Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Different Retirement Income Sources and Their Tax Implications in 2025
Feb 12, 2025
Image: Freepik
Most people want to retire after working for much of their life. However, they hesitate to fulfill their dreams because of the financial insecurity. No one exactly knows how much they need to live peacefully after retiring. According to experts, you can do well with 60% to 70% of your pre-retirement income based on your lifestyle. Some may even require less than this. Hence, it all depends on your lifestyle decisions, the age from when you start using your savings, and what you do with your inheritance. They believe that retirees must know the types of retirement income sources they have and how taxes apply. Considering this aspect is equally essential as focusing on the savings. Some standard options include registered retirement savings plans, tax-free savings accounts, government pensions, employer pensions, etc. Let’s delve into a few of them for some quick knowledge.
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RRSP Savings
A larger group of Canadians earn their retirement money from their contributions to their registered retirement savings plans. The benefit of this savings plan is that your capital and income continue to grow tax-free. You pay tax during fund withdrawal, whether before or after retirement. Theoretically, people pay lower taxes when they withdraw money after retirement. However, it will be high if you use the funds during your working year while earning a reasonable sum. You must close this account when you are 71. If you take out cash, it will be fully taxable. The better option can be transferring it to some other viable tax-advantaged accounts. How do you choose? Consult Aleph Retirement Planners or other specialised agencies to understand your choices.
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Government pension plans
Canada pension plan and old age security are the two common sources. You can benefit from OAS based on your income and the number of years you spend in Canada. CPP can be accessible based on how you contribute to it during employment. Benefits can be enjoyed as early as age 60. However, 65 is the standard. Early withdrawals severely affect your payouts up to 36.0%. Otherwise, the monthly amount will be reduced by 0.6%. In 2025, OAS payments for 65-74 age groups can be C$728 and for 75 and over, C$800. The amount can be significant if you withdraw it later, until age 70. At the same time, you must be careful about the net income generated from various sources. OAS clawback may apply if it is more than C$90,997 in 2024. Since these areas become a little tricky, it's best to contact your retirement planner to understand your options.
Furthermore, Guaranteed Income Supplement can be available for seniors with less than C$21,624 income. However, this threshold can be slightly higher for an individual living with his spouse. These things depend on the status of the OAS pension.
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TFSA
Tax-free savings accounts are not necessarily a retirement income source. But they can be included in the plan to optimise earnings. You can use this plan throughout your life with continuous yearly contributions. Withdrawals can be non-taxable. Hence, you must consider drawing your funds when receivables from other sources don’t meet your needs.
See: Fintech Trends & Predictions Across Generations in 2025
Managing all these complexities without an advisor can be challenging because of your busy schedule. So, choose someone you can trust to plan your retirement better.
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