Let’s meet Nolan. Nolan and Avery are married and live in Ontario. He earns $45,000 and she earns $40,000. They both plan to have 60% of their respective current income (adjusted for inflation) during retirement. Their children are now grown. He currently faces a tax rate of 30% but during retirement that tax rate is expected to reduce to approximately 21% due to his lower income.

Assumptions:

•Income is not in a range where RRSP contributions or withdrawals impact government benefits.

•Investment rate of return is 5% per year.

In this scenario Nolan would be much better off investing in an RRSP for retirement.

Finally, let’s meet Chance. Chance lives in Ontario and earn $105,000 per year. He plans to replace 80% of his current income in retirement (adjusted for inflation). He currently faces a tax rate of 43% but during retirement his tax rate is expected to reduce to 33% with his reduced income in retirement. His retirement income will fall within the range where Old Age Security (OAS) clawback can be expected to apply.

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