Hello everyone, and welcome to the Retiring Canada Podcast!
In today’s episode, we’re discussing a topic that might seem like a good problem to have: over-saving in retirement accounts.
Specifically, we’ll cover:
Three key considerations when you have more than enough.
A real-world example of what happens when there’s no plan in place.
Overcoming the fear of spending in retirement.
Creating a legacy from your abundance.
And finally, some action items for you to consider.
Over-saving in retirement sounds like a good thing—because it is! Having more than enough to meet your income needs and knowing you won’t run out of money is a liberating feeling. However, this financial security introduces new challenges that must be managed strategically.
Let’s talk about a few of these today.
1. Tax Planning
With over-saving, you’ve likely maxed out your RRSPs and TFSAs, have a well-funded non-registered account, and possibly own multiple properties, some generating rental income.
During your working years, you did all the right things to accumulate wealth, but now comes the challenge of unwinding it efficiently to minimize taxes.
This is where tax planning is critical.
I should mention that my financial planning practice has a long-standing history. Many of my clients have worked with our team for generations, allowing us to see both the accumulation and decumulation stages firsthand. We’ve helped hundreds of families transition through this cycle, and a common scenario we encounter is the over-saver—maxed-out accounts, multiple properties, and substantial investments.
Here are five key considerations for tax efficiency:
Timing of CPP & OAS: Delaying benefits could help manage taxable income and prevent a future tax bomb.
Income Splitting: Efficiently splitting income with a spouse can reduce your overall tax burden.
Avoiding OAS Clawback: After age 70, strategic withdrawals can help mitigate this 15% additional tax.
Optimizing Asset Location: Different investments are taxed differently, and holding them in the right accounts makes a big difference.
Using the Tax Valley: The period between retirement and age 70 is an opportunity to convert taxable assets to tax-free accounts like a TFSA.
Now, let’s look at what happens when tax planning is ignored.
Real-World Example:
A retired couple, both age 60, has $1.5 million in RRSPs, fully maxed-out TFSAs, a home, a cottage, a property in Palm Springs, and a $1.5 million non-registered investment account.
They start CPP & OAS at 65 and defer RRSP withdrawals until 71.
They withdraw from their non-registered account first to minimize tax.
At 71, their RRSPs convert to RRIFs, adding significant taxable income.
Their OAS is partially or fully clawed back due to their high income.
At 75, they sell their cottage, triggering a massive capital gains tax bill.
At 80, the husband passes away, doubling the taxable income in his wife’s hands.
At 95, she passes, and her estate gets hit with a huge tax bomb, losing nearly 50% of the RRIF to taxes.
By deferring taxes too aggressively, the CRA becomes the largest beneficiary. The key lesson? Tax planning should be proactive, not reactive.
2. Overcoming the Fear of Spending in Retirement
Many financially successful individuals are frugal by nature. Switching from saving to spending can feel unnatural.
But ask yourself: What was the purpose of saving in the first place?
Was it to ensure financial security?
To avoid the struggles your parents faced?
To provide for your children and grandchildren?
Whatever your reasons, your savings should translate into meaningful experiences with loved ones.
If your advisor has built a tax-efficient decumulation plan and you have confidence you won’t run out of money, start enjoying it! Take that vacation, buy that car, or help your kids financially. You’ve earned it.
3. Creating a Legacy & Sharing Wealth
A great way to give back is by setting up a Donor-Advised Fund (DAF).
This operates like a private foundation but with lower costs and greater flexibility.
You receive immediate tax savings for your donation.
It allows for strategic, long-term charitable giving.
Donating appreciated securities, ETFs, or mutual funds eliminates capital gains tax while maximizing your charitable impact.
4. Estate Planning for Over-Savers
Estate planning isn’t just for the ultra-wealthy—it’s for everyone. But for over-savers, the stakes are higher.
Key considerations:
Estimate your estate tax liability today. Understanding this will help you optimize withdrawals and reduce your future tax burden.
Review beneficiary designations. Ensure your wills, retirement accounts, and insurance policies align with your intentions
Consider structured inheritance payouts. Would you want an 18-year-old to receive a lump sum, or should it be distributed over time?
As Christopher Wallace famously said: “Mo’ Money, Mo’ Problems.”
Final Thoughts & Action Items
If you and your spouse passed away today, how much tax would your estate owe? If you don’t have a strategy, that bill will only get bigger.
If you have a solid retirement plan and want to take a dream vacation, do it! Life is short—enjoy your wealth.
That’s it for today’s episode!
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And remember, 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.