Questioning planner’s advice

Question: I am 56, retired, and my financial planner is suggesting I withdraw funds from my RRSP for the next four years “to top up my annual income while I’m in a lower tax bracket”, before I start receiving CPP at age 60. I currently have a good pension, plus monthly income generated by investments within a non-registered portfolio, so I don’t need the money.

However, at age 65, my current pension will decrease due to the loss of a temporary annuity and a bridge benefit, and it’s then that I may need to start withdrawing funds from my RRSP. I maintain that it’s better to hold the investments as long as possible within the tax-sheltered portfolio until I need the funds. If I withdrew some now, I’d simply be investing the funds in my non-registered portfolio, adding to the tax burden, and that doesn’t make sense to me, despite my current lower income.

I fully appreciate where the financial planner is coming from, but am I getting the best advice here? — P.P.

Gordon answers: I’m glad you understand where the planner is coming from because I don’t. His advice is based on the assumption that you will be in a higher tax bracket down the road but fm what you say there is nothing to indicate that — quite the contrary. Ask the advisor to show you projections to validate this assumption. If he can’t, it tells you a lot.

I agree with you that the loss of tax sheltering for the next nine years, until you turn 65, is also an important consideration. Taking money from the RRSP now will not only trigger an immediate tax liability but will also expose the income earned on any non-registered reinvestments to tax.

In sum, it doesn’t sound like a great idea to me.

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