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Douglas,* 66, is getting mixed messages from advisers. His financial adviser wants him to leave the money he has in his registered accounts to grow while his accountant says it is time to start drawing down those funds to minimize tax.

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Retired since 2020, Douglas lives in Ontario with his wife of seven years, Anne,* who is also retired. This is a second marriage for both Douglas and Anne. They purchased their forever home together — now valued at $900,000 and which they each own equally — are debt-free, keep their finances separate and contribute to shared expenses. So far, Douglas’s non-indexed employer pension and government benefits have met his cash flow needs, but he is concerned about the growing impact of inflation.

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“We have a great life together,” said Douglas. “We travel a lot, and plan to continue to do more of the same.” Douglas’s annual expenses are about $43,200 including $6,000 for travel. His annual income is about $48,300 before tax. This includes about $24,000 from a locked-in retirement account (LIRA) that is not indexed to inflation, $3,380 in employer benefits, $12,100 in Canada Pension Plan (CPP) benefits and $8,600 in Old Age Security (OAS) payments. Anne’s annual income is similar.

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Douglas’s investment portfolio includes about $240,000 in registered retirement savings plans (RRSPs), $490,000 in a LIRA and $28,000 in a tax-free savings account (TFSA) largely invested in stocks and some equity funds. He dipped into his TFSA and a non-registered account to help one of his children and is now working on building both back up. He contributes $300 a month to his TFSA. He also has an emergency fund of about $6,000 in a savings account.

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“Does it make financial sense to convert my RRSP to a registered retirement income fund (RRIF) now and begin withdrawing funds to increase TFSA contributions and to rebuild my non-registered investment account?” he asked.

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A father of two adult children, stepfather to Anne’s two adult children and grandfather to six grandchildren, Douglas is also focused on their future. “What are the best strategies to preserve or grow my portfolio to ensure I can live comfortably and leave an estate for my children?”

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What the expert says

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Barring any major changes to his current lifestyle and assuming an average long-term annual return of seven per cent on his nearly $760,000 equity-based portfolio, Douglas can afford to withdraw an additional $4,500 a year — the maximum amount he can withdraw without pushing him into a higher tax bracket — or 3.5 per cent of his investments (up from the 3.2 per cent he is currently withdrawing). According to a long held general rule of thumb for retirement spending, withdrawing up to four per cent of your total investments has been sustainable 97 per cent of the time in the past 150 years, said Ed Rempel, a fee-for-service financial planner, tax accountant and blogger.

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That said, Rempel’s best advice for Douglas is to wait two years, just before he turns 68, to start withdrawing $4,500 a year more from his LIRA – and only his LIRA. “There doesn’t seem to be a reason to start and pay tax on these funds when he doesn’t need the money and it can continue to grow,” said Rempel.