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 You’ve paid taxes all your life and retirement is no different. The difference is that now, because you’re retired and your funds are relatively fixed, you may want to be extra focused on reducing your taxes to the lowest level possible.
There are forms of investment income that receive preferential treatment from the Canada Revenue Agency. As you can see in the chart below, income earned from Canadian dividends and capital gains is taxed at lower rates than income earned as interest. This chart shows approximately how much of each dollar of investment income is left after taxes*.
* Assumes a marginal tax rate of 40%
RBC offers four cash flow solutions, two of which provide tax savings opportunities – the RBC Cash Flow Portfolio and the RBC Enhanced Cash Flow Portfolio.
However, there is a trade-off. To be able to enjoy those tax savings, you have to be willing to expose your capital to possible market fluctuations.
Although equities may pose more risk than fixed income securities, they do offer one important advantage not available with fixed income investments – the potential of superior growth.
In the final analysis, it’s up to you to decide how much security you want and how much risk you’re willing to take.
This information on tax efficiency is very simplified. Tax is a complicated subject and for complete answers a tax specialist should always be consulted. If you’re not sure who to call, you can begin by talking with an RBC financial planning professional.
You can also learn more by reading “8 ways retirees can save on taxes” in the Retirement Planning section.
Continue reading with RBC Cash Flow Solutions.
Financial planning services and investment advice are provided by Royal Mutual Funds Inc., a member company under RBC Investments. Royal Mutual Funds Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. Royal Mutual Funds Inc. is licensed as a financial services firm in the province of Quebec.
There may be commissions, trailing commissions, management
fees and expenses associated with mutual fund investments.
Mutual funds are not guaranteed, their values change frequently,
and past performance may not be repeated. Please read the
prospectus before investing.
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