Personal Investor: Health costs and taxes draining retirement nest eggs
A new retirement poll from CIBC reveals that retirement in Canada isn’t all sunsets and sailboats.
It finds 48 per cent of respondents 50 years and older left the working life either for health reasons, or were pushed out the door. So, it shouldn’t be surprising many are finding health care costs and taxes are draining their savings.
In a country that prides itself on universal health care, 24 per cent of respondents said health issues are consuming more of their savings than expected.
- 15 per cent say taxes are higher than expected, as many fail to take into account the full tax implications of withdrawing from a registered retirement savings plan (RRSP).
- 11 per cent say debt – including mortgage debt – costs are higher than expected, even with borrowing rates at record lows.
- 9 per cent pointed to unexpected home maintenance and renovation costs.
It’s also no surprise 38 per cent of respondents wish they had started planning for retirement sooner, but CIBC offers practical advice to better prepare for retirement including a good tax strategy that maximizes RRSPs and tax free savings accounts (TFSA).
One specific strategy involves withdrawing funds from an RRSP in a low tax bracket and putting them in a TFSA, which is not taxed when funds are withdrawn.
Another strategy is adjusting Canada Pension Plan (CPP) payments to keep taxes low and tax advantage of Old Age Security payments (OAS).