7 Retirement Income Decisions That Can Make or Break Your Retirement
- Michael Isbister CFP
- 1 day ago
- 4 min read
When people think about retirement planning, they often focus on one thing: how much money they need to save. But once retirement begins, the real work starts. The decisions you make about how you draw income, how you manage taxes, and how you coordinate benefits can have a massive impact on how long your money lasts and how confident you feel along the way.
Here are seven key retirement income considerations that deserve careful planning.
1. Have a Decumulation Strategy
Decumulation simply means the order in which you withdraw money from your retirement accounts to fund your lifestyle. Surprisingly, this is an area where many retirees are underserviced.
The starting point is understanding all sources of fixed income, such as defined benefit pensions, annuities, CPP, and OAS. Once those amounts are clear, the next step is filling the income gap using RRSPs, RRIFs, and non-registered accounts in a sustainable way.
If you are not yet receiving CPP or OAS, knowing what those benefits will look like in the future is critical. In some cases, drawing more aggressively from taxable accounts earlier in retirement may make sense, especially if it allows you to delay government benefits and create tax-paid dollars later on.
2. Timing of Government Benefits
The decision of when to start CPP and OAS is one of the most important retirement choices you will ever make. Taking CPP early permanently reduces your benefit, while delaying it increases your lifetime income.
What often gets overlooked is how this decision affects your RRSPs, RRIFs, taxes, and even government benefits later in life. CPP and OAS decisions should never be made in isolation.
Factors such as large RRSP balances, age gaps between spouses, future inheritances, or the sale of rental properties can all influence whether early, delayed, or staggered benefits make the most sense. This is where personalized planning matters far more than generic rules of thumb.
3. Creating Tax-Efficient Retirement Income
Every retirement income decision is interconnected. One of the most powerful planning opportunities occurs during what I call the “tax valley” the period between retirement and the start of fixed income sources like CPP, OAS, defined benefit pensions, or annuities.
During this time, it can make sense to draw down registered accounts more aggressively while delaying pensions. This can reduce lifetime taxes and enhance future government benefits.
For business owners, planning often involves drawing from RRSPs while deferring corporate income, coordinating closely with accountants to manage tax accounts such as RDTOH and capital dividend balances. For couples, income splitting strategies, CPP sharing, and spousal loans may also come into play.
This isn’t a one-time decision. It’s a balancing act that should be reviewed and adjusted every year as life changes.
4. Fixed Income and Cash Reserve Strategies
Many retirees use fixed income or cash wedge strategies to reduce exposure to equity market swings. While this can provide peace of mind, it’s important to remember that fixed income is not risk-free, as 2022 clearly demonstrated.
Some research even suggests that retirees may be too conservative and that higher equity exposure can improve long-term outcomes. That said, retirement isn’t just about math. The psychological comfort of having a cash reserve during market downturns can be incredibly valuable.
For most Canadians, giving up some growth potential in exchange for flexibility and peace of mind is a reasonable trade-off.
5. Setting Up a Home Equity Line of Credit
Many retirees enter retirement debt-free, which is a great position to be in. Still, having access to debt can be a powerful planning tool.
Unexpected or large expenses don’t always arrive at convenient times. Without access to credit, retirees with most of their wealth in registered accounts may be forced to withdraw large sums and pay unnecessary taxes.
A home equity line of credit can add flexibility and help manage cash flow without derailing a long-term plan.
6. Planning for the Loss of a Spouse
Beyond estate documents and beneficiaries, there are major income and tax implications when one spouse passes away.
OAS stops completely for the deceased spouse, and CPP survivor benefits are often far less than people expect. Defined benefit pensions may drop by 40 percent or more, depending on survivor options.
On top of that, income splitting disappears, RRIF minimums increase for the surviving spouse, and taxes may rise. These risks need to be planned for years in advance, particularly during early retirement and the tax valley.
Equally important is ensuring both spouses understand the financial plan. When one spouse handles most of the finances, the surviving partner can feel overwhelmed and vulnerable. Retirement planning should always involve both spouses, without exception.
7. The Advisor’s Role in Retirement Planning
Retirement planning is both a science and an art. Software and projections are important, but life rarely unfolds in straight lines.
Markets change, health changes, goals change. The real value of advice comes from adapting plans over time, stress testing decisions, and explaining complex strategies in plain language.
No one has a crystal ball. That’s why we focus on evidence-based investing paired with robust, ongoing financial planning to help retirees move forward with confidence.
If you are within five years of retirement, now is the time to start laying the foundation. Many people wait too long, missing opportunities that require advance planning.
Retirement rewards those who prepare early, revisit their plan often, and stay flexible as life evolves.
When it comes to retirement, don’t take chances.
Make a plan so you can retire with confidence.
All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.