Managing Your Tax Bracket After Retirement: 10 Smart Steps to Follow Why Tax Bracket Management Matters In retirement, your income typically comes from a mix of registered and non-registered investments, government benefits, and any other sources like rental income, corporate holdings, or professional corporations. Even if your total income is lower, your marginal tax rate can still stay high if you aren’t intentional about how and when you access these funds. For dentists with a Dental Professional Corporation (DPC) or holding company, the planning stakes are even higher. The Lifetime Capital Gains Exemption (LCGE) can allow you to shelter up to $1.25 million (2025 limit) in capital gains when selling qualified small business corporation shares— which may include shares of your professional corporation provided that various conditions are met. Coordinating LCGE use, corporate investment withdrawals, and personal income can significantly affect your retirement tax bracket and estate value. Without a thoughtful plan, you could face Old Age Security (OAS) Recovery Tax, missed opportunities to draw down your Registered Retirement Savings Plan (RRSP) before converting it to a Registered Retirement Income Fund (RRIF), or a large tax bill on your estate from capital gains and probate fees. The Smart Approach Whether you’re selling a dental practice, winding down a corporation, or drawing from other investments, the right strategy can make a significant difference to your retirement Retirement marks a new chapter in your financial plan, not the end. It’s a shift from building wealth to preserving it, and that shift comes with new considerations. Once you’re no longer earning income from your dental clinic, managing your tax bracket in retirement becomes just as essential as managing your investments. “Dentists often focus on the clinical side of their careers and practice growth,” says Matthew Wright, Investment Planning Advisor, CDSPI Advisory Services Inc. “But once you step back from practice, how you structure withdrawals and plan your income can have just as big an impact on your wealth as your investment returns.” income. For practice owners, that may mean ensuring the sale qualifies for the Lifetime Capital Gains Exemption (LCGE) and timing withdrawals from your corporation or holding company to stay in a favourable tax bracket year after year. “With careful planning, we can often significantly reduce the tax bill on a practice sale and plan for substantial tax savings for future years,” says Francis Lanois, Partner, MNP. “That means more of your hard-earned value stays in your hands—and can work for you in retirement.” 10 Practical Steps to Manage Taxes and Protect Your Wealth 1. Coordinate withdrawals across account types Balance withdrawals from RRSPs/RRIFs, Tax Free Savings Accounts (TFSAs), non-registered accounts, and holding companies or DPCs, if you have these. For example, in years when your investment income or capital gains are higher, you might draw more from your TFSA to prevent moving into a higher tax bracket. 2. Time your withdrawals to reduce your tax bill You can’t completely avoid taxes in retirement, but you can control when and where income comes from. For example, starting RRSP withdrawals before age 72 can spread income over more years, reducing the risk of higher tax brackets and OAS claw-backs later. The extra cash you need could come from a TFSA, non-registered accounts, or retained earnings in your DPC. 32 | 2025 | Issue 6
RkJQdWJsaXNoZXIy OTE5MTI=