{"id":295988,"date":"2026-02-17T17:47:10","date_gmt":"2026-02-17T17:47:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/295988\/"},"modified":"2026-02-17T17:47:10","modified_gmt":"2026-02-17T17:47:10","slug":"using-rrsps-to-bridge-the-retirement-income-gap-before-cpp-and-oas","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/295988\/","title":{"rendered":"Using RRSPs to bridge the retirement income gap before CPP and OAS"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

If a client has very little employment income after retiring from full-time work, RRSPs can be a good source of income.Feodora Chiosea\/iStockPhoto \/ Getty Images<\/p>\n

When Canadians retire before the age of 60, they don\u2019t have access to Canada Pension Plan income, which can begin at 60, or Old Age Security income, which can begin at 65. How they choose to bridge the gap between work income and government pensions can have a significant impact on the taxes they pay in the short term and over their lifetimes. <\/p>\n

It\u2019s important to be ready to help clients in this situation in light of a recent Manulife Group Retirement survey<\/a> that found 56 per cent of Canadians who retired earlier than expected weren\u2019t doing so by choice. One-third experienced a health issue, 13 per cent needed to care for a loved one, and 10 per cent were laid off and couldn\u2019t find work. <\/p>\n

Whether early retirement comes by choice or necessity, \u201cthe goal should be to manage tax over a client\u2019s lifetime, not just from year to year,\u201d says Michael Lawrence, a strategist within the Canadian advice and guidance department at Edward Jones in Ottawa. <\/p>\n

That means smoothing income across the decades by co-ordinating withdrawals from RRSPs, TFSAs and non-registered accounts with income from CPP, OAS and other sources.<\/p>\n

Gillian Stovel Rivers, senior wealth advisor with Flourish Family Wealth at CI Assante Wealth Management Ltd. in Burlington, Ont., sees a client\u2019s retirement as an opportunity to \u201cconstruct a retirement income stack\u201d from different income sources. For those who retire from a full-time position at a younger age, that may include part-time or consulting work. <\/p>\n

She tells clients that retirement income planning isn\u2019t a \u201cwaiting room\u201d so much as a \u201cdesign studio\u201d containing various financial buckets that can be accessed or set aside at different times.<\/p>\n

\u201cLook at it as a transition window in which you get to design your income \u2026 in a way that\u2019s going to suit your cash-flow needs but is also very tax-efficient,\u201d Ms. Stovel Rivers says. <\/p>\n

\u201cWhat you don\u2019t want to be doing is claiming all of these sources of income at the same time and then paying a crazy amount of taxes because you didn\u2019t orchestrate those income streams mindfully.\u201d <\/p>\n

If a client has no or very little employment income after retiring from full-time work, she says RRSPs can be a good source of some income. Withdrawals are taxable, but taking money out during low-income years helps avoid a situation in which a client has millions of dollars in assets in an RRSP when it converts to a RRIF at the end of the year during which they turn 71, leaving them with very high taxable minimum withdrawals.<\/p>\n

Sometimes, Ms. Stovel Rivers says, a client may be living primarily off withdrawals from non-registered accounts. But she\u2019ll still assess their situation toward the end of the year and recommend a lump-sum RRSP redemption that both ensures they\u2019re taking full advantage of their basic personal exemption, net of deductions, and replenishing the non-registered money they\u2019ll be using the following year. <\/p>\n

\u201cWe just want to make sure we\u2019re not deferring all of the taxes to later, but we\u2019re not pulling them all into the present,\u201d she says.<\/p>\n

In general, Ms. Stovel Rivers prefers to keep TFSAs intact so they can be used as emergency savings vehicles for large, unexpected expenses in retirement. TFSAs are also useful as wealth transfer vehicles, as they can pass to the next generation tax-free and outside probate (where applicable). <\/p>\n

Delaying CPP and OAS for longer<\/p>\n

Even if a client retires early, it may not make sense to start CPP and OAS the moment they\u2019re available. <\/p>\n

James McCarthy, wealth advisor and client relationship manager with Nicola Wealth Management Ltd. in Vancouver, generally recommends holding off on CPP until at least 65, and sometimes until 70, to take advantage of higher amounts of guaranteed, inflation-indexed income. OAS also pays a higher income the longer a client waits to start it.<\/p>\n

Assuming a client is relying on RRSP withdrawals to bridge the gap before government pensions begin, the question boils down to whether it makes sense to start government pensions to preserve what remains of the RRSP (and grow it with tax-deferred compounding) or to continue to withdraw from the RRSP and get higher CPP and OAS payments later.<\/p>\n

Whenever CPP and OAS withdrawals begin, Mr. McCarthy says it\u2019s often wise to slow or stop withdrawals from RRSPs, as all three sources are fully taxable income. At that point, income needs beyond CPP and OAS can ideally be met with more tax-efficient withdrawals from sources such as non-registered accounts.<\/p>\n

Mr. McCarthy emphasizes it\u2019s important to show new retirees their starting pool of capital across all accounts, the plan in place to grow this money, the tax treatment of different sources of income, and how they\u2019ll meet their expected spending in retirement. <\/p>\n

\u201cFor most people, the idea of never earning another paycheque is very unsettling,\u201d he says. \u201cIt\u2019s not good enough to just tell them they\u2019re going to be okay or reassuring them. \u2026 The knowledge piece is so crucial.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: If a client has very little employment income after retiring from full-time work,…\n","protected":false},"author":2,"featured_media":295989,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[697,114,268,8150,85,46,14093,266,267],"class_list":{"0":"post-295988","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-appwebview","9":"tag-business","10":"tag-finance","11":"tag-globe-advisor","12":"tag-il","13":"tag-israel","14":"tag-noastack","15":"tag-personal-finance","16":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/295988","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=295988"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/295988\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/295989"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=295988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=295988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=295988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}