Tuesday, August 2, 2016

Use of Various Sources of Income

11:17 AM


Question:

Does RetireWare optimize the various streams of income in retirement, i.e. non-registered, registered, etc. for each year to provide the most tax efficient outflows?

Does the software provide cash flow results in after-tax dollars?

Answer:

The program does not do a year-by year optimization. Rather, the procedure for the use of funds followed by RetireWare is to determine whether existing pensions, such as company pensions,
Canada or Quebec Pensions and Old Age Security are sufficient to meet the retirement income objective. If not, RetireWare uses non-registered investment income (and capital until exhausted, if you select that option), then Tax-Free Savings Accounts (TFSA), locked-in RRSPs (including funds from a defined contribution pension plan), and RRSP/RRIFs last. This has the advantage of achieving tax-free compounding of registered investments for as long as possible. RetireWare uses locked-in RRSPs before non-locked-in RRSPs.

The software shows detailed cash flow charts and tables, showing each source of income, income tax payable each year and net income.

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