Retire in Style: Tax Saving Strategies for Seniors
Owner of Home Instead Senior Care Brampton
Ah, taxes! One of the components that remain a constant in our lives. We work hard, earn money, and contribute a portion of our income to fund our government and its social services. It's just the way it goes. In fact, many of us don't mind sacrificing a portion of our income for the greater good, and it is often the last thing on our mind when it comes to planning for our future. But as we prepare to retire it is best to remember one thing – our taxes aren't retiring with us!
Yes. It's true. When you retire in Canada, you must pay taxes on things like your pension, RRIF withdrawals, and any other sources of investment or retirement income. Understanding your tax obligations now gives you time to plan ahead. By determining your new tax liabilities and preparing yourself in advance, you can ensure that taxes won't interfere with your happy and stress-free golden years.
How to Save on Taxes in Retirement
When you retire, your tax liabilities are likely to change. While the amount you'll be required to pay will be less than when you were working, your taxes might put a damper on your plans for a comfortable retirement. The best way to avoid this is by determining ways to lessen your tax burden. You can do so by contacting a financial planner and tax expert who can help you see if you are eligible for the following credits and strategies.
- Retire in a lower tax bracket: Depending on your income, you may be able to lower your tax burden by contributing to your Registered Retirement Savings Plan (RRSP). This savings plan is tax-deductible, meaning that your taxable income is reduced by the amount you contribute.
- Utilize your Tax-Free Savings Account (TFSA) – While contributions to this account are not tax-deductible, all income from capital gains and dividends can be withdrawn tax-free.
- Avoid clawback: When you use Guaranteed Income Supplement (GIS) funds, a percentage of the income is retained or “clawed back” for government benefits. You can avoid this by lowering your taxable income with tax-efficient investments.
- Consider pension splitting: The approach involves sharing a portion of your pension with your spouse. This can reduce the taxable income of the higher paid partner.
- Make informed withdrawals: Instead of immediately withdrawing from a non-tax-deferred account, it's wise to consult with a financial expert who can determine the most tax-efficient approach to withdrawing your funds.
- Use your government benefits: Make sure that your tax advisor has enrolled you in all government benefits and tax credits that you are eligible for. These include the Canada Pension Plan (CPP) and Old Age Security (OAS). Here some more information on tips from the Canadian Revenue Agency and from the Ontario government.
Use Your Tax Savings to Hire Quality Help from Home Instead
If you or your senior loved one is in need of a professional caregiver or in-home assistance, don't hesitate to enlist the services of Home Instead Brampton. Our trained personal care workers are dedicated to providing top-notch live-in care and companionship for seniors. With customized home care services including medication reminders, personal care, cooking, Alzheimer's care, Parkinson's care, and more, you can make the most of your tax savings by regaining your independence and living life to the fullest.
Call us at (905) 463-0860 to schedule a no-obligation, in-home consultation. Learn more about the compassionate, quality senior care we deliver daily to families in Brampton, Halton Hills, Inglewood, Norval, Georgetown, Glen Williams, Limehouse, Peel Village.