Outsmarting Retirement Taxes: How a $1M Plan Delivered Peace of Mind

A couple recently came to us with a simple but important question: If we’re 60 years old and have saved $1 million, how much can we actually spend in retirement?

Here’s a look at their situation, what their retirement looked like at first, and how we improved their outcome through smart planning and strategy.

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The Situation

Both Mr. and Mrs. Smith were 60 and wanted to retire at the end of the year. They hoped to spend $5,700 per month on everyday expenses and an additional $1,500 per month on travel for the first 15 years of retirement.

Their savings and assets included:

  • Mr. Smith: $450,000 in an RRSP and $100,000 in a TFSA
  • Mrs. Smith: $200,000 in an RRSP, $100,000 in a TFSA, and $150,000 in a non-registered account
  • Their home: valued at $650,000, owned jointly
  • Both were eligible for CPP (starting at age 61) and maximum Old Age Security (starting at 65)

On average, their expenses worked out to $6,450 per month across their entire retirement.

Their Current Trajectory

With their current plan, they were on track to spend $5,900 per month—about 89 percent of their goal. But they would run out of money six years before life expectancy, with a projected shortfall beginning in 2047.

Their advisor had suggested a drawdown plan that started with their TFSA, then their non-registered account, and finally their RRSPs. The goal was to keep taxes low early in retirement.

Their plan also assumed CPP would start at 61 and OAS at 65.

We Made Three Key Adjustments to Improve Their Outcome.

1. Timing of government benefits

They originally planned to start CPP at 61, but we showed them the impact of delaying to age 70. Doing so increased their long-term income and reduced reliance on portfolio withdrawals later in life. This boosted their retirement success rate from 89 to 96 percent and added $224,000 to their projected estate.

They ultimately settled on starting CPP at 67—a middle ground that still improved outcomes without the full delay risk.

For OAS, we modeled a delay to 70, but since there’s no survivor benefit and a modest deferral bonus, they chose to start at 65 as originally planned.

2. Reversing the withdrawal order

Instead of using their TFSA first, we modeled a strategy where they began drawing from their RRSPs first, followed by the non-registered account, and lastly the TFSA. This allowed them to pay taxes at lower rates early on and preserve more tax-free and tax-efficient assets for later.

This change boosted their retirement success rate and added to their projected estate value.

3. Matching investments to withdrawal timing

Since their TFSA would be used last, we suggested investing it more aggressively. Their RRSPs, which would be used first, were shifted more conservatively to manage short-term risk.

This improved their projected success rate to 100 percent and increased their estate value by $130,000.

Results

By combining these three strategies, their retirement was now fully funded with a half-year cushion. Their estate value increased by $370,000.

Spending More in Retirement

After improving their financial picture, they asked whether they could increase spending and enjoy more of their money while they were still healthy.

We modeled a 10 percent increase in monthly spending. This created a shortfall late in retirement, but if they chose to sell their home and rent for $4,000 per month at that point, their income needs would still be met.

In this scenario, they would have a smaller estate of just under $98,000, but a more enjoyable retirement.

Final Thoughts

If you’re wondering how much you can spend with a $1 million portfolio, there’s no one-size-fits-all answer. But with the right strategies, you can increase both your peace of mind and the value you leave behind.

To see how we help Canadians retire with confidence and tax efficiency, visit our website and book an appointment with us.

Click here to book a free consultation with our team.

Watch the full video breakdown here.

Marc Sabourin is a Winnipeg-based Financial Advisor and Retirement Specialist with Harbourfront Wealth Management. His specialty is working with pre-retirees and retirees who are looking for retirement, investment, & tax advice. 

Disclaimer: The views expressed are those of Marc Sabourin, Certified Financial Planner, and Investment Advisor, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund

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