Most retirement planning advice focuses on couples. But if you are single, your approach to retirement withdrawals needs to be different, especially when it comes to taxes.
From CPP timing to estate planning, there are some important differences to consider when you do not have a spouse to share assets with or roll accounts over to.
Life Expectancy and Planning Horizon
Let’s say you are 57 years old and recently retired. You are healthy and want to make sure your savings last. Based on current life expectancy data, you could reasonably expect to live until 85. But to stay on the safe side, it makes sense to build a retirement income plan that runs to age 90.
From a tax perspective, though, this longer time frame can be a disadvantage, especially for singles.
CPP Timing Is More Personal When You Are Single
In many cases, the math says you should defer your CPP to age 70 to receive the highest total payout. But timing is not just about numbers. It is about when that income will be most meaningful to you.
If you take CPP at 60, you might enjoy that income more during your active retirement years. As a single person, you also miss out on the survivor benefit that couples can rely on. This often pushes singles to start CPP earlier to make sure they receive it while they can.
The Tax Challenge Singles Face
Many retirees accumulate the bulk of their savings inside registered accounts like RRSPs or pensions. For couples, if one person passes away, their registered assets roll over to the surviving spouse tax-free.
But if you are single, your RRSP or RRIF gets fully taxed on your final return. That could mean giving up 40 to 50 percent of your remaining portfolio to the CRA.
Let’s look at a simple example. If you live to age 85 and still have 380,000 dollars in your RRSP, your estate could owe a substantial tax bill. If you pass away at age 80 instead and there is 630,000 dollars still in the account, the taxes are even higher.
A Smarter Strategy for Singles
Instead of spreading RRSP withdrawals over the full span of retirement, it often makes sense to accelerate withdrawals and wind down your registered accounts by age 85.
This helps you:
- Take advantage of lower tax brackets early in retirement
- Avoid a large final tax bill on your estate
- Control how much of your wealth is left in taxable accounts
In this strategy, your overall income plan still runs to age 90, but your registered account balances are mostly depleted by your life expectancy. You still meet your spending goals, but you do it in a more tax-efficient way.
Final Thoughts
If you are planning for retirement as a single person, do not just copy the playbook designed for couples. Your withdrawal timing, your CPP decision, and your estate tax exposure all require a more intentional approach.
For a personalized retirement withdrawal strategy for singles, visit our website and book an appointment with us.
