Drawing down on investments with OPB Advisor Michael Trklja, CFP®

Your pension is an incredibly important piece of the retirement equation, but if you’ve taken the time and effort to build other personal investments like RRSPs and TFSAs, you may be wondering when is the best time to start drawing income from other sources.

Depending on what savings vehicles you have accumulated other assets and when you choose to access these funds, you can maximize your savings to add to your retirement income.

Read on to learn more about your options, with information from Client Service Advisor, Michael Trklja one of OPB’s in-house Certified Financial Planners®.

When you should start your CPP and OAS benefits

“When to start these payments will be dependent on your personal financial circumstances. It’s really income-dependent,” shares Trklja. “It depends on how much income you need and when you need it.” Another determining factor is that income sources like workplace pensions, Canadian Pension Plan (CPP) and Old Age Security (OAS) are taxed as regular income, so Trklja advises retired members to look carefully at when they’re going to start receiving these payments.

Deciding on when to start your CPP and OAS is similar to the thought process you go through when deciding on when to retire and start your PSPP. “You can start collecting a reduced CPP at age 60 — but the question is, does that make sense for you, or does it make more sense to wait until age 65 or 71? With OAS, 65 is the minimum age [to start collecting], but when to start these payments will really depend on your personal circumstances – but we can help you understand you options and the possible tax implications of your available choices.”

One strategy you will need to consider is income splitting with your spouse or partner. Read on to understand whether this is an option for you.

Pension income splitting*

As a retired member, splitting your pension income with your spouse or partner is one tax strategy you can employ to help optimize your income. This simply means that your PSPP pension income can be split with your spouse or partner by making an election on your T1032 – Joint Election to Split Pension Income Tax form. You can also apply to share your CPP pension with your spouse using the Pension Sharing form (ISP1002) on the Government of Canada's website.

There are other income splitting options available but these will depend on other sources of retirement savings you have. For example, if you have a Registered Retirement Income Fund (RRIF) you can gain tax credits and reduce your marginal tax rate by splitting this income as of age 65.

These are a couple of options that we can help you understand and pursue with your accountant or when you file your taxes.

*Please note that this section of the article has been corrected since the January 2020 newsletter was mailed. The previous version incorrectly stated that you could split OAS pension, and had listed the incorrect form for pension income splitting.

Other investments and savings

When it comes to other personal investments and saving you may have, there is a lot to consider when determining the best time to draw down these sources of income. Your personal circumstances will ultimately help inform what the best time to access these savings is. Each retired member’s situation will be unique to them and require a deeper look at their individual needs. OPB Advisors can help you determine how your pension income fits within your overall financial plan, and suggest where you might involve an external financial planner to help set you up for a successful retirement.

The most important thing for retired members to do

One piece of advice that applies across the board, Trklja says: “don’t be afraid to ask us for help!”

“A lot of this is new to most people, and the more potential sources of income you have, the more complicated it could be,” he adds. “And sometimes small changes lead to big savings on taxes.” Reaching out to one of OPB’s Advisors can help you understand your financial plan, any decisions you need to consider that affects your finances and how your pension fits within it, and potentially provide a better outcome for retirement.

In addition to this, Trklja also advises retired members to reduce or eliminate debt and give themselves options for flexibility. “Things will happen in retirement that you didn’t foresee, and you’ll need access to capital.”