Retirement’s greatest threat?

There’s no dearth of potential pitfalls for those about to retire. Inflation, pension plan insolvency, and an abyssal stock market have all conspired to menace many retirement portfolios.

However, a recent survey suggests the No. 1 threat to retirement security in Canada appears regularly on television in a black suit and sunglasses, whispering ominously that he’s watching you. That’s right, the tax man.

A series of polls by the Investors Group has revealed that 46% of Canadians are concerned about high income and property taxes, compared to poor stock market returns (39%), and fear of job loss (33%).

“Taxes can have a significant impact on investors whether saving for retirement or in later years when living on fixed income,” says Jack Courtney, assistant vice-president, advanced financial planning with Investors Group. “It pays to employ tax saving strategies that can help cut tax bills in future years or help mitigate the impact of taxes when withdrawing from investments.”

Courtney explains that investment vehicles such as RRSPs, Tax-Free Saving Accounts and corporate class funds can help minimize taxes while allowing investments to grow at a faster rate. He advises retirees to consult a planner to help decide the most tax-efficient approach to withdrawing funds, how to avoid clawbacks and consider income pension splitting.

“Every dollar saved is a dollar earned, and this is especially true during times like this,” he says. “A professional planner can recommend tax-efficient strategies that will ultimately put more money in your pocket and leave less for the taxman.”

(03/25/09)