Retirement income: How to plan your withdrawals?

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Welcome to the first episode of our new podcast Powerful Advice. Here, 

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we don't only talk about money, we talk about journeys, decisions, 

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and what truly matters in people's lives. In each episode, 

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we will share real stories, stories of wealth and life. 

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But because behind every financial decision, every question, 

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and every intention, there is often a lot of uncertainties and 

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a lot of unknown. Today we will talk about an important 

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moment- 

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In someone's life, retirement. People want to know, will I be okay? 

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What does financial confidence really mean? 

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We also will bring you clarity in your decisions. 

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What is there to know in order to take the best decision in your reality? 

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I am Nancy Paquet, Executive Vice President, 

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Wealth Management at National Bank and today I have the privilege of being 

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accompanied with my colleague, Shan-Shan Chua. Welcome, Shan-Shan. 

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Thank you, Nancy. So Shan-Shan, you are an Expert, 

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an Expert Advisor at National Bank Private Banking 1859 and together we will 

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share a real case that you have advised. Yes. That's Elisa and Mark. So, 

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they are a couple who've been together for many decades and they do not have 

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children. Elisa has retired a couple of years ago 

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already. And for Mark, he told sold his business. 

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So, they built obviously significant wealth. 

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They have real estate, they have investments, 

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they even have a holding company, and they are wondering about this stage 

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of their life. So first, "Will I be okay? " as as I said in the intro. 

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Can they maintain their lifestyle? What lifestyle are we talking about? 

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What's the best tax decision, tax efficient way to withdraw the money? 

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So, can you give us a bit of clarity as to 

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what you said to Elisa and Mark? That's a lot of questions Nancy. I know. 

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Honestly, when they come to us at this stage, 

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they already have a good feeling of their wealth and, talking about retirement, 

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people are happy and they know one day, it's coming. 

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So they have spoken to you before taking the decision to retire? Yes, yes, yes. So, 

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that's definitely what we recommend to meet them before retirement. So, people- 

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Like Mark, they have been entrepreneur their whole 

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life. They've seen a lot of financial 

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statements, but a lot of times didn't even may not 

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have seen their balance sheets, just like assets minus debts. 

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So we are here to give them like the whole picture, 

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clarity on their own situations. It's been like 15 years that I started as 

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a tax specialist, like in about like 8 years more as a 

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financial planner. And honestly, it is very important to begin by 

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understanding their life, their intentions, 

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and what they want to do in the next steps,- 

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Which is- 

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A new adventure actually. So it's their adventure. Yeah. 

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And retirement, you know, it can last 30 years and even more. So, 

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people are reaching financial freedom younger now, 

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specifically entrepreneurs like your client here. So, 

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you've spoken about a financial plan a couple of times. What is it for you? 

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What is a good financial plan? Yeah, for me, 

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a financial plan is like a guide tailored to my clients' needs. So, 

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I always start by gathering information, talk, 

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have a discussion with them to know them better. 

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So I have a summary of their financial and family situations. 

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Then we take assumptions from the Financial Planning Institute, 

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which are the assumptions that we take Canadian widely and it's regulated. 

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We then do a projection of their wealth and they- 

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Are actually very surprised how compound interest can be over 30 years in a 

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projection. We also look at other fields in financial 

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planning. So we do, we look if there's any tax optimizations, 

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if they have any insurance needs, if they still need protections, 

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and eventually we'll look at the estate planning. And estate planning, 

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it's a word that makes people a little uncomfortable because you need to think 

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of when you will not be here anymore. So, - 

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How do you make sure that people can have that conversation with you and, 

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ideally before retirement or at least when you really start retiring? Yes, yes, 

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we, we do it step by step because obviously 

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you just started retirement and retirement is not an end. 

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It's actually a start. And estate planning is like another end, 

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but we start with the retirement planning for Elisa and Mark. 

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Actually their current question is how would I, like, 

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did I accumulate enough for retirement? How do, how do I withdraw my funds from- 

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All the assets that I have? You mentioned that they have a holding 

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company. They have personal non-registered 

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accounts, registered accounts. Real estate. Real estate, TFSAs, 

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they all have like different taxability rules. So, 

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how they withdraw funds and how they will use it during retirement is different. So, 

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for Elisa, Elisa and Mark, for example, they, 

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it was not beneficial for them to withdraw RRSP earlier because they 

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actually have a holding company. So they have more flexibility. 

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They can control the withdrawal and where the income at the personal level- 

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Arrives, and by discussing with them, I realized that Elisa actually worked in 

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Mark's business for more than five years. So when- 

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The spouse worked for the company, we can actually maybe do splitting income 

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like strategy. Another tax efficient way to withdraw 

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money. Exactly. So the projections were showing that 

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Elisa, and Elisa had actually like a tax rate, 

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an average tax rate about like 10% less than Mark. So over 30 years. 

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So if we were able to transfer $30, 000 of Mark's income to Elisa, 

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then that's like- 

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10% of it is 3000 tax saving every year. Yeah, very good. So, 

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without adding more efforts in the example you're giving us, 

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you know tax optimization is just beneficial and that's why we need a tax 

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expert like you. Yes, yes. But of course, we have to look at the corporate 

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structure and we have to confirm with their accountant and tax specialists at 

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external because they are the ones who structured their, 

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who actually did all the compliance about their work. 

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But those are definitely opportunities that we can- 

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Flag or we can suggest, if we see them. And then we explain to the client because 

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maybe sometimes, outsiders like the external accountants, 

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they are more busy and don't have the time to explain it in large. That's good. 

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We're complimentary. So,- 

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They want to enjoy life. They're retired. They don't want to add complexity. 

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They don't want to add stress for sure. So, we know now that they're okay, 

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they have accumulated enough assets. So, you bring the holistic view, 

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the example that you just gave. But here in their personal situation, 

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they did not have children. Usually, you know, 

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when we talk about estate planning, we think about, you know, 

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leaving some assets to the kids or to the grandkids. 

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But here they don't have children. So, how do you go about this conversation? 

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Yes, you're right. So, well, at first,- 

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There's complexity definitely retirement, we're not going to suggest to add more 

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complexity. So, we do the analysis, to financially see the pros and cons, 

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because it costs money if it needs restructuration for, 

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to be able to split the income. And so at that point, 

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if the tax savings is not material as opposed to the complexity and the fees to 

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put the structuring on and the time, then we just forget about it. 

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We keep it simple for their retirement. They have other interests and hobbies, 

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I'm sure. So, as for the estate, if they don't have children,- 

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A lot of, a lot of, clients are actually very close to their 

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nephews and nieces and other family members. 

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So they may want actually to gift them during their lifetime or at death. 

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But otherwise, there's also causes that may matter to 

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them like animals, pets, and very caring people that we have. 

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So usually there's charitable organizations for that they can, 

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so they can give to these organizations. And if we go further, 

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we can also talk about private foundation. So that way they can actually gift more 

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for a longer time,- 

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Even after death. So that's interesting because they think, 

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"Okay, I'll give the money", but it can last for decades after they 

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passed. Yes, definitely. It actually becomes a legacy of them. 

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So they, we often do that. Actually, we have, 

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we like to have this discussion about donations, organizations, 

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private foundations when they have, when they're selling their business 

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because of that year, most likely they will have a lot of like 

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a lot more income, capital gains for which we can use all 

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the charitable donation credits. And it's financially- 

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Beneficial to have donation credits, but it's actually, 

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it means that they can give more to these organizations as well. That's great. So, 

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the conversation in your perfect world should start when before retirement? 

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I would say two to five years before retirement and, 

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or at any time that they are unsure and they want to know what's going on in 

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their life. And, and even for a younger person, 

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you think about retirement because it's the strategy to aggregate assets, right? 

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So, I think retirement 5 to 10 years, definitely. 

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But it should be a conversation every time you meet your client, right? Yes,- 

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At all age. We do definitely meet more and more 

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younger people, especially a lot of startups, 

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entrepreneurs gets the funds, the company has a growth value like 

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growth really quickly in the past few years. So, if we usually, 

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if we take projections assumptions and saying that the growth will continue for 

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the next 40 years, the numbers are a bit, a bit over the board, but- 

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We would try to give more conservative- 

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Assumptions. But also we looked at what is their 

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future projects since like in their shorter term and for younger clients. 

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Good. So,- 

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Mark and Elisa story is a great story. So, thank you for sharing it with us. 

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What should we remember about this specific case? Well, first, 

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I think we should remember that they did very well. 

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Like I truly could like truly congratulate them and I'm happy with that 

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for them. And but it's important to know that 

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financial planning, it adds value to their situation, 

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to their wealth. It's not always monetary. For example, in their situation, 

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they had a good feeling about their situations, but they were not sure. So, 

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with the financial plan, we've brought up clarity and certainties. 

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We also test when we do the analysis, we test 1000 different markets scenarios. 

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So, for example, in their situation, it was really what was really all 

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positive results. So, if there's any market corrections, 

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they can continue to sleep and enjoy their retirement and it should get back 

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there. Their wealth should get back to the 

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projections usual. Well, thank you. So, thank you for sharing that. And as always, 

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you have to remember that this specific example that Shan-Shan shared with us is 

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specific to Elisa and Mark and definitely not a financial advice- 

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To your current situation. But please reach out to us and we will be 

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happy to to look at your situation so that we can provide advice. So, 

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thank you again, Shan-Shan for your insights and expertise. 

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Until next time. My pleasure, Nancy.