One Spouse Retired... Now What?
How to make the most of a staggered retirement when one spouse retires before the other, unique financial planning opportunities emerge. Learn 8 retirement planning strategies to reduce taxes, optimize income, and prepare for a confident retirement.
Retirement doesn't always happen at the same time for both spouses. In fact, many couples retire several years apart, creating a valuable planning window that can unlock tax savings, retirement income opportunities, and a smoother lifestyle transition.
Why Staggered Retirement Can Be a Strategic Advantage
Many households have one spouse retire while the other continues working. This arrangement allows the retired spouse time to establish routines, hobbies, and post-career goals while the working spouse experiences the retirement transition indirectly and gains insight into what their own retirement could look like.
Beyond lifestyle benefits, staggered retirement years often create planning opportunities that disappear once both spouses are fully retired.
8 Retirement Planning Strategies When One Spouse Retires First
Optimize Lower Tax Brackets
If the retired spouse has little income, it may be worthwhile to intentionally create taxable income through RRSP withdrawals or other strategies. This can help utilize lower tax brackets and potentially reduce future tax burdens.
Key Takeaway:
Don't automatically assume the retired spouse should have zero taxable income.
Consider Triggering Capital Gains Strategically
When income is lower, it may be an ideal time to realize capital gains on investments, land, or rental properties. This can reset adjusted cost bases and potentially result in a lower tax bill than waiting until later.
Key Takeaway:
Low-income years often create unique tax-planning opportunities.
Carefully Plan CPP and OAS Start Dates
Retiring at age 60 doesn't automatically mean starting CPP immediately. For some households, delaying CPP and OAS may provide better long-term outcomes and support broader tax planning goals.
Key Takeaway:
The optimal start date is unique to each household.
Maximize and Properly Position TFSA's
A TFSA should not only be maximized but also invested according to it's intended purpose. For many retirees, TFSA assets may never be needed for income and can potentially be positioned for long-term growth.
Key Takeaway:
Prepare Portfolios for Retirement Drawdowns
The spouse already retired may need an income-focused portfolio today, while the working spouse may not need withdrawals for several more years. Retirement portfolios should be structured around anticipated withdrawal dates.
Key Takeaway:
Retirement income planning should be customized for each spouse's timeline.
Complete Major Purchases Before Full Retirement
Large expenses such as renovations, RV purchases, boats or travel plans should be evaluated while one spouse is still earning employment income.
Key Takeaway:
Use working years strategically to fund major goals.
Consider Final RRSP Contributions
While many retirees focus on withdrawals, there may be situations where additional RRSP contributions make sense. This can be especially valuable when bonuses, severance payments, or usually high-income years occur shortly before retirement.
Key Takeaway:
Sometimes adding to an RRSP before retirement can improve overall tax efficiency.
Build an Integrated Retirement Plan
The most effective strategy is tying all retirement decisions together into a coordinated plan designed to optimize both the final working years and decades of retirement ahead.
Key Takeaway:
Successful retirement planning focuses on lifetime outcomes, not just this year's tax return.
Action Items
Compare retirement timelines and explore whether a staggered retirement strategy could benefit your household.
Create a list of major purchases and expenses expected during the transition period between retirements.
Pull out a calendar and map the next five years, identifying planning opportunities related to taxes, benefits, and retirement income.
Final Thoughts
Staggered retirement years should not be viewed as an awkward transition period. Instead, they can become one of the most valuable planning windows of your financial life, creating opportunities to reduce lifetime taxes, optimize government benefits, and build greater financial flexibility.
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.