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Tax planning in retirement: non-registered asset sales

RobHLeave a comment

My retirement savings1 are spread across multiple kinds of accounts: primarily RRIF, but there’s also TFSAs and non-registered accounts. Here’s today’s snapshot, courtesy of my multi-asset tracker:

For tax reasons2, about 2/33 of this year’s salary is actually funded by my non-registered accounts. But I hold a bunch of assets in both my and my spouse’s non-registered accounts, each with their own adjusted cost base, each in a position to generate a capital gain when sold, each representing a tax obligation for one of us. Assuming I’m trying to reduce CRA’s take, how do I decide which asset to sell at any given time?

Let’s start with some principles that I try to keep in mind as I work through that decision.

Principle #1: Try to equalize our taxable income

Why equalize? Because Canada’s tax system is graduated (i.e. it has tax brackets), the more you earn, the higher your overall tax rate is. It therefore follows that the minimal possible tax bill is generated when both members of the tax household make close to the same taxable income. A quick example: here I’m using the advanced Canadian Tax Calculator, and assuming that all income below is employment income, with no special deductions, and using Ontario as the location of the primary residence:

My IncomeMy Tax BillSpouse’s IncomeSpouse’s Tax BillTotal Tax bill
100k17.1k0017.1k
80k14.1k20k.1k14.2k
70k11.1k30k2.5k13.6k
60k8.3k40k4.4k12.7k
50k6.25k50k6.25k12.5k

In each case (row) above, the total household income is 100k, but the lowest tax bill comes when each spouse is earning 50k. Equalizing the income makes for the smallest tax hit.

In retirement, income looks a bit different. Taxable income for our household comes primarily from four sources, which I summarize for you:

Income SourceMe My Spouse
EmploymentEssentially 0not 0
RRIF paymentsYesYes — the same as me4
Capital GainsYes – variableYes – variable
Dividends, InterestA bitEven less
TotalRRIF + variable capital gains + a bit of dividend/interestEmployment + RRIF + variable capital gains + even less dividend/interest

Employment and RRIF payments are known at the beginning of the year, and dividends and interest can be estimated within an acceptable range (they are small compared to other chunks of income, anyway). That leaves the capital gains portion of the income to worry about, and it’s variable because of course it depends on what I sell, when I sell it, and who gets the tax attribution.

What’s clear from my table above is that my capital gains attribution needs to make up for the extra income my spouse earns — an employment salary — if I want to meet my goal of equalizing our income.

Principle #2: Get rid of tax obligations early

I figure it’s better to pay taxes sooner rather than later. In the case of my non-registered assets, given that they are 100% equity, they are only going to grow (on average) over time and give me a larger tax liability down the road. And dying with non-registered assets is the worst from a tax perspective, since CRA treats that as a “deemed disposition”, meaning that dead you is effectively taxed as though you sold everything all at once. A tax time-bomb.

So to help with that, I not only track my adjusted cost base per unit for each asset I own, but I track the capital gain per dollar liquidated. Let’s look at some examples:

Asset SymbolACB per share (A)Current Price (B)Capital gain/share (B-A)Capital gain / Dollar (B-A)/B
HXS58.20106.7948.59.455
HXT48.3696.2347.87.497
HXDM39.1264.4325.31.393
  • ACB per share: I track ACB of all my non-registered assets using adjustedcostbase.ca
  • Current price: Current as of market close November 5, 2026 per googlefinance()
  • Capital gain per share: The difference between the market price and my average cost. Your actual capital gain reported to CRA for a given “sell” transaction is this value multiplied the number of shares you sold.
  • Capital gain per dollar: helps me decide which shares to liquidate. Higher means a higher capital gains for the same amount of money, meaning a higher tax liability. Since I’m selling shares with the intent of generating part of my retirement paycheque, knowing the capital gain for liquidating (say) $10000 of HXS is way more meaningful to me than knowing the capital gain involved in selling 100 shares. And it quickly gives me a way to quickly calculate the impact of a given sale on taxable income.

So if I needed $10,000 I could:

  • Sell 93.64 shares of HXS and generate a capital gain5 of 10000*.455 = $4,550
  • Sell 103.38 shares of HXT and generate a capital gain of 10000*.497= $4,970
  • Sell 155.21 shares of HXDM and generate a capital gain of 10000*.393 = $3,930

You could say that selling HXDM is the correct approach since it generates the lowest amount capital gains, but I usually select the one with the worst outcome, in this case HXT. Why? Stocks tend to go up over time6, and I figure by trimming the biggest gains first will save me tax money in the long run.

What it effectively means

The strategy therefore becomes pretty easy to articulate: every tax year, sell assets in my non-registered account until such time as my taxable capital gains equal my spouse’s salary7. After that, try to finesse any remaining monthly payments so that our taxable incomes are (roughly) equal. I’m working on automating some of those calculations.

  1. You can read about how I classify what counts as retirement savings over here: What’s included in your “retirement bucket”? ↩︎
  2. My reasoning is to get rid of “extra” sources of income early in retirement, before CPP and mandatory higher RRIF payments kick in. And having fewer accounts to manage as I get older seems like a good idea, too. ↩︎
  3. 63% if you want to be exact ↩︎
  4. Both me and my spouse are the same age, and our RRIFs are very nearly equal in size. Score one for me on the planning side. ↩︎
  5. That’s raw capital gain, not taxable capital gain. For every $10000 my spouse earns, I get $20000 in raw capital gains to equalize. ↩︎
  6. Not steadily, of course, but I don’t claim to be able to predict near term futures. ↩︎
  7. This is only possible because my wife only works part time, so her salary contribution to the overall household income is modest. ↩︎

high angle shot of two people working in the office

Retirement taxes versus paycheque taxes

RobHLeave a comment

I’ve talked about how to think about taxes in retirement before (and I re-read my post, it still holds up) but maybe something that isn’t clear how it differs from when you collected a steady paycheque.

The paycheque withholds tax et al at the source; retirement, maybe not

I think this is well understood. The government likes getting taxes all year round, not just in April. And so part of your paycheque is remitted to the government — taxes, yes, but also CPP/EI contributions and all that stuff that no longer applies when you stop collecting a paycheque.

Withholding tax is an excellent example of the “pay yourself first” principle popularized by The Wealthy Barber. You never see the money, so you sort-of forget it’s yours. Anyway, all things being equal, the withholding amounts should be pretty close to correct, but there are all kinds of things that can throw off the calculation: bonuses, charitable giving, and RRSP contributions are the main ones. I never quite understood people who were happy to get a tax refund. That’s your money you’re getting back, and you’ve given the government an interest free loan.

Anyway, in retirement, this may not be the case:

  • If you pay yourself RRIF minimum (as I do) then there is no tax withheld at source. Of course, you can take MORE than RRIF minimum, in which case you will experience withholding tax, just like the bad old days when you were working.
  • If you pay yourself from non-registered investments (as I do), you’re likely creating taxable income if you’re selling assets that have increased in value. And that taxable income contributes to (surprise, surprise) your tax bill. Now it bears repeating that only half of your capital gains attract the CRA’s attention: the other half, and the money you put in, are all yours to keep, tax-free.
  • And of course T-slip capital gains, interest income and dividend income isn’t taxed at the source either. All of it must be accounted for at tax time.

The implication of all this is that you have to be ready to pay some of your retirement salary back to the CRA. I have a special Wealthsimple savings account1 that I contribute to monthly; I “self-withhold” about 15% of my salary, fully expecting to drain this account come tax time2.

You care less about marginal tax rates, and more about overall tax rates

In case you weren’t aware, not every dollar you make is taxed the same way. Canada has tax brackets; each tax bracket has its own tax rate. Thanks to taxtips.ca, you can get a combined federal/provincial look for how your income is taxed:

This table (and most tables like it) are showing marginal rates. The marginal rate is the tax rate charged on the income that sits above the floor of the tax bracket. Lots of people mix up the idea of marginal rates versus overall tax rates. Let’s take a simple example of someone who is drawing a salary or getting their income from a RRIF: both are taxed as “other income” in the table above:

  • Net income: $50,0003. Tax bill: 19.05%*$50000=$9525. In this example, there is no difference between your marginal rate and your overall rate.
  • Net income: $55,000. Tax bill: $9525 on the first $50,0004, and 23.15%*$5000=$1,157.50 on the remainder. Your total tax bill in this case is therefore $9525+$1157.50=$10,682.50. Your marginal rate is 23.15%, but your overall rate is much lower: $10682.50/$55000=19.4%.

My financial advisor I hired pre-retirement suggested I should target a 15% marginal tax rate, blended between my spouse and I. That’s not easy to do on RRIF payments alone, but then of course you have to consider other income sources like capital gains and dividends.

Non-registered investments can pay a salary; but tax treatment is quite different

So I look for my non-registered investments to generous returns — whether those are capital gains or dividends is unimportant. From a tax perspective, capital gains are especially weird because when you’re paying yourself by selling assets, you are typically earning MORE than “just” the capital gain (i.e. the part that is taxable) part. An example may help.

Let’s say you bought $10000 of XEQT in January 2023. As of today (October 22), it would be worth $200005:

And say you sold it all on October 22m — you’d have $20000 in your bank account. Hooray. CRA would say you made a capital gain of $10000. So if that represented your whole taxable 2026 income, that would attract a tax bill of 9.53%*$10000 =$953.00. Thinking about overall rather than marginal tax rates, you’d therefore have an overall tax rate of $953/$20000 = 4.7%! Pretty sweet.

If instead that $20000 was a RRIF withdrawal, and you had no other taxable income, CRA would present you a tax bill of 19.05%*$20000=$3,810.00, an overall tax rate of 19.05%,

Maybe you’re counting on your non-registered investments generating $20,000 of dividends instead. This generates an overall tax credit in this case6!

Retirees are obsessed with how much tax they pay

Since taxes tend to be your single biggest expense in retirement, I understand why. I try to be smart without going to extreme lengths; as I learned managing my parents’ estate, there’s either going to be a tax bill while you’re alive, or a much larger one when you’re dead. Taxes you avoid in the early years of retirement are either going to come due once you start collecting CPP/OAS7, or when you’re dead. RRIFs8 and non-registered accounts are considered liquidated on the day of death, attracting all the income/capital gains in one calendar year, and hence the highest possible tax bracket.

  1. This account does NOT factor into my net-worth calculations. I’ve already, in effect, written it off. ↩︎
  2. And in my case, this I expect will start to be every quarter as I’ll shift to paying tax in instalments. Oh well. ↩︎
  3. Net income is lower than your salary, since everyone has (at least) the personal deduction. ↩︎
  4. using the calculation above ↩︎
  5. And doubling your money in less than 4 years is an excellent argument for holding equities. (Of course, you’ll all be crowing when the floor eventually falls out, but equities do outperform over time…) ↩︎
  6. If you’re in a lower tax bracket, it’s hard to beat dividends. They start to become less efficient as you climb the brackets, especially if you’re collecting OAS since grossed up amount of dividends are use to test eligibility for OAS. ↩︎
  7. OAS clawback is a particular obsession of the retired. ↩︎
  8. Unless you declare your spouse as a successor annuitant; you’ve already done that, right? ↩︎

What’s included in your “retirement bucket”?

RobHLeave a comment

My monthly retirement salary is calculated using a methodology called Variable Percentage Withdrawal, or VPW for short. You can read about the methodology over here, and you can follow an excellent real-time illustration of how it works over at https://tinyurl.com/vpwForwardTestFiniki.

Part of the “how it works” is calculating your total retirement savings on a monthly basis. For me that includes the real-time value of:

  • 5 different RRIF accounts (3 for me, 2 for my spouse)
  • 2 TFSAs (1 for each of us)
  • 3 non-registered accounts (one for me, one for my spouse, one that serves as VPW’s cash cushion)

But what’s not in it?

  • My day to day chequing accounts
  • A rainy-day savings account
  • A tax savings account
  • A short term investment account

Since I’m continually talking about what’s in my retirement portfolio (most recently here), I figured a few words of other assets I have might be helpful.

My day to day joint chequing account

This is the account my spouse and I use for day to day banking. It’s an account we’ve held at CIBC for decades. It’s the kind of account that charges no fees as long as a minimum balance is maintained. It doesn’t pay any interest on balances. I could still conceivably use it to write physical cheques, but I can’t remember the last time I used it for that. Like most day to day banking, it has inputs and outputs:

  • Inputs: RRIF payments, payments from my non-registered retirement accounts, my spouse’s salary, eTransfers
  • Outputs: Most bill payments (subscriptions, utilities, insurance, credit cards, taxes, charitable donations), eTransfers, transfers to other accounts

As I build my relationship with Wealthsimple, some of the day-to-day duties are being shared — depending on cash flow I will sometimes pay bills from Wealthsimple, and if my CIBC balance gets too high (not often, but it does happen sometimes) I will move money from CIBC to Wealthsimple since Wealthsimple pays interest and CIBC does not. And if I’m traveling in a foreign country, the Wealthsimple credit card comes into play1, and balances for this card need to be paid from a Wealthsimple account.

My rainy day savings account

Every month, without fail, I redirect some funds to my rainy day savings account2. This is a separate account that pays interest. The rainy day fund pays for unexpected (but never ending) expenses. These could be car related (major repairs), house related (renovations, repairs), or sometimes a large splurge (vacation related). There isn’t a hard and fast rule as to when to apply rainy day savings, but a good starting point is when the cash flow of the joint chequing account looks like it’s heading to dip below the threshold where bank fees start getting paid for day to day banking. I hate all banking fees. Discretionary3 spending from the rainy day account is a joint decision.

My tax savings account

Every month, without fail, I direct some funds from my chequing account to the tax savings account. As a retiree, my only income comes from

  • Monthly RRIF minimum payments, which get no special tax treatment4. It’s like income. The big difference between a RRIF paycheque and a salary paycheque is that a typical salary paycheque has tax withheld at the source, CPP payments, EI payments… A RRIF paycheque has none of that.5
  • Payouts from my non-registered accounts, which also don’t come with any withholding tax. Every payout typically6 generates a capital gain and even with a 50% tax break on capital gains, it adds up!

So yeah, there’s a good chunk of income coming in (all flowing in to my day to day chequing account) but no taxes. So to cushion the blow in April, I’ve set aside funds to pay the looming tax bill. And for simplicity, I keep this separate from other accounts so there’s no temptation to “borrow” from it or to “forget” to make a payment. Payments are automated, direct from the chequing account every month. Wealthsimple makes this sort of thing quite painless to set up. And it’s a straight savings account, paying a small amount of interest, about 50 basis points below Bank of Canada overnight rate.

Short term investment account

This is something I’ve set up after getting a small inheritance. I haven’t decided what to do with this money, but while I think about it, I have it invested in an account with a reasonable return without taking on too much risk. It’s like the rainy-day fund, but with a likely longer time horizon.

The firewall between retirement savings and everything else remains in place. But everything else is a bit more complex than you might expect at first glance!

  1. No FX fees when I use this card. One of three I carry, which I talked about lately. ↩︎
  2. There’s actually a few of these held at different providers (Wealthsimple, Simplii) at the moment; this needs to be consolidated. ↩︎
  3. Renovations that aren’t urgent, for example. ↩︎
  4. I’m ignoring the fact that if you’re over 65 (I’m not) then you can split RRIF income with your spouse however you like. Because I planned ahead, my spouse and I are both the same age, and have very nearly the same RRIF value saved up, so even once I turn 65, the splitting may not be needed. ↩︎
  5. To clarify, if you take RRIF minimum payments (as I do) then there is no withholding tax. If you take more than RRIF minimum, then there is, and the amount withheld will depend on how much above the minimum you go. Full and complete rules outlined by the CRA (prepare coffee before reading). ↩︎
  6. A lot of the things I hold in my non-registered account I have held for a long time. And since it’s mostly boring index funds (I covered what’s inside a while back), they tend to increase in value over time. ↩︎

Give more to charities, less to the CRA

RobH2 Comments

It’s probably not news to most of you that charitable giving in Canada attracts tax breaks that reduce your tax owing to the CRA. It’s a nice deal — support the causes that are meaningful to you while saving a bit of tax owed.

But for those of you with non-registered accounts holding stocks and ETFs, did you know there’s even a better option that can save you even more tax? By donating shares in-kind to your chosen charity, you get the same donation credit AND you avoid paying capital gains tax on the shares donated!

The differences can be sizeable depending on the unrealized capital gains you have in your portfolio.

Here’s a quick example: let’s say I bought $10,000 of XGRO1 5 years ago in my non-registered account. Per this dividend calculator featured in “Tools I Use” I see that it’s currently2 worth $15,850.

Say I want to donate $1000 to a charity — selling $1000 of XGRO today would generate a capital gain of $369. That’s taxable at 22.48% marginal rate in Ontario in 20253, so I have to pay an additional $83 in taxes4.

If I instead donate the shares in kind to the charity, I pay nothing on the capital gain, and I keep $83 either for me, or for additional charitable works.

So how do you do this? Well, it will depend on the online broker you deal with, but generally the steps are something like:

  • Let the charity know you’re intending to do this. Larger charities will have a published process, for example the Ottawa Food Bank’s is here5. Smaller charities can still benefit if you use a service like CanadaHelps6.
  • Let your broker know your intent. Every broker will have a different process, usually including some kind of form. Here’s some examples I found:7

And that’s it. The receiving charity will issue a donation receipt reflecting the market value of the donated securities for your tax filing. The nullification of the capital gain is done using form T11708 when it comes time to file your taxes.

I plan to do this more systematically for the charities I support; it’s admittedly a bit more effort than automated contributions. Since Questrade (my current broker) charges me $25 every time I do this, I’ll have to be a bit more strategic about amounts and timing.

  1. XGRO is a significant part of my portfolio, and as such it is included in my ETF all-stars page. What is also true is that I don’t hold much of it in my non-registered portfolio, but that’s just a historical investing habits showing up. ↩︎
  2. 5 year return, WITHOUT dividends reinvested as of July 17, 2025. Not reinvesting the dividends means my cost base is clearly $10k, useful for the example that follows. ↩︎
  3. Per https://www.taxtips.ca/taxrates/on.htm for taxable income between $114k and $150k. Don’t forget that capital gains are only taxed at 50% of the value of the gain. ↩︎
  4. Ignoring the tax savings generated by the charitable donation in the first place since that’s the same in both scenarios. ↩︎
  5. Googling “donate securities” <charity name> is helpful ↩︎
  6. They do keep a portion of the donation to offset their expenses, so it may not be a good idea for small donations. ↩︎
  7. Sorry Scotia iTrade users, I did my best but could not find their form. Let me know if it’s available somewhere and I’ll update. I’ve successfully used the process with both BMO and QTrade. ↩︎
  8. i’m not an accountant. Consult a professional if you have concerns. ↩︎