The average Canadian doesn’t need to send as much money to the government as they do. None of us want to pay more in taxes…we just don’t know how to get around it. Most of the time, however, there’s an easy way to avoid paying too much. Just another reason why retirement planning is not a do it yourself project.
People wait too long to transfer their wealth to their children and grandchildren. By designating beneficiaries early on, you can avoid paying probate fees and estate administration tax, saving tens of thousands of dollars on the distribution of assets.
Consider this scenario: Julie, 25, makes $40,000 per year. She wants to start putting money aside for her retirement. Should she choose a Tax Free Savings Account or a Registered Retirement Savings Plan?
If Julie sets aside the maximum allowable amount of $5,500 every year in a TFSA at a growth rate of 5%, her retirement savings could produce a yearly retirement income from age 65 of $48,000 for life when combined with other sources of government income such as CPP. The same amount put into an RRSP at 5% would produce a retirement income of $42,000 after tax, indexed at 1.5% for life. The difference? The RRSP option comes with a tax bill of $487,000.
Should you begin drawing on your Canada Pension Plan benefits at age 60, or defer them until age 70? If you have $71,000 or more in income, the government will take away your old age security allowance. Decide when you are most likely to earn a combined total of $71,000 and begin drawing benefits then.
These are just a few scenarios with major tax implications. There are many others. To avoid sending the government too much of your hard-earned money, tap into deep tax knowledge. That’s exactly what you will get at Wernham Wealth Management. There is no extra charge—it’s part of being a client.
For sound, strategic tax advice, please contact our office to arrange a consultation. Simply call 519-670-3177 or email [email protected].