How To Avoid A Large Unexpected Tax Bill In Retirement (In Canada)

I always pre-pay my estimated income taxes (about 16%) whenever I take money out from my RRIF or receive money from other taxable income sources. One could make the argument that I should delay paying the tax and make interest on that money (not much at today's rates) but any interest on keeping back the taxes owed is unlikely to make much difference to my life. I figure I am retired, I want to keep my life simple rather than having to stress about money at tax time. Of course that's just my personal preference but it works for me.

OK this was important with lots of information and I appreciate the visual and the summarizing at the end of the presentation. I will have to look at the OAS clawback vid because of the amount of taxes you pointed on with an income example of only 45,000. A wake up call coming in a few years. Thanks for your work. 👍 🇨🇦

Excellent video thank you ! I always like the videos on decumalation strategies

Each year after I do our taxes I figure out the % of tax paid on my gross income. Knowing that % I can put all my income sources on an XL spread sheet monthly along with the amount of taxes withheld at Source eg RRIF, CPP etc. Thus by using the same calculation as I use on my tax form from the pervious year I can compare the current average tax rate to last years. Personal exemptions go up every year & as long as I stay slightly above last year’s tax rate then I know there will be no tax payable. If I start to fall behind then a call to my financial advisor to increase the tax withheld % from my RRIF or to Service Canada to withhold more taxes at Source from OAS or CPP to maintain the correct tax payable %. By doing this monthly then no surprises at tax time & I can take into account any increases in my revenue stream. I do this for myself & my wife. This is simple, it keeps you current, you can compare the numbers on your T- slips, & it works.

One of the best videos I have watched on this subject. Any video, howsoever long cannot be conclusive on this subject. As a follow up, can we request your thoughts on the best strategies for drawing down from taxable accounts & Dividend income taking. Also your thoughts on rental income vs selling a rental property and investing in more efficient taxable accounts during retirements. Truly appreciate the effort you put into your videos. Thank you.

Hey there, I have been waiting for the notification in this topic....so looking forward to now viewing it...and bookmarking it for future reference. 😀 👍. 🇨🇦

I guess there is a major difference between how to "avoid a large tax bill", and "how to avoid a large unexpected tax bill." eh?

in Canada we've been programmed for years to max out RRSP contributions which is great if you have the income but the TFSA is ultimately going to be your best friend particularly I think if you can start early in your career. A nice $200,000 in your TFSA when you retire (contributions plus investment returns) would help your tax situation immensely. IMO, contributing to your RRSP as much as you can and depositing the return into your TFSA is a great plan. Requires a lot of discipline for sure because your return looks better in Cancun than your TFSA. Your thoughts Adam?

Thanks very much for the great information...!!

good stuffs. thanks. can you make a video about how TFSA can be taxed or it will not be taxed because it was money after taxed?

60% of the labour force in Canada has no pension. Stated more accurately, 60% of the labour force is NOT UNIONIZED. The ENTIRE public sector in Canada is 100% UNIONIZED. 3.6 MILLION people now work in the public sector ...as of JULY 2022. The current population of Canada is 38,400,913 as of Friday, July 1, 2022. That's about as close to 10% of the population of Canada ....BUT more importantly, in 2021, about 15.4 million people aged 15 years and older were employed on a full-time basis in Canada!!!! Now the percentage of PUBLICE SECTOR workers to PRIVATE SECTOR works out to 23.4% of the employed workforce in Canada ....work in the PUBLIC SECTOR!!!! ......and EVERY YEAR ....THEY PUBLIS SECTOR WORKERS DEMAND MORE WAGES, MORE BENEFITS, MORE PENSIONS, AND MORE PENSION BENEFITS .......OR THEY GO ON STRIKE .....which is the case in British Columbia shortly, this year, 2022, for TEACHERS. Their FIRST complaint is they are NOT keeping up with inflation ....which we ALL know through the media is very hight. What the teachers will NOT mention is that their annual income is $100,000 ....and they only work 9 months of the year. They also have a BENEFITS plan that no private sector has, PENSIONS that no private sector has, and PENSION BENEFITS that no private sector has ......BUT ..... if they don't get what they are demanding ...THEY WILL GO ON STRIKE. What's the point here ...considering this video is about CPP??? It's quite simple. CPP is paid out by the FEDERAL GOVERNMENT. In order to do this, they need to either invest contributions and get a guaranteed return ....OR ....THEY WILL NEED TO INCREASE TAXES .....TO EVERYONE!!!! It is a vicious circle with the unionized government workers winning out EVERY TIME. Oh, did I mention that the average pension rate to PUBLIC SECTOR WORKERS is about 50%? That means teacher's pensions is about $50,000 annually ....and they can also double-dip when they retire ...that means work as a substitute teacher for about $450 per day. YUP ...teachers are concerned about their wages not keeping up with inflation. .

Very good presentation Adam. You have shown all the key details which affects the Tax bill. Being in my 70's I just got into retirement. The RRIF and CPP are triggering a substantial Tax bill. I have a quarterly tax payment which I instituted with the CRA. This helped to keep my end of the year tax bill low. I'm looking forward to your next installment on how to reduce the quarterly installment. Excellent presentation.

Under your tips and strategies section of this video where does pension splitting fit in for tax planning in retirement????? ......sorry if you have already covered this in other videos. Thanks. Like your content!!!

I recently found out that my financial institution is calculating my RRSP withholding tax based on my cumulative withdrawals for the year. I withdrew $10,000 earlier in the year and they withheld 20%. When I went to withdraw another $10,000 I was expecting the tax to be 20% again and was told that because my total withdrawals were over $15,001 they would be withholding 30%. So withdrawing smaller amounts may not necessarily work depending on how often you do it in the tax year.

Let's say I have a source of tax free income in my "retire early" retirement, but also rrsp available to use and no cpp and oas just yet. How much of rrsp could I draw per year and owe no tax (in Ontario, married)? Thx.

In contrast to getting CPP or OAS to withhold tax at source, could a better strategy be to make deposits to my MyCRA account when money comes available during the year? Also, how would this be claimed at tax time? Would it be similar to claiming taxes paid as instalments?

Hello Dear thank you for the information is really helpful I have a question I haven't done my taxes for two years I am already retair is possible that you give any advice please I am lost Thank you so much Maritza

My RRSP's took a serious hit over the last few years. With less then 2 years to go to retirement, I am not a happy camper.

Hi Adam, When I retire and file my taxes, will the Basic Personal Amount (BPA) still apply? I can't seem to find an answer on Canada Revenu only that is applies to all individuals. Does this include retired individuals? - thanks, Cara in Montreal.

I am 66 drive long haul truck. I make close to the 79000 gross every year. I started taking cpp and oas earlier in the year. I don't wish to create a clawback scenario. I need to know do I need to work less to bring the gross income down and or donate to bring my final income to an acceptable non claw back scenario.