How do I put all the pieces together?

As we go through our working years, we receive a regular paycheque from our employer.  Retirement income, however, is created from benefits and from drawing income from our own assets.  This is a big change in how the creation of income occurs -- and is a large psychological shift. 

Your retirement income plan should be structured in such a way as to:

- reflect the changing stages of retirement -- from the lifestyle expenditures of the early, active years, to estate planning strategies and potential health care costs of the later years

- preserve assets by maximizing tax benefits, preventing clawbacks, and employing intelligent withdrawal tactics which result in less stress on your savings, especially during market downturns

Your advisor needs to be proficient in 'layering' your income.  This is the process of putting together your income streams in the most efficient manner possible to create the after-tax cash flow you need.  It involves the intelligent disassembly of your savings and incorporates the following considerations: 

• Use the least-flexible income sources first -- start stacking with CPP, OAS, Pensions, Annuities and any other sources over which you have little or no control as to amounts and timing of payments
• Use the least tax-efficient sources in the lower tax brackets
• Work efficiently within the tax brackets
• Put the least amount of 'strain' on an asset to produce the next dollar of spendable income
• Look for income-splitting opportunities
• Determine which assets are best to use and which are best to defer

Income should be drawn from these sources in accordance with one basic rule:  use the least flexible, least tax-effective sources first.