Retirement Income

The 6 best strategies to minimize tax on your retirement income

The 6 best strategies to minimize tax on your retirement income

You will have a lot more tax saving opportunities after you retire than before.

If you get a salary, you may have limited tax deductions or tax saving strategies. When you retire, it is completely different.

You can essentially determine the amount of income you will be taxed on once you retire. You can decide:

  • How much you withdraw from your investments.
  • How much you withdraw from your RRSP vs. TFSA vs. non-registered.
  • How tax-efficient your investments are.
  • When you start your RRIF, work pension and government pensions (CPP and OAS).

These 6 best strategies will give you an idea of the flexibility you have to minimize your tax with effective tax planning.

These ideas are most effective if you plan for them at least 5 or 10 years before you retire.

1. Plan to retire in a low tax bracket with the right mix of RRSP and TFSA

Your taxable income can be very different from the cash you receive. You do not really need income – you need cash flow. Income is taxable – cash flow may or may not be taxable.

You can have a lower taxable income by having the right mix of fully taxable, low tax and tax-free incomes.

You are fully taxed on your pensions, RRIF withdrawals and interest, but only partially on tax-efficient non-registered investments and not at all from TFSA withdrawals.

The ideal goal is to have your taxable income below $46,000, regardless of how much cash you get. This is the lowest tax bracket. Even better, if it is under $25,000 for a single person (or under $37,000 total for a married couple), you can also receive the tax-free Guaranteed Income Supplement (GIS).

For example, you want a taxable income under $46,000. Your government CPP and OAS pensions are $15,000 and you have no work pension. That means you can have up to $30,000 taxable income from your investments.

You could achieve this by having no more than about $750,000 in your RRSP and the rest in a TFSA.

With $1 million in investments, if it is all RRSP, you are required to withdraw at least 4%, or $40,000, of which $30,000 is in the lowest 20-23% tax bracket, while $10,000 is in the middle 30-33% tax bracket.

If you have $750,000 in your RRSP and $250,000 in your TFSA, then you can withdraw $30,000 from your RRSP, all at the lowest tax bracket, plus $10,000 from your TFSA all tax-free.

2. Plan to retire in a low tax bracket with tax-efficient investments

If you have non-registered investments, the type of investment affects your ability to stay in a low tax bracket.

You can receive income from your non-registered investments as interest, dividends, capital gains, or deferred capital gains, depending on how you invest.

For example, if you want to stay in the lowest tax bracket and receive $30,000 taxable income from your investments, here is how much cash you can receive:

Income TypeCash To YouEffect on Taxable Income
Interest & Foreign Dividends$30,000100%
Capital Gains$60,00050%
Deferred Capital Gains (Est.)$120,00025%

Dividends are “grossed-up” by 38%. Multiply the dividend by 1.38. That means $22,000 of dividends is $30,000 taxable income.

Interest income is straight-forward – $30,000 income is $30,000 taxable income.

Capital gains are only 50% taxed. Multiply by .5. That means $60,000 of capital gains is $30,000 of taxable income.

I’ll explain deferred capital gains in strategy #4. Essentially, they are a mix of capital gains and getting your invested money back. The effect on your taxable income can range between 0% and 50%, depending on how much your investments have grown so far.

3. Plan to avoid the clawbacks

The highest taxed Canadians are seniors with incomes under $25,000. Shocked? This is because, in addition to income tax, they get $.50 of their Guaranteed Income Supplement (GIS) “clawed back” for every dollar of taxable income.

For higher-income seniors, their Old Age Security (OAS) is clawed back at 15% of their income from $75,000-$121,000.

Many other government benefits are clawed back based on your taxable income, including the GST credit, the deductible on your provincial drug coverage, and rent on retirement homes. Governments are increasingly clawing back benefit programs based on taxable income.

This means that the tax strategies wealthy people benefit from because of their high tax rates also work for seniors in the clawback income ranges.

Planning to have a lower taxable income with the right RRSP/TFSA mix and tax-efficient investments saves you much more tax if your income will be in these clawback ranges.

If you realize you will be affected by either of these clawbacks, it might be worthwhile to cash in some or all of your RRSPs before age 65 to avoid the clawbacks. This only works if you can withdraw your RRSPs at a low or moderate tax rate.

The table below shows the tax brackets that affect seniors, once you include these clawbacks. Seniors have more red income ranges with very high tax rates.

The table shows the tax brackets that affect seniors, once you include these clawbacks. Seniors have more red income ranges with very high tax rates.

4. Use an SWP to get the lowest tax on your investment income

The lowest tax rate on investment income is on deferred capital gains at almost any income level.

Capital gains are taxed at preferred rates. With tax-efficient equity investments, you can defer the gain and pay capital gains tax years from now, instead of this year.

To get cash flow from deferred capital gains, just sell some of your stocks, mutual funds or ETFs each month. This is called a “systematic withdrawal plan (SWP)”. You are taxed on the gain that has built up in the investments so far.

If you just bought your investments, then the SWP is tax-free. You are just taking back some of your own money. If you owned these investments for years and they are up hugely, you could be receiving mostly capital gains.

For illustration purposes in the chart, I assumed your investments have doubled since you bought them, so half of your SWP is a capital gain and half is tax-free because it is your original investment.

The chart below shows the marginal tax brackets, including the clawbacks, on different types of investment income. Note that deferred capital gains are always in green low brackets.

The chart shows the marginal tax brackets, including the clawbacks, on different types of investment income. Note that deferred capital gains are always in green low brackets.

5. Invest for dividends only if your income is $25,000-$46,000

Dividends from public Canadian companies actually have a negative tax rate if your taxable income is in this range. That’s right – negative tax.

The danger, though, is that dividends are taxed at an extremely high 62% rate if your income is below $25,000!

You need to be careful because dividends are the highest taxed investment income if your taxable income is below $25,000, but the lowest taxed income from $25,000-$46,000.

Why is the dividend taxed so high for the lowest income? The GIS clawback is on the grossed-up dividend. Dividends are a disaster for low-income seniors!

Dividend tax on low-income seniors is strange – but important to understand. If your income is under $25,000 and you receive a $1,000 dividend, it is grossed-up by 38% and adds $1,380 to your taxable income. The 50% GIS clawback on this $1,380 is $690. This is a 69% GIS clawback, which is reduced by 7% negative income tax on the dividend to get an effective tax rate of 62%.

In short, the government gets $620 of your $1,000 dividend.

If you can plan to have a lower income and keep some of the GIS, then you should avoid dividends entirely. However, if your income will be at least $25,000 without the dividends, then you can take advantage of the negative tax.

For example, let’s say you will get $15,000 from CPP and OAS, and $10,000 from your company pension. Your income is already too high to qualify for any GIS supplement. You can now get up to $21,000 taxable income from dividends at a negative tax rate. That would be $15,000 of cash from dividends (before the gross-up).

If your income is above $46,000, there is no real advantage of dividends. They are taxed about the same as an SWP (deferred capital gains) up to $75,000 of income and then the dividend tax rate leaps to 30% if your income is over $75,000.

Dividend investing has the disadvantage that the negative tax only applies to Canadian companies on the stock market that pay dividends. This can limit the diversification of your portfolio. SWPs with deferred capital gains work with any company anywhere in the world.

Negative tax rates on dividends only exist in Ontario, B.C., New Brunswick and the 3 territories.

6. Defer converting your RRSP to do the 8-year GIS strategy

You can get up to $10,500/year of Guaranteed Income Supplement (GIS) tax-free ($12,700 for a couple) from age 65 to 72, if you have no taxable income other than OAS. You can still receive non-taxable income, such as from your TFSA or investments.

This is a cool strategy if you have enough in your TFSA or non-registered investments to give you income for these 8 years. You could plan for this by cashing in some RRSP before you turn 65 to maximize your TFSA or build up non-registered investments.

You could also get income by withdrawing from a secured credit line on your home during these 8 years.

To qualify, you could delay converting your RRSP to an RRIF until the end of the year you turn 71. You can also delay starting your CPP until age 70.

You could also make a large RRSP contribution before age 65 and defer the deduction until you need it during these 8 years to give you the maximum GIS.

At age 72, you have to start withdrawing from your RRIF, but you will still receive GIS for one more year since it is based on the prior year’s income. You will likely lose some or all of your GIS after that.

Deferring CPP to age 70 means you get 42% more CPP for the rest of your life. Delaying converting your RRSP gives it an extra 8 years to grow, during which time it could nearly double.

The “8-Year GIS Strategy” can mean you have a much more comfortable retirement after age 71.

Creative retirement tax strategies

The number of effective tax-saving strategies is only limited by your creativity. There are more effective strategies, but I believe these are the 6 most effective that almost anyone can do.

Your goal is to receive the cash flow you need for your desired retirement lifestyle, while paying the least possible tax on it.

You can effectively decide your own taxable income. You can plan to be in low tax brackets, avoid the clawbacks, and possibly qualify for GIS.

You have many tools to use in creating strategies. Your tools include your mix of RRSPs and TFSAs, deciding how much to withdraw from your RRIF, TFSA and investments each year, investing tax-efficiently for deferred capital gains or dividends, using tax-efficient withdrawal strategies such as SWPs, using “T-SWPS” to defer capital gains, deferring CPP and/or OAS to age 70, starting CPP early at age 60, deciding on the best time to convert your RRSP to RRIF, accessing your home equity, contributing to your RRSP or cashing in some RRSP before you retire, and the 8-Year GIS Strategy.

If you had a salary all your life, you may have had limited tax deductions or tax saving strategies. When you retire, it is completely different. You have many options, especially if you plan for them before you retire.

This article originally appeared in the January 2018 issue of the Canadian MoneySaver (click here to save 20%).

Canadian MoneySaver


  1. toddd yourth

    I have 60,000 in RRSP non in TFSA yet
    Pension of 35,000 and Im 57yrs old.
    With my CPP + OAS is 15,000 at 65yrs .Pension is now 25,000 at 65yrs because of the Bridge is removed .Would it be smart to draw my CPP at 60yrs and turn it into a TFSA or should I wait to draw my CPP at 65yrs. Or should I transfer some of my RRSP into TFSA now

    • Ed Rempel

      Hi Toddd,

      Sorry, but the answer to your question depends on many factors.

      There are a lot of options for most people. You really need a Financial Plan to get a proper answer.

      In general, taking CPP early to contribute to a TFSA rarely works. Possibly taking it early and contributing to RRSP to offset the taxable income.


    • Terry Yakimak

      I assume you have government pension. we were given a financial retirement course and what was continually stated to us was take cpp at the earliest date. The reason is because of your bridge loss at 65 is very close to what your cpp/oas payments are. The reduced cpp from 60 to 65 payments add approx 7200$ / year more.

  2. Jean Pierre Laporte

    Great comments for the general public. Of course, for business owners the most effective strategy is a Personal Pension Plan coupled with some permanent insurance purchased by the corporation with lightly taxed corporate income.

    • Ed Rempel

      Hi Jean Piere,

      I disagree.Personal Pension Plans are costly and generally only work for more conservative investors. For equity investors, you can quickly run into the limits, which means you end up with less contribution room than you would have with an RRSP.

      Very few people need permanent insurance and the investing options are usually very limited.

      The best opportunity usually for business owners is to leave their profits in the company (or a holding company) and build up tax-deferred investments to withdraw whenever is the best time. It works something like an RRSP.

      The new tax on small business means you have to be careful how much you build up inside your corporation, but you can usually still build up $1 million or more without running into the new tax.


      • Jean-Pierre Laporte

        Ed…the tax savings/refunds generated by having the ability to contribute a lot more than under RRSP rules means that the cost of the PPP is irrelevant, and in fact puts you in the ‘black’ from day 1 in most cases.

        Moreover, the ‘limits’ you refer to apply to IPPs, not PPPs where one has the option of using the Defined Contribution/AVC side of the plan, and where the ‘limits’ you refer to (excess surplus rules) have no application.

        As for permanent insurance, my understanding is that there are no investing options with Universal Life (not to be confused with ‘whole life’). So that also is not accurate.

        It is not tax optimum to leave profits in the company or holding company under the affiliated company rules and the 1:5 reduction in active business income benefiting from the small business rate due to the Morneau tax measures. Not only does the increase the taxes payable on active business income due to the passive investments generated by retained earnings kept in Opco or Holdco, it also subjects passive income generated at the corporate level to ongoing taxation during the accumulation phase.

        This means that second generation income is mathematically going to be lower than with a tax deferred account.

        PPPs notionally increase someone’s lifetime registered limits by about $1 M over 30 years. All financial planners should at the very least run the numbers first before dismissing this extra tax advantage with the back of the hand.


        • Aaron

          I think its disingenuous for you to come here and spout your comments about PPP out of context without disclosing your interests. The way you conduct yourself here is very telling of how you run your company.

          The costs to administer a PPP make it less preferred to building up a tax-deferred investment portfolio (invested in something that does not generate passive income to maximize deferral).

  3. Ann Kavanagh

    Great article…i am keeping it for reference.

    • Ed Rempel

      Thanks for the kind words, Ann!


  4. John

    When you are mentioning the income received and then applied to your strategies are you talking about individual income or combined spousal income ??

    • Ed Rempel

      Hi John,

      Great question.

      In the article, I refer to individual income. The issue can be more complex, because the tax brackets are individual, but most of the clawback taxes are on family net income.

      I considered having multiple tables with family income assuming each spouse has the same income, but I’m trying to keep the article from getting too comlex.


  5. Peter

    Hello, I have over 300K in non-registered savings, 100K in RRSP, 15K in TFSA. My house and a rental property are mortgage-free and I have no other consumer debts. I am currently 50 and work retirement is scheduled in 5 years. The work pension is expected to pay me around 70K per year when I turn 55. What would be the best strategy to minimize tax after retirement and before starting collecting CPP and OAS? I had contemplated taking 1 or 2 years off without pay before retirement and use up some of my RRSP and savings. Your thoughts and feedback is much appreciated.

    • Ed Rempel

      Hi Peter,

      You have a lot of options. You would need a Financial Plan to get a proper answer about your best option.

      For example, questions include how much income you need and when, take your CPP & OAS early or late, max your RRSP or drain your RRSP, what to do with your rental property, possibly use your home equity, possibly commute your pension, etc.

      A couple general comments;

      – Your large pension means you will likely run into the OAS clawback with other taxable income. Being tax-efficient with other investments will be important for you.
      – You should definitely max your TFSA.
      – Paid off rental properties are generally not very good investments and very tax inefficient. Rent is fully taxable. you can usually get more income at much lower tax rates from other investments. Tax-efficiency is important for you, so you should consider selling your rental property to diverify your investmnents.
      – You may be able to do the “8-Year GIS Strategy”. You would have to commute your pension. Complex topic, but it could work for you, since you plan to retire by 55.

      I hope that’s helpful, Peter.


  6. Ron

    Wow. I think the article would be way too complex for people with little or no knowledge of some of these topics. I am still trying to get my head around SWPs and your explanation of deferred capital gains. I feel the article could have been much more clear.


    I agree. A lot of theorems/concepts used are undefined.

    Not a good teaching tool. Easiest to understand by author himself.

    • Ed Rempel

      Hi Daniel,

      I agree it is an involved and complex topic. This article is meant to be an introduction to the best ideas.

      After reading it, hopefully you can see which strategies might work best for you. Then do more research – or get advice.


    • Brian Vroomen

      Actually it is a good teaching tool. Some financial planning concepts are what they are. If they are complex, that is how it is. The key take away here is to see something that you may not understand but the point is to see that you have options that may be in your best interests which are beyond what a DIYer is capable of. This is where you seek external advice, yes at a cost, to get a clear plan that will save you money in the long run. You don’t have to fully understand everything. Many times the concept is enough. If it applies, get proper advice from someone who is knowledgeable and can help you implement the advice.

      • Edmund Ma

        bravo! Perfect comment Brian. One has to start somewhere.

  8. Bogd


    I am 55 years old and should be employed for another 10 years when I would like to retire.
    My retirement income will include 41K in pension
    I have RRSP and contribute to this account every 2 weeks, but don’t have TFSA yet. I have also rental income from the house – that’s why RRSP to lower the tax payable on income rental.
    Could you advise the strategy for the next 10 years to diversify it better?

    Thank you

    • Ed Rempel

      Hi Bogd,

      I would need to know a lot more to give you a proper answer. You would need a Financial Plan to have a clear answer.

      A couple general comments:

      – With a $41K pension, you will end up above the lowest 20% tax brackets. Your pension is probably “integrated with CPP”, which means that you get $41K from your pension + CPP< but add your OAS and you get into the middle tax bracket that start at $47,000. Therefore, tax-efficiency on other income is important for you.
      – Contributing rent income to your RRSP is generally a good idea.
      – Based on the infomration you gave, you may or may not be in a higher marginal tax bracket today than you will be after you retire. Therefore, it's hard to say whether RRSP or TFSA will be better for you.


      • Lisa

        Hi Ed,
        I am 56, single, and teetering on retiring. I am currently working 3 days a week earning and living on about 40,000 net/year. I have 2,000,000 in a LIRA 800,000 in RRSP, 340,000 in non registered stocks and a maxed out TFSA at 76,000. No debt and mortgage paid off. I have no pension. On the surface it looks good but it’s clear that taxes are going to be a huge issue for me. Should I be taking from my RRSP first to pay lower rate of taxes before I’m forced to withdraw a minimum from a RRIF and LIF at 71? Any other tax tips that should be obvious for me? Thanks!

  9. Peter

    Over my head. Too bad; it seems to be sheer folly not to take advantage of these tips, yet it’s too difficult for me to grasp and apply it in such way so I can truly benefit from them.
    Sad that the tax laws are written in such a esoteric language that the average Joe and Jane are simply left behind.

    • Ed Rempel

      Hi Peter,

      I agree it is a complex topic.

      There are a lot of opportunities for most people to significantly improve their income and save tax.

      If you don’t understand, it is probably worthwhile for you to get advice.


  10. Joanne

    If you have Mutual Funds in Non Registered investments you may be able to take a TSWP instead of a SWP. This TSWP is usually up to 8% of the investment and is solely comprised of return of capital so is not taxable – it lowers the Adjusted Cost Base of the investment.

    • Ed Rempel

      Hi Joanne,

      Good point. A T-SWP is another option.

      Whether a T-SWP or a SWP is better for you depends on many factors. A T-SWP usually has lower tax for about 12 years, but then higher tax after that, plus a huge capital gain when you sell.’

      The problem comes in because the cash flow from a T-SWP reduces your Adjust Cost Base (as you said). Once your ACB reaches zero, the full cash flow you get is all considered a capital gain.

      Then when you sell, your ACB is zero, so the full value of your investments is all a capital gain – even if the investment value is the same as when you bought it.

      T-SWPs work when tax-efficiency for the next few years only is very beneficial for you. You generally get lower tax for about 12 years and then higher later.

      There are planning opportunities. I use it sometimes to help clients get GIS. Every 12 years, we sell and rebuy the investments. They get a large capital gain, but most is taxed at a low bracket. They lose GIS for one year, but can continue to get it for the next 11 years again.


  11. 65 in 18

    2018-04-12 Excellent article, which confirms we (spouse and I) pay more than our fair share of taxes.

    NO OAS
    NO GIS
    NO GST credits
    NO Age 65 credit amount & Pay 40% tax on CPP

    • Ed Rempel

      Hi 65,

      Your situation is not the worst problem to have. You will obviously have quite a high retirement income and comfortable retirement.

      You probably still have a variety of options and tax-efficiency will make a big difference for you.


  12. B

    I am more confused how to proceed forward than ever. Having literally no financial background to speak of this is far too confusing to me. I would have preferred submitting my info and getting some advise breaking down more examples so I can find my category.

    thanks for listening

    • Ed Rempel

      Hi B,

      It is a complex topic with many options. I would need to know a lot about your situation and life goals to be able to give you a full remmendation on the best things for you to do.

      To get individual advice like you requested, you really need a Financial Plan.


  13. Rob

    As I see it, one of the problems with this article is that it adds an extra layer of confusion by talking about the GIS. My assumption would be that any senior contemplating tax efficiency strategies such as SWPs, TSWPs, dividends, etc. would unlikely qualify for the GIS. (By the same token, someone who qualifies for the GIS would probably not be contemplating tax efficiency strategies.) So, for starters, you could eliminate all reference to the high tax rates for seniors making under $25K and focus on what applies to the rest of us.

    • Ed Rempel

      Hi Rob,

      In real life, I have seen quite a few people with large portfolios that either get GIS or can plan to get it.

      For example, I have prepared several Financial Plans for couples planning for a real freedom retirment. They plan to sell their expensive home in a big city to move into the country (or to a lake) and clear close to $1 million. They can then retire in their early 50s to travel the world, and they can qualify for the “8-Year GIS Strategy” if they invest tax-efficiently and plan properly.

      I have helped sevearl couples with multi-million dollar portfolios that planned well and get the GIS.

      Anyone that collects GIS and has any investments needs to be careful. Every RRSP withdrawal or interest is taxed at 50-70%, including the clawback tax.

      I talk with quite a few dividend investors that plan to retire on just their dividends, thinking that they can collect $50,000/year in dividends tax-free. That does not work at all once you reach age 65.


  14. Mark

    Good article, as usual. The whole SWP concept to me is a little flakey. If I understand it properly, I’m paying low taxes because I’m basically getting back my original investment that I’ve previously paid taxes on, and then paying normal capital gains on the gains. To me, this SWP term provides no value, and is just confusing.

    Other than that, very good ideas for when to invest for dividends, when to consider early RRSP withdrawals, and potentially using line of credit and deferred CPP to get some GIS between ages of 65 – 72. I really enjoy your articles!

    • Ed Rempel

      Thanks, Mark.

      I’m glad you found it useful for you.

      The SWP concept is highly-effective. It is the best method for most retired people to get cash flow from their non-registered investments.

      Most retired people mistakenly believe they need “income” when they actually need cash flow. They end up buying income-producing investments, such as dividend stocks, REITS, bonds or GICs.

      If instead, you invest in the best portfolio based on your risk level (hopefully with a good equity allocation) and then just take a SWP for the cash flow you need, you are better off in every way.

      YOu have:

      – Full control and flexibility to chose your exact desried income.
      – Better growth in your investments.
      – Better diversification, including global diversification.
      – Lower tax.
      – Lower clawback taxes.

      I call these SWPs “self-made dividends”. They are better than ordinary dividends in every way.

      Here is an article about it: .


  15. Chris

    The Perminant insurance comment is totally untrue as there is no financial gain from universal or whole life products they are wealth robbers .

    • Ed Rempel


      I agree. Very few people have a permanent insurance need. The investment choices are very limited and you can invest much more effectively.

      These life insurance strategies for business owners really only work if you are not going to spend your income and it is only for your kids.



    There’s no discussion LIRA. Are they treated the same as RRIF?

    • Ed Rempel

      Hi Kevin,

      Yes. You convert a LIRA to an LRIF or LIF (depending on your province), which are mostly like RRIFs.

      The difference is far less flexibility. You have a maximum withdrawal every year (not just a minimum like with a RRIF), you can never take lump sum withdrawals, and you can’t make contributions.

      You can “unlock” 50% of a LIRA when you convert it to an LRIF. This means you can transfer half to a regular RRIF and half to an LRIF, which gives you more flexibility.


  17. Heather

    Thanks for your excellent article. I’m going to be one of those low income seniors in 4 yrs so this info is helpful. I do feel like speaking with someone regarding a Financial Plan would be helpful. Could you point me to the type of Professional? I have found that most Financial Planners are resellers of Mutual Funds/Insurance. Few understand the complexities of OAS/GIS and CPP and how to work those to my best advantage.
    Thanks for any thoughts.

    • Ed Rempel

      Hi Heather,

      Yes, unfortunately, almost all financial planners just sell muutual funds or life insurance, and do not offer comprehensive financial plans. The financial plans are so beneficial to detail your life goals, help you make life decisions when you see which goals are and are not affordable for you, and work out the best possible way for you to achieve the life you want.

      Your Financial Plan is the GPS for your life.

      I offer a Free 30-Minute Consultation, if you want to discuss whether or not we are a fit to work together. It is here: .


  18. ron


    You have completely missed the boat on this article and your other articles in support of this article. I feel you are confusing people, especially those that are relatively new to investing, and are doing a disservice to readers. I have over 35 years of investment experience and I find it very difficult to understand the pertinent points that you are trying to get across. Rest assured, your articles rate as some of the most confusing I have ever come across.

    I could write pages and pages to dissect what you have written. But I will try to keep it short and focus on only some of the major points:

    • You are advocating investors to buy growth stocks, since you speak mainly of capital gains in your article. However, this is a forum for those in retirement or planning for retirement, so many of your readers need reliable sources of income; capital gains cannot and should not be depended on.
    • In the event of a downturn or market sell-off, like 2008, investors will be forced to continue selling off their principal at a time when share prices will be at reduced prices. As a result, they will need to sell a higher percentage of their capital. Dividend investors will continue to receive income and barring any issues with the dividend payers, will not have to sell any of their principal. They have the luxury of “getting paid while they wait”.
    • This term “self-made dividends” is just bad. This is the first I have ever heard of this term. To be clear, they are not self-made. Second, they are not dividends; they are capital gains. You really should stop using it. I can imagine new investors getting thoroughly confused and trying to differentiate between eligible and ordinary dividends, and now “self-made”.
    • You were not clear at explaining deferred capital gains or where they come from. You should be discussing and using the term Return of Capital (ROC) and providing a clear example. Also, you appear to assume that everyone has investments that will have Return of Capital. This is not always the case.
    • You have not made it clear that most of this applies only to:
    o unregistered money
    o investing in Canada
    o those concerned about any clawbacks

    e.g. what if I invest some of my LIRA into dividend paying stocks? No dividend tax credit, but no tax bill either. Plus the potential for continued growth of dividends if I invest in companies with good business prospects and management

    Up until recently, I looked forward to receiving this newsletter and have even recommended it to others but after this article, I think it is time I unsubscribe. You need to go back to the drawing board and hit the reset button. Although I was the first to provide you feedback on this, I see that there are lots more comments on the site now, most of which are not favorable. You have left a torrent of confusion in your midst.
    Jim needs to get involved as it is his reputation at stake as well.

    • Ed Rempel

      Hi Ron,

      A couple comments. My article is purely educational to help readers understand the most effective planning and investment strategies.

      “Self-made dividends” (also called “homemade dividends”) is not a new term. It has been talked about for many years among financial planners. I admit it is not well-known in the investment industry.

      Respectfully, I think you would have no difficulty understanding them if your mind was open. You seem to be really sold on the conventional wisdom of dividend investing.

      Self-made dividends is a very practical concept. They are not complex. Just invest in a broad, tax-efficient equity portfolio. When you retire and need cash flow, just sell a bit every month. Sell an amount that is within a reliable withdrawal rate. That’s it. Easy.

      They are better than ordinary dividends in every way. ( ).

      Self-made dividends are taxed at lower rates. Ordinary dividends have 2 big risks – over-valuation and lack of diversification. Self-made dividends avoid these risks and have a list of major advantages:

      1. You decide the amount of dividend you receive.
      2. You can start, stop and change the dividend any time you want.
      3. You are not forced to pay tax on dividends when you don’t need the cash.
      4. You can invest properly based on risk/return, instead of chasing yield.
      5. You can avoid buying expensive investments to get a higher dividend.
      6. You can properly diversify globally, instead of having all your investments in Canada.
      7. For seniors, the clawback of government benefits from ordinary dividends is 5-6 higher than on self-made dividends.
      8. You pay less tax than on ordinary dividends (or sometimes no tax).

      Three important facts:

      1. Retirees don’t necessarily need income. They need cash flow. Income is taxable cash flow.
      2. The stock market is reliable over the long-term, even when you are withdrawing regularly from it. I researched 150 years of history and my findings are here: .
      3. Many people can plan to get GIS or OAS. It’s not just people affected by clawbacks, but anybody that can plan to be. I have helped several clients with multi-million dollar portfolios get GIS.

      Open your mind to self-made dividends. It is a simple & effective concept.


  19. Phil

    Yes Ed’s writing is one unto it own. Once you find his flow then You’re good to go. This is info that’s not for everyone, I think it’s great. Look differently and see what you could make…
    Its a blast to learn how to be more efficient. I’m looking at retiring at age 45 or 50 (now 35) and will have a mix of corporate, non reg, small rrsp, , maxed TFSA. Want to keep what I can and not waste because of ignorance.

    I follow an indexing stagegy with my investments and tend to think that I should allow each investment vehicle show their talents. Let TFSA be flexible to increase $ w/o tax rate , rrsp for long term compounding likely no more contributions to keep smallish, corp for income splitting and initial tax deferral, and non reg for rest, swp.

    Ed any advice for how to plan allocations to each vehicle over time? I still have time to make adjustments.I’m DIY diehard and have worked many individual calculations to smooth income over the years. Tentatively I’m planning to empty ccpc first then non reg. Take pensions early, leave rrsp to 71 and scoot under the oas clawback the whole way. Any suggestions would be awesome. My portfolio follows tax advice of Canadian couch potato and justin bender for where to place investments.

    • Ed Rempel

      Hi Phil,

      I agree. It’s a blast to learn how to be more efficient.

      I usually find it is best to invest every account that is part of your retirement plan based on effective long-term investments. In most cases, I invest every account the same.

      The one possible exception is perhaps a more tax-efficient version for non-registered in a or corporation. This may apply for you, since I assume you are a somewhat conservative investor. (Couch Potato investors tend to have larger bond allocations.)

      The best way to structure your retirement income depends on many factors. Often, I plan a target taxable income at the top of a low tax bracket. Withdraw as much as possible at the low tax bracket.

      In these cases, I usually withdraw from all or most accounts in an optimal way to hit my target taxable income, but also planning ahead that the amounts left in each account won’t be a problem in future years. I don’t usually deplete accounts one at a time.

      In other cases, one of the clawbacks is a factor or can be planned to be a factor. This might require more extreme withdarawals from certain accounts.

      Sometimes, you can qualify for the “8-Year GIS Strategy”. You have to plan ahead for it and it is opposite to the normal structure. It is surprising how many people can get it. I have helped a few clients with multi-million dollar portfolios qualify for 8 years or more of maximum GIS.

      Maximizing how much you can withdraw, splitting income, tax-efficient investing, tax-deductible fees, options for home equity, and leaving a legacy are all often important factors.

      It’s interesting your focus on being efficient and also couch potato investing. You lose surprisingly a lot vs. total return equity investing – a minimum of 1.4%/year. The chart here is the 5 Couch Potato portfolios since all current ETFs existed vs. 80% MSCI World & 20% TSX60: ( ).

      There is also a world of “above index investing”, including portfolio managers that essentially charge only based on how much they beat their index.

      My point is that you can improve your efficiency with more effective investments, as well as your withdrawal strategy.


      • Phil

        Awesome thanks for your response, I was excited to find your reply.

        When you compare ‘total return equity’ with ‘couch potato’ I think your referring to the idea of not having a fixed income allocation? I have been 80/20 equity bonds for 7 years and have considered all stocks but found some compelling arguments that an 80/20 mix can provide very similar returns while providing some cash in down markets to buy more. Do you agree with this? I do see from a taxable standpoint that the bonds are less efficient.

        As for equity i have
        22.5% XEF, VUN,
        25% VCN,
        10% VEE
        20% VAB

        I do like the approach of having only two holdings, it’s nice and simple but its cheaper to own these than a MSCI World ETF + TSX60 plus I can keep more of one in a particular location if there is a tax advantage.

        My family is at a 50% savings rate and my wife has a DB pension so I would consider moving to less bonds or no FI. Also currently (in a direct way) I don’t use leverage to invest and really like your ideas in this area. Very cleaver. I have been thinking that I could wait until a 30% market drawdown to get a sizeable loan. I know I could be waiting a long time…

        Anyways Ed thanks for all the time and info you contribute to the web world and am open to any other suggestions you have.

  20. Rossco

    Ed, a question about OAS clawback rates. As you mention, it is 15% for each dollar above ~$75,000. However in you chart you only show an 8-10% “tax” rate for OAS. Can you clarify please. I would assume it is still an incremental 15%.

    • Ed Rempel

      Hi Rossco,

      Good question. The clawback tax is 15%, but OAS is taxable. When your OAS is reduced, your taxable income is lower and your income tax is reduced, depending on your tax bracket.

      8-10% is the net clawback (net of income tax).


  21. John Bonar

    Please note, if some reader has not done so already, OAS “claw back” is based on the Net Income line of your tax return and not Taxable Income line.

  22. Andrew

    I have invested my RRSP in 3 year enhanced growth product on July 30, 2016 and maturity of the product is August 19, 2019.I will turn 71 on June 01, 2018 and by the rule need to convert my RRSP to a RRIF by December 2018. An as per government rule I do need to take any RRIF withdrawals until December 2019.
    My question is – how my RRSP investment will be converted to a RRIF.
    Please advise.


  23. Ed Rempel

    Hi Andrew,

    Sorry, but I get a chuckle about the marketing with an “enhanced growth GIC”. It’s like a super-sonic turtle! 🙂

    You won’t have a problem, Andrew. Your bank converts the RRSP to a RRIF this year, keeping the investments the same. in 2019, you have to withdraw at least the minimum amount, but your GIC comes due in 2019, so you can start your withdrawal during the year.


  24. Ken Doll

    Universal life insurance policies offer a vast array of investment options. They also offer creditor protection. If a corporation owns a universal life insurance policy it can provide creditor protection for retained earning, it also provides tax sheltered growth for retained earnings (similar to a TFSA) and it can benefit from the CDA account to flow money out of the corporation. Business owners should at least consider a universal life insurance policy and/or segregated funds for creditor protection of retained earnings. And before I get the seg funds are too expensive comment, companies like Empire Life offer very competitive seg funds compared to mutual funds.

  25. Yury

    Just out of curiosity: Why everywhere it is said that GIS clawbacks are 50%? Clawbacks actually substantially higher – from 63 to 67 percent. It’s much more than 50%. Yet, everyone says it’s 50%

    • Owen Winkelmolen

      Hi Yury,

      The GIS claw back is 50% but there is an additional GIS “top up” and it has an extra claw back of 25%. So at a certain income level the claw back jumps from 50% to 75% and then back down to 50% again.

      Over the entire GIS income range this makes the average claw back more than 50%.

      • Yury

        It seems a little bit different.
        I compiled GIS claw back and:
        Income Claw back
        1000 49.2%
        2000 49.8%
        3000 58.0%
        5000 64.8%
        10000 66.5%
        15000 61.0%
        17000 59.7%

        So I would say that after 2000 of yearly income claw back jumps to 60% and higher and never goes lower. So CRA claim that its 50% is kinda deceptive.

  26. Owen Winkelmolen

    Awesome post, the 8-year GIS strategy is great.

    In the claw back table you should include the GIS “top up” claw back. This adds another 25% claw back to GIS making it a full 75% claw back.

  27. Bruce

    Hi Ed:

    Some interesting ideas. My biggest problem is determining how I can get out $ from my RRSP, which is where I have the vast majority of my retirement savings, prior to my actual retirement.

    Any thoughts on that?

    • Captain Obvious

      make withdrawals.

  28. Geoff

    Thanks Ed. There are plenty of American blogs talking about ways to use the tax code to their benefit. This is the first article I I have seen that does the same for Canadians.

    US tax code may simply have more ways of getting at tax deferred dollars (ROTH IRA conversion ladder, health spending accounts etc).

    I would be curious to know if there was material your aware of about anything else we can do (up to 25 years) in advance of 60 to help minimize taxes? (i.e high savings rate 50%-60%, TFSA RRSP maxed out).

    Or similarly any material on what to do once you ave saved up the approx 1Million in corporation. (i.e Morneau small business deduction clawback). From what I gather, simply investing for capital gains and then selling only once every 4-5 years or less to minimize the years where business deduction is lost.

    Finally, any material elaborating on your position about PPP/IPP?


  29. Paul

    Canadian tax tables list income & tax rate. Does this refer to net or gross income. For example, if my gross income is $57k & the tax rate is 15% for income up to 45K, am I taxed at that rate ($57k – 12K Basic Personal Exemption= 45K)? I am using simple numbers & looking for a simple answer.
    SIMPLY: If I have no other deductions, do i subtract the “Basic Personal Deduction” before I use these income numbers listed in tax tables.

    We want to get as much of our RRSP investments ($600k) out when I retire at 61 & my wife retires at 60 and before we start collecting approx $35k combined in CPP & OAS.

    John Bonar says:
    Please note, if some reader has not done so already, OAS “claw back” is based on the Net Income line of your tax return and not Taxable Income line.

  30. Linda

    I am single … In January the year of my 65th Birthday (June 25), I withdraw $4500 from RRSP, leaving $16,000 aprox to RIFF when I was converting it too a RRIF and asked to have $4500 withdraw on Jan of 2019, subsequently every year, till I have depleted the RIFF. I have a CPP of $215 month. In July after my Birthday, I receive my OAS and my GIS, using only my CPP(aprox $2580) as income. Doing my income tax this year, I realize that I will lose some GIS because of the $4500 withdraw of RRSP, and because I already receive the $4500 of the RRIF in January of 2019, that the GIS will be reduce for 2 years… Can I change my RRIF to only receive the minimum, I am thinking around $500 a year, to bring down my net income, to raise my GIS ?? what would the minimum be ?? my RIFF is now only $12,000 aprox, does this make sense to do this?? I have been contributing as much as I can to Tax Free Savings Accounts,

  31. Gad Hamak

    Hi. I have a comment on the taxable income for seniors age 65+.
    I was wondering how you came up with 70% for income in the range of $20,000-$25,000. Say for example a single senior has a taxable income of $24,000. In 2018 OAS and GIS is about $18,000/yr or approximately $1,500 a month broken down to about $600 OAS and $900 GIS. OAS is taxable and GIS is not. By GIS rules, the GIS allotment will be reduced to $0.50 for every $1 of taxable income.
    Taking into account the above for a 20% marginal rate the net monthly income will be $2,000 + $480 + $0(GIS) = $2480. If they were taxed at 70% the monthly gross, it would have been $8,267 per month or $99200/year
    Can you please shed light onto this?

  32. M J Pringle

    Hi Ed . we are planning on retiring in 2 years i will be 58. My wife has worked for our corp for last 15 years . I have a DB that will pay 4500 a month at 58. We have 600,000 in rsp and 400,000 in retained earnings , Should we draw dpwn our rrsp in our 60s and not take ccp till 65 . Thanks any advise will help.

  33. Rhonda

    It is too late for me.I am 68 and waited until 68 to collect CPP and OAS until I retired in Sept 2018.
    I did not work for the government so no pre retirement
    I wish to God that I had read this article prior to retirement.
    What is so upsetting is my financial advisor (wealth management at a major bank head office) since approximately 2005..has /had no responsibility to tell me the things I read today.
    He turned ALL my RRSP into a RIF.He broke up my insurance guaranteed product.It was worth 200,000 $..and he moved 100,000 $ into a RIF.Plus I have depleted my TFSA which had about 10 k..used for a trip a year plus some CC larger balances…so should I look for a new advisor .He says I should have enough money to last until I am 90….but did not discuss any tax implications.Worse he put approx.2k in a fund in my TFSA so it is not liquid.Any advice?.

  34. Peter

    Hi Rhonda,

    My advisor did the same to me. But last year I transferred the rest of my RRIF back to RRSP. You also can transfer your RRIF back to RRSP before 71 years old.

  35. Richard W

    Hello. I am 47 and work in the construction trades. I have a union pension($100k so far) and wanted to know advantages/disadvantages to retirement in the Dominican Republic. I plan to use my current residence(condo) as a rental during my retirement and contribute the maximum to my TFSA starting next year(2021). I want to know the best strategies to paying the lowest tax or none during my golden years. Ty

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