Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Todd Korol/Globe and Mail

Herb has a union job in the oil patch that takes him away from home more than he would like. At the age of 63, his goal is both reasonable and modest: to retire from his $120,000 a year job next year and spend time gardening, cycling and travelling south each winter with his wife, Hattie, who is 11 years younger.

Hattie, who is self-employed and earns about $30,000 a year, would retire at the age of 55 “so we can do things together before I’m too old,” Herb writes in an e-mail. They have two children, ages 21 and 31.

Herb has a work pension that will pay him $2,300 a month, not indexed to inflation, starting at the age of 65. They also have savings and investments.

Story continues below advertisement

Herb’s main concern is how to structure their retirement cash flow. Their spending goal is $60,000 a year after tax. “My question is, what should I draw down first and what should I leave for later, always keeping in mind tax efficiency,” Herb writes. He also wonders about their portfolio. “Am I properly invested?”

We asked Ross McShane, vice-president of financial planning at Doherty & Associates in Ottawa, an investment counselling firm, to look at Herb and Hattie’s situation.

What the expert says

Herb and Hattie will have sufficient assets to cover their income needs without having to worry about outliving their capital, Mr. McShane says.

In preparing his forecast, the planner makes a number of assumptions, among them a 4.5-per-cent average rate of return, after fees, on their investments and an inflation rate of 2 per cent a year. Herb begins collecting full Canada Pension Plan (CPP) benefits at the age of 65, and Hattie partial benefits, also at 65. They both begin taking Old Age Security (OAS) benefits at 65.

Mr. McShane “bumps up” their retirement spending goal to $70,000 a year after tax to allow for vehicle depreciation and to provide a buffer against unexpected expenses. They are currently spending about $42,000 a year.

If they keep their spending as is next year, they may not have to draw from their investment income after Herb retires mid-year, the planner says. His pension starts in 2020. In 2022 – the first complete year in which they are both fully retired – they are forecast to have $1.5-million of investments, spread among registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs) and non-registered, or taxable, accounts.

Their income sources will be Herb’s pension, CPP and OAS benefits totalling slightly less than $50,000 gross. Hattie will have no income source (other than investments) until she turns 65 and begins getting OAS and CPP. They will need to withdraw $35,000 from their investments that year to cover the gap, a withdrawal rate of 2.5 per cent.

Story continues below advertisement

“The good news is that they will only be dependent on the income (interest and dividends) from their portfolio and should not have to draw on their principal,” Mr. McShane says.

Herb can split his pension income with Hattie, lowering their tax bill. This also will allow Hattie to claim the federal pension income credit.

“An argument could be made that Hattie should consider an RRSP withdrawal in 2022 to take advantage of her low tax bracket,” Mr. McShane says. But after going over the numbers, he does not foresee their tax brackets surpassing 30 per cent in the future. “Given that there is not expected to be a significant increase in tax brackets later on in retirement, my suggestion for now is to delay withdrawing from the RRSP,” he says. They should review this annually.

As for their investments, they have a “smorgasbord” of guaranteed investment certificates, mutual funds, stocks and exchange-traded funds (ETFs), Mr. McShane notes. Their asset mix is 30-per-cent cash and fixed income and 70-per-cent equities. He wonders whether they have an overall strategy. “Are all of these accounts working together as one?” he asks.

As well, the portfolio is not as tax-efficient as it could be, the planner says. The TFSAs are heavily weighted with U.S. dividend-paying ETFs “that give rise to a withholding tax [on the dividends] that is not recoverable,” he says.

“It is generally better to hold the U.S. dividend payers in the RRSPs with the Canadian dividend payers inside the TFSAs.” This could be taken a step further by replacing the U.S. dividend payers that are held in the non-registered account with Canadian dividend payers, he adds. A dividend from a Canadian company is taxed at a lower rate than a dividend from a non-Canadian company. “Better to hold the foreign dividend payers in the RRSP.” The overall mix does not have to change, only the location of where the investments are held, he says.

Story continues below advertisement

Client situation

The people: Herb, 63, and Hattie, 52

The problem: How to make the most of their savings and investments after Herb retires

The plan: Retire as planned. Herb splits pension income with Hattie and they draw shortfall from non-registered portfolio first.

The payoff: Financial security

Monthly net income (past year): $8,655

Story continues below advertisement

Assets: TFSAs $143,500; investment portfolio (including cash) $766,500; his RRSP $350,000; her RRSP $115,000; RESP $24,000; residence $400,000; estimated present value of his defined-benefit pension plan $400,000. Total: $2.2-million

Monthly outlays: Property tax $210; home insurance $60; maintenance $525; utilities $265; groceries $750; clothing $25; health care $75; phones, TV, internet $190; entertainment/dining $150; hobbies, activities $100; gifts, donations $75; travel $500; personal discretionary $200; miscellaneous $50; transportation $310. Total: $3,485. Surplus available for saving $5,170

Liabilities: None

Want a free financial facelift? E-mail

Some details may be changed to protect the privacy of the persons profiled.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies