FRP Step # 2 - Income Planning

Hello everyone, and welcome to the Retiring Canada Podcast.

In today’s episode, we’re diving into Step Two of the Fundamental Retirement Plan - Income Planning.

We’ll cover:

• The four crucial aspects of income planning

• How Step One (Investment Allocation) impacts Step Two

• Planning for the “go-go” years of retirement

• Addressing your biggest income concerns

• The single most important decision you’ll make during this stage

• A few action items to get you thinking

Why Income Planning Matters

Now that Step One has given us a solid investment allocation, we can build a dynamic income strategy, one that adapts to your lifestyle and financial needs over time.

In reality, when we create your FRP plan, we tackle Steps One, Two, and Three together:

Investment Allocation, Income Planning, and Tax Planning.

But for today, we’ll focus on Step Two.

Many people approaching retirement have a “lightbulb moment” when it hits them:

My paycheque is stopping. I need to create my own.

Questions start flooding in:

• Where will my income come from?

• When should I start CPP?

• How will it be taxed?

• When do I convert my RRSP to a RRIF?

• How do I fill the gap from my investments?

From a planning perspective, retirement is far more complex than the accumulation years. That’s why we built the Fundamental Retirement Plan, because there’s no retirement without a sustainable income.

The Four Pillars of Income Planning

Here’s how we think about income planning for retirees:

1. Diversified income streams

   We coordinate CPP, OAS, registered and non-registered accounts, and if applicable corporate accounts. We look for the optimal start dates, withdrawal schedules, and tax strategies to make it last.

   
   

2. Preserve and grow your principal

   Whenever possible, we aim to live off portfolio income without eroding capital.

   
   

3. Inflation-aware strategy

   Retirement should come with periodic “raises” to maintain purchasing power.

   
   

4. Tax-smart withdrawals

   Drawing income in a tax-efficient way maximizes after-tax cash flow and minimizes claw-backs. This is your decumulation strategy.

   
   

These pillars are deeply connected to Step One’s investment allocation decisions and will flow directly into Step Three’s tax planning.

How Step One Impacts Step Two

Example: If you have a $1M+ non-registered portfolio and we adjust your allocation to reduce taxable interest and dividends, three things happen:

1. We control the timing of most income. Critical if you expect other taxable events.

   
   

2. More tax is paid as capital gains, which is more efficient.

   
   

3. We reduce the risk of pushing you into a higher tax bracket and triggering OAS claw-backs.

   
   

Building Your Retirement Paycheque

Once we understand your after-tax monthly spending needs (plus periodic expenses like travel or renovations), we can model an income plan.

We often plan for higher spending in the first 10 years, your “go-go” years, before tapering down. We run multiple scenarios using conservative assumptions, adjusting annually for inflation.

Some questions we answer together:

• How much can I safely spend?

• What’s my sustainable withdrawal rate?

• When should I start CPP and OAS?

• How should I draw from registered accounts?

• How much should I dividend from my corporation?

• Can I afford $20K/year for travel?

• Can I gift $100K to my kids without risking my retirement?

• Will I ever run out of money?

This is where your nest egg turns into a lifestyle, whether that’s trips to Europe, helping family, or simply knowing you’ll be okay no matter what happens.

The Danger of Early Missteps

In the first few years of retirement, you could make income planning mistakes without feeling the impact, yet those decisions could quietly jeopardize your long-term security.

That’s why we tie your income plan into your investment and tax strategies, giving you visibility into the future and the ability to course-correct early.

The CPP Decision

CPP is one of the most reliable, inflation-protected income sources you’ll ever have. It’s paid for life and partially continues to a surviving spouse.

Delaying CPP after 65 increases it permanently; taking it early reduces it permanently. Sometimes we recommend one spouse start earlier and the other delay, based on factors like ongoing employment, tax-splitting rules, registered asset levels, or health concerns.

Determining your optimal CPP start date is best done within the full FRP process.

Your Action Item

Take time to visualize your retirement:

• How will it feel?

• Where will you travel?

• Will you help family financially?

Income planning is personal. We can crunch numbers, but understanding what matters most to you is key to building a retirement plan that truly fits.

That’s it for today’s episode.

Add us on LinkedIn and Facebook.

For links and resources, check the show notes or visit retiringcanada.ca.

If you enjoyed the show, please subscribe and leave us a 5-star review. And sign up for my weekly Retiring Canada newsletter.

When it comes to your retirement don’t take chances.

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.