1. Hold the right assets in the right accounts

Holding the right investment types in registered retirement accounts is a key component of minimizing taxes. Consider sheltering interest generating assets, as they are taxed at your marginal rate, while income from dividends and harvested capital gains are generally taxed lower. Further, dividends are treated quite differently than capital gains, and the potential impact on benefits such as Old Age Security (OAS) should be considered. 

 

2. Manage asset sales in non-registered accounts

The order in which assets held in your non-registered accounts are sold is an important consideration. Whether an asset sale will trigger a capital gain or loss can have a significant impact on your taxes. You should be aware of whether you have the opportunity to offset capital gains and losses, and should always consider which assets make the most sense to sell from both a tax and investing standpoint. 

 

3. Balance your registered account withdrawals

Withdrawing funds from your Registered Retirement Savings Plan (RRSP) is generally most beneficial when your tax rate is relatively low. On the other hand, Tax-Free Saving Account (TFSA) withdrawals do not trigger taxes and can make sense when your taxable income is relatively high, but additional funds are still required. Registered Retirement Income Funds (RRIFs) have minimum withdrawal requirements, but if extra funds are needed, consider making withdrawals when your marginal tax rate will be lower. 

 

4. Equalize your income with your spouse

When one spouse is in a higher marginal tax bracket than the other, income splitting strategies can help reduce the total taxes paid by a couple. Employee pensions, government pensions and RIFs all follow slightly different rules, but the income can often be split with a spouse. Spousal loans are another way to help equalize income between spouses to lower total taxes.

 

5. Insurance Solutions 

Insurance solutions can offer more than just the security they're typically associated with, especially with respect to retirement income. Insured annuities typically provide higher after-tax yields than GICs and bonds, while tax-exempt life insurance has the potential to provide tax-free income during retirement.