aren’t being

implemented to your knowledge.

2. Try to answer the questions within the table provided.

3. Have an advisor go through each of these strategies and

calculate how much you’ll save, or how much your net
worth will increase.

4. Get the strategies implemented! Remember that in

terms of dollars per hour, this is the most important
thing you can do for your nancial well-being.
fi
fi
g
 Retirement Tax What’s it Is it Being Have I
Strate y Worth When Utilized by Gotten a
Implemente My Advisor? Second
d? (yes/no/not Opinion?
(total $) sure) (yes/no)

#1 CPP/QPP sharing

#2 Spousal Loans/
RRSPs

#3 E ective use of
surplus assets

#4 Minimum RRIF
withdrawal
planning

#5 Tax bracket
management

#6 Order of
withdrawal

#7 Three types of
taxes for
investment income

RETIREMENT TAX STRATEGY #1: CPP/QPP SHARING

You can take your Canada Pension Plan and split it with
your spouse. The beautiful thing about this strate y is that
the greater the tax bracket di erence between you two, the
ff
g
ff
g
more you can save per year in taxes! This is a quick win, it’s
very easy to implement and you will clearly see the tax
savings.

Any advisor or nancial planner should be able to save

you taxes using this strate y. This only applies, of course, if
you are eligible to receive it. Sharing your pension may
result in tax savings.

RETIREMENT TAX STRATEGY #2: SPOUSAL LOANS

What is a spousal loan?

This strate y is great for couples where both of you are in

totally di erent income brackets; the further away the
better. You will also want to have a large number of funds
to invest, usually in non-registered investments.

A spousal loan is when a high-income spouse gives a loan

to a lower-income spouse while charging a prescribed
interest rate.

Is now a good time for spousal loans?

Yes. Right now the prescribed rate is only 1%, as of July

1st, 2020. The lower the rate, the less interest you have to
pay, and the more money you will save! This has been cut
in half since the last interest rate of 2%.

Step by Step Strate y:

1. Find the best tax advantage investment for the spouse in

the low tax bracket.

2. Calculate the tax savings based on the di erence

between the two brackets.
ff
g
fi
g
g
ff
 3. The spouse in the higher tax bracket will send money to
the one in the lower while charging a 1% interest fee.

4. The spouse in the lower bracket will invest the money

for the other spouse.

Is this strate y right for you?

1. Do you and your spouse have very di erent incomes?

2. Does the higher tax bracket spouse have a large

amount of money to invest?

If the answer to both of these questions is yes, you

de nitely want an advisor to look into this for you.

RETIREMENT TAX STRATEGY #3: EFFECTIVE USE OF

SURPLUS ASSETS
If you have excess money on the sidelines, or have equity
you can pull out from assets, you can use this strate y.
There are three di erent options for allocating the surplus:

1. Trusts and lifetime gifts.

2. Life insurance (with tax-free bene ts).

3. Charitable donations.

Trusts & Lifetime Gifts

If you have extra cash or assets such as second

properties, trusts and lifetime gifts can be the way to go.
This is especially true if you’re planning to pass these assets
down to children.
fi
g
ff
fi
ff
g
 You may also wish to pay for children’s vacations,
weddings, or perhaps secondary education.

Right now, your high income or higher marginal tax rate

is eating into all of those dreams. Establishing a family trust
can really help mitigate this issue.

How a Trust Works

A trust is a 3rd party entity. This entity can hold money

or assets for your children and can be given to your kids or
anyone else, for that matter. Allowing you the peace of
mind that your assets are well taken care of. You can also
leave instructions as to when the children receive money
from ‘the trust’ and how much is given. If your kids are 18
or older they do not get hit with taxes based on the money
invested in the trust (which is great!)

You can either give your kids the principal (original

investment) or the interest made o the investments. If you
only give them the interest made, then your trust can make
payments to your children for as long as a lifetime. This is a
huge upside.

You can put a chalet, cottage (any asset really) into a

trust.

Another option is that the trust can “lend out” money to

family members. This means they can borrow out money
(tax-free!) but then they need to pay the principal back.

Trusts are an advanced topic that requires careful

planning and execution. Make sure to vet your advisor and
accountant/lawyer accordingly to make sure they know
ff
 how to use this. If you have a lot of assets though, this
could be a very big advantage for you to use.

Life Insurance (With Tax-Free Bene its)

Anytime there are assets to be disbursed or you need to

make sure your family members are protected in your
absence, insurance is a must. We talk about this in the
estate section as well.

There are certain insurance products that allow tax-free

growth of investments within their policy. These can be a
silver bullet if you are looking for a conservative investment
and have the funds to purchase the policy.

You will get the following advantages:

• Tax-free growth (in some policies)

• Guaranteed growth

• Certain policies give dividends (Hint: Canada Life has

given a great dividend over the last 20 years)

• Upon your passing, you can transfer tax-free cash

disbursements to your loved ones. This is known as a
death bene t and is meant to take care of assets and
normal living expenditures.

It’s important to note that with life insurance, you have

options to take loans against your policy that could be tax-
free during your retirement. As long as the policy is
nancially sound, you are not even necessarily required to
pay them back.

Charitable Donations
fi
fi
f
 Do you want to give back to Charity? Or do you want to
lower your taxes? Well, you can do both!

If you have extra cash or a surplus of assets, you can

generally help out a good cause and get tax relief at the
same time.

You’ll need to make sure they are quali ed charitable

organizations or charitable foundations.

This is once again a complex topic with lots of nuances

which we won’t go into detail, however, please contact
your advisor on this if it’s something you’d like to pursue.

RETIREMENT TAX STRATEGY #4: MINIMUM RRIF

WITHDRAWAL PLANNING
Just keep this one in mind for now. We’ll be covering this
strate y in detail a bit later in the book.

RETIREMENT TAX STRATEGY #5: TAX BRACKET

MANAGEMENT
In general, it’s advantageous to consider tax-lowering
strategies during your high-income periods. When you
make a lot of money o your investments in one year, you
want a plan in place that LOWERS your taxes. When you
have a year when your investments don’t do so well, you
want to have a strate y that uses these losses to your
maximum advantage.

The two key questions to ask your advisor:

1. If I decide to pull out investments that create a capital gain,

how are you going to prevent me from paying too high of a
tax?
g
g
ff
fi
2. If I decide to pull out investments that create a loss, how
are you going to use this to my advantage?

We will go through an example below.

Tax-loss Harvesting: Selling Stocks in a Loss Position

During Your High-Income Periods

Tax-loss harvesting is when you sell stocks that have a

current value less than the original purchase price, during a
period where your income is higher than normal. This
triggers a realized loss and can be used to o set gains.
When done correctly, the current and future tax savings
provided by the loss will be greater than the actual loss
itself.

The key point: Anytime there is a signi cant loss within

your portfolio, look at it as an opportunity to get your
money out at a lower tax bracket.

There are several strategies like this that advisors and

accountants can suggest during both periods of losses, and
gains. For a full list of strategies that are applicable to your
situation, make sure to meet with someone who knows the
full details of your nances.

RETIREMENT TAX STRATEGY #6: ORDER OF

WITHDRAWAL
I know I’ve mentioned this before, but it is important to
say again - everyone’s situation is unique. This is why it is
crucial to get good advice from a nancial advisor to
properly prepare for your retirement.
fi
fi
fi
ff
 Since Canadians could have their assets or funds in
di erent locations or buckets, there are di erent ways or
sequences that they could pull their funds out. For
example, should they liquidate their RRSP rst? Or their
TFSA? Or should they liquidate their non-registered
accounts rst? Or maybe they should do a combination of
all of the above or other sources as well? Which order of
withdrawal would make the most sense?

There’s a myriad of factors to consider when

contemplating this, but for most people, there is one order
of withdrawal that’s the best … and that's usually the order
that saves the most amount of taxes!

Let’s assume that you are a typical Canadian pre-retiree

with funds in:

• Non-registered accounts, like the chequing account at

your bank

• Registered accounts, like your TFSA and RRSPs

In which order should you withdraw your funds?

For most people, the optimal order to pull the funds out
is this:

1. Non-registered or TFSA (depending on your situation)

2. Then RRSPs

Let’s work through this together using these three key

points:

#1: Use Your Non-Registered Investments First

ff
fi
ff
fi
 Most of the time, people decide to draw money out of
their non-registered investments or TSFAs rst. Since
RRSPs are always taxable, these are often used last.
Structuring withdrawals in this way can not only allow you
to control the taxes you are paying (and defer them in
many cases) but can also maximize the return on your
investment. Always try to maximize gains and minimize
losses.

#2: Stagger Your RRSP Withdrawals

Whenever you are withdrawing money out of RRSPs, it is

always good to make sure that you have a long-term plan.
You want to draw out more money when your tax bracket
allows it, and then minimize your tax bracket if you happen
to have an unexpected in ux of cash. People commonly
make the mistake of taking large withdrawals from their
RRSPs in the same year, which could bump them into a
higher tax bracket.

For example, suppose you sell assets in one year. In that

year, you could leave your RRSPs alone, and live o of the
money you received from the sold assets. If you actually
withdraw funds from your RRSP in the year when you sold
the assets, then both the RRSP withdrawal and the funds
you received from the sale would be added to your annual
income. This could push you into a higher tax bracket and
trigger unnecessary extra taxes.

#3: The RRSP and TFSA Compliment Each Other

An important point to remember about RRSPs is that

they can turn into a RRIF. We will be discussing a lot more
about RRIFs further into this book, but for now, appreciate
fl
fi
ff
that a RRIF is like an RRSP in reverse. An RRSP is a tax-
deferred vehicle to save for retirement, while a RRIF is a
vehicle to live on in retirement. An RRSP has a maximum
contribution amount, while a RRIF has a minimum
withdrawal amount.

The year that you turn 71, you must withdraw the funds
from your RRSP, and you would then have the option to
move this into a RRIF, tax-free. Now, the question is - do
you want to do that?

Remember, RRIFs have a minimum amount that you

must withdraw, and that amount is taxable. If you forget to
withdraw that amount each year, the penalty is signi cant.
This means that if you have other sources of income, you
would not be able to control your annual taxable income
and could end up being pushed into a higher tax bracket,
triggering once again unnecessary taxes.

On the other hand, you also have your TFSA. The great
thing to remember about the TFSA is that you do not get
taxed on withdrawals, and you do not get taxed on the
growth of your investments.

With TFSAs, you never have to worry about your

withdrawals pushing you into a higher tax bracket. Since
your RRSP/RRIF withdrawals are taxable, you usually want
to withdraw from these last. Why?

It’s because you get taxed on RRSPs/RRIFs withdrawals.

For that reason alone, you do not want to touch these
unless you have no choice, as any withdrawals you make
would be taxable events. You want to instead leave them
alone so that the funds grow the quickest and longest that
they can. This maximizes your wealth.
fi
 The TFSA lets you withdraw funds without being taxed,
and the withdrawals have no bearing on the amount of
your pension bene ts. So depending on your level of
retirement income, it may be in your interest to wait until
you are 71 to start making withdrawals from your RRSP.
While using your TFSA at the start of your retirement.
These are important considerations to go over when you
meet with your advisor.

Tip: If you end up not needing the money you pull out
from your RRIF, put it in your TFSA! You can then start
investing tax-free, even in retirement! If you have any room
in your RRSP and TFSA right now, work hard to max it out!

Questions to ask yourself:

1. Has your advisor walked you through their strate y,

detailing how to pull out tax-e cient funds in
retirement?

2. How much contribution room do you have in your

RRSPs right now?

3. How much room do you have in your TFSA?

RETIREMENT TAX STRATEGY #7: THREE TYPES OF

TAXES FOR INVESTMENT INCOME
It’s very important to be aware of the fact that not all
investment income is taxed the same, and it’s not even
close. When you're investing, keep in mind (if we are
simplifying) there are three ways to make money with
investing:
fi
ffi
g
 Type of Investing Tax E ciency E ciency Percentage

Interest income Low 100% taxable

Dividend income Medium Dividend tax credits and

other advantages

Capital gains High 50% taxable

If you want to build true wealth, then capital gains is the

way to go, just based on the math. Does that mean you
shouldn’t have any interest or dividend-bearing
investments? Not at all, these each have their own places
within a nancial plan.

However, when you are coming up to retirement age, you

may want higher gains as you can usually assume more
risk. Capital gains with stocks are a great option! Capital
gains also have low taxes, and you only pay them if you sell
the investment for a higher price than you bought it.

For interest income, you are taxed at 100%, in contrast to

the 50% for capital gains. This means that most times, it’s
better to go with capital gains. Just to be clear, when we
contrast 100% vs. 50%, we do not mean that's the tax rate.
Your tax rate or tax bracket would be determined by your
annual taxable income. 100% vs. 50% is simply contrasting
how much is considered when calculating your annual
income. For example, if you sell a lot of stocks that did very
well (capital gains) and you get $30,000, for tax purposes it
would be assumed that you only made 50% of that,
$15,000. If you had instead made $30,000 on bonds
(interest income), then the full $30,000 would be added to
your annual taxable income, and you would be charged
ffi
ffi
fi
 higher taxes. Remember though that interest and capital
gains are NOT taxed in the TFSA, and are only tax-deferred
with RRSPs.

Understanding the tax di erences between investments

can make the di erence between working an extra 5, or 10
years at your job. When looking at investments or reports
from your advisor, always ask them what the after-tax
return is.

Let’s look at an example to illustrate. If you made a 10%

return on investment, and you have a marginal tax rate of
30% (which is the tax rate you would pay on the next dollar
you made) then your after-tax rate of return is really 7%.
Which is the gross 10%, reduced by 30%. Read through that
a couple of times if need be; it’s an important concept to
grasp. This is a great way to compare investments.

Here are some great questions to ask your advisor:

1. How have you set up my investments so they are tax-

e cient?

2. Which investments are the most tax-e cient, and which

are the least tax-e cient? What is the strate y?

3. Are my investments mostly capital gains, dividends, or

income-focused?

4. How tax-e cient is my portfolio?

ffi
ffi
ff
ffi
ff
ffi
g
Mistake #7: Drawing a RRIF Too Late

E
veryone decides to take money from their Registered
Retirement Income Fund (RRIF) at di erent ages …
but you do have to take it by age 72. Does that mean
you should wait? Should you take it early? What are the
advantages and disadvantages? Let’s rst de ne what a
RRIF is, and then tackle each of these questions.

So What is a RIFF, Exactly?

A RIFF is an account registered with the federal

government that gives you a steady income in retirement.
Remember how you were putting money aside in a tax-
deferred account called an RRSP? Well, now you can pull
money out of that account as retirement income called a
RIFF!
ff
fi
fi
 Keep in mind, RIFFs are fully taxable, and that is why
you did not pay taxes on your RRSPs. Now if you have
lower income in your earlier years (say 60’s), and higher
income in your later years (say 70’s), you could be making a
mistake by NOT pulling money from your RRIF while in
your 60’s.

This is because if you have a lower income, you can

increase or top-up that income by pulling from your
accounts without necessarily being pushed into a higher
tax bracket. You get more money out, but with fewer taxes.

In certain cases, if you delay converting your RRSP into a

RIFF, you could be creating a higher tax bracket for
yourself which could have been avoided. If the tax bracket
is high enough, this could greatly reduce or eliminate your
Old Age Security, which is not desirable.

Remember, based on your annual income (not including

your TFSA), the government would reduce your Old Age
Security (OAS) if you are earning too much. So how do you
avoid all of these issues? Make sure to get a nancial
planner and plan this out right away.

Four Other Things You Need to Know About RRIFs

1. According to the rules, there is a minimum amount you

have to take out of your RRIF. This amount goes up with
age. This is how the government ensures they get their
taxes. You can pull out as much money as you want
from the account, but taxes will go up!

2. You can transfer your RRSP, DPSP (a pension plan), and

certain other registered plans into a RRIF.
fi
3. You can only open a RRIF at age 71 or earlier.

4. If there is money left over in your RRIF when you pass

away, this goes to your estate. So make sure you have a
plan in place.
 Mistake #8: Not Getting a Second
Opinion

I
f you have worked for multiple decades, do you really
want to roll the dice with your retirement planning?
This is such a common mistake, and it’s such a bad one
too, that it physically hurts me to even write it.

The number of times I’ve heard the following statements

must be astronomical:

It’s ne, I have my friend looking after my nances.

There is a nancial advisor who comes into work for everyone

and does their RRSPs.

I’m a “do it yourself” kinda guy, I look after my family's

nances. We’re good.
fi
fi
fi
fi
 There are so many variations to this it is hard to write
them all.

Here is the key point with all of these:

It doesn't matter WHO looks after your nances, always

always always get a second pair of eyes to look it over.

In years past, I used to run an educational company that

provided books and study materials for university students.
Even though I thought I had the best teaching and tutoring
books out there, I still looked at my competition. Simply to
see if there was anything I was missing or anything I could
do better.

And guess what? Every once in a while there was

something I could do better, and I only caught that because
I had a third party review everything (I had my colleagues
do this for me).

This is the same with your retirement plan. You only get
one chance to get this right. It does not matter if it is your
friend, your mom or dad, or the best nancial advisor in
the world running your nances …

Always get a second opinion.

They are usually free of charge with no obligation.

This alone can potentially save your retirement from a

disastrous mistake. It could be as simple as your current
advisor missing something. Everyone makes mistakes.
fi
fi
fi
 Getting a third-party review on anything of substance is
just good practice. It’s one of those golden rules in life, the
sheer importance of avoiding colossal, unforced errors.

You also need someone who can review EVERYTHING

altogether. Some advisors are only good at investing, or
only good at estate planning. You need someone who is
good at investments, has an accountant on their team, an
estate lawyer, can handle insurance, and all the other
important parts of your nancial life.

Questions to ask:

1. Who can give me a quali ed second opinion?

2. Does this person have knowledge of all the areas I need?

3. Does my current advisor have knowledge on all the

areas I need?
fi
fi
YOUR ADVISOR CHECKLIST
How good is your advisor? The following checklist can
help you do an honest, sober assessment.

A Moment of Truth (Check all that apply):

I hear from my advisor once or twice a year, minimum

I have a copy of my full written nancial plan and it’s

updated often

I have a clear understanding of what I have in my

portfolio and why

My advisor understands my tolerance for losing money

because we have talked about it

I get a response to my calls and email within 24 hours

If you are in a relationship, both partners’ views have

been addressed

I have maximized all income splitting and tax deferral

opportunities

I have a current Will and Powers of Attorney

We have talked about guaranteed retirement income

options beyond CPP and OAS

My advisor tries to help me improve my nancial habits

My advisor has clearly explained the cost of ownership

of my investments

My advisor is a simpli er, I come out of interactions

with greater clarity
fi
fi
fi
 My advisor asks me questions about life, goals and
aspirations

My advisor covers matters beyond investments, like

debt, taxes, insurance and estate planning

My advisor is a Certi ed Financial Planner professional

I am con dent that my savings will last me well through

my retirement, even through market volatility

My advisor has implemented all 7 retirement tax

strategies, as outlined in Chapter 6

My advisor has quanti ed for me how much taxes they

are saving with each strate y

Now let’s count it up, how many did you get?

14 16: You likely have a good nancial advisor

10 13: There is room for improvement

7 9: Time for a second opinion

6 or less: RUN to a new advisor

-
-
-
fi
fi
fi
g
fi
In Conclusion
I am frequently disheartened by the mistakes being made
by friends, family, and retirees that cost so much in the
long run. Not just in monetary terms either, but in peace of
mind and overall happiness during their retirement years.
It’s the reason I write this book.

When we retire or are planning our retirement, we don’t

want to be dealing with nancial stresses. After working so
hard and for so long, the focus should be on enjoying the
fruits of our labor and spending time with loved ones.

My aim is to ensure that every Canadian family gets great

advice and is able to protect their nest egg in retirement.
There are many powerful strategies mentioned in this book
to help ensure you have the best information possible. I
also recommend that you speak to an advisor who can
guide you and your family on a successful nancial path.

This book has truly been a labour of love for me. I hope it
was helpful to you and provided some insights along your
own personal nancial journey. Thanks for reading, and I
wish you the best of luck!

- David
fi
fi
fi