Small mistakes can cost you millions, even with a $4M retirement plan. In this article, we’ll show you the most common $4M retirement plan mistakes and how to fix them before they quietly drain your wealth.
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Meet Mike and Laura
Mike (64) and Laura (62) live in Manitoba and have built a retirement portfolio worth over $4 million, including:
- RRSPs and pensions
- Tax-Free Savings Accounts (TFSAs)
- A joint non-registered investment account
- Cash savings
- A fully paid-off home valued at $850,000
Their goal wasn’t just to avoid running out of money but to maximize efficiency and minimize taxes throughout retirement.
The Hidden Problems in Their Retirement Plan
Even with millions saved, Mike and Laura’s retirement plan revealed several costly mistakes that could quietly drain their wealth over time.
1. High Investment Fees
Mike and Laura’s accounts were spread across four different banks, with an average fee of 2%, far higher than necessary.
Strategy:
Consolidate their accounts with one institution to negotiate a lower fee (around 0.85%), saving them over $1.25 million throughout retirement.
2. Inefficient Investment Allocation
Their registered accounts (RRSPS and pensions) were invested aggressively, while their TFSAS, where growth is tax-free, were invested conservatively.
Strategy:
Flip the investment approach:
- Make TFSAs more aggressive for higher tax-free growth.
- Make RRSPs and pensions slightly more conservative to limit future taxable withdrawals.
3. Suboptimal Withdrawal Strategy
They planned to:
- Withdraw only from non-registered accounts early
- Delay RRSP withdrawals until age 72
While this kept early retirement taxes low, it created a high tax bill later, triggering:
- Higher taxes
- Old Age Security (OAS) clawback
- Big RRIF balances taxed heavily at death
Strategy:
- Start RRSP withdrawals earlier to smooth taxable income.
- Defer OAS benefits to age 70 to maximize payments and reduce clawback risk.
- Target specific income thresholds to stay within efficient tax brackets.
How Smart Planning Changed Their Future
By implementing just a few strategic adjustments, Mike and Laura’s retirement outlook dramatically improved:
| BEFORE | AFTER |
| 116% funded for retirement | 136% funded |
| Net Estate: $2.7M | Net Estate: $4.4M |
| Higher taxes and OAS Clawback | Lower taxes, more flexibility |
These changes didn’t require them to save more or take on extra investment risk. They just optimize what they already had.
Final Thoughts: Even a Strong Nest Egg Needs Careful Planning
If you’ve saved well for retirement, don’t assume the hard work is over.
Fine-tuning your investment fees, asset allocation, and withdrawal strategy can add millions of dollars to your after-tax wealth and create a smoother, more stress-free retirement.
If you’re ready to optimize your plan and protect your retirement savings, we’re here to help.
