If you're retired, you know firsthand how difficult it can be to get a satisfying retirement income.
Traditional retirement Investments Like GICs and bonds continue to pay very low interest after taxes and inflation there can be very little left over.
What's more people are living longer so they need their retirement savings to last longer too.
So what can you do to maximize your after tax retirement income without taking on too much risk?
Here are a few ideas.
First, get the most out of your interest paying investments with a GIC or bond ladder.
For example, with a 5-year Bond ladder you invest equal amounts in a 1, 2, 3, 4 and 5 year bond.
Now as each bond matures you reinvest in a new five-year bond. At the end of five years you hold only five year bonds.
The advantage?
Longer-term bonds historically pay higher interest than shorter term bonds.
Second, look at other investments that pay higher income.
Some options include corporate bonds, insurance company guaranteed investments, and dividend paying stocks.
They all have higher risk than traditional GICs and government bonds, to varying degrees, but you can reduce the risk through diversification.
The key is to find the right balance between higher income and lower risk based on your individual situation.
Third, consider how different investments are taxed in your regular non-registered accounts.
For example, dividends from Canadian corporations enjoy tax advantages while interest from GICs and bonds are fully taxable.
Sticking with the tax theme, also consider income splitting with your spouse to enhance your combined after-tax income.
With this strategy you transfer income from the higher-income spouse to the lower-income spouse so your combined tax rate is lower.
You can split up to 50% of your eligible pension income like RIF income with your spouse.
You can also split income with a spousal RSP or a spousal loan strategy.
These are just a few ideas for enhancing your retirement income.
If you would like more ideas specific to your situation, I invite you to contact an RBC Wealth Management advisor.
This video is provided by RBC Wealth Management for informational purposes only. The comments contained in this video are general in nature, and do not constitute legal, investment, trust, estate, accounting or tax advice. RBC Dominion Securities Inc.*, Royal Trust Corporation of Canada, The Royal Trust Company, RBC PH&N Investment Counsel Inc., RBC Wealth Management Financial Services Inc. are affiliated corporate entities and member companies of RBC Wealth Management, a business segment of Royal Bank of Canada. *Member – Canadian Investor Protection Fund. Please visit www.rbc.com/legal/ for further information on the entities that are member companies of RBC Wealth Management. ®/TM Trademark(s) of Royal Bank of Canada. Used under license. © 2021 Royal Bank of Canada. All rights reserved.
