• When’s the best time to retire? The timing is not always up to you, but if you can choose, there may be an ideal date.

    The best date to retire for tax purposes

    For most Canadians planning their retirement, tax isn’t the primary factor, Laf. However, there are instances when tax can come into play for choosing a retirement date, as well as other timing and calendar-based considerations.

    Tax rate for retiring in Canada

    Canadian tax is levied on a graduated basis, with higher income moving into higher tax brackets. Federal tax brackets increase at about $50,000, $100,000, $156,000, and $222,000 for 2022. Provincial and territorial tax brackets vary, and this results in most taxpayers falling within many tax brackets. Only income that exceeds the tax bracket thresholds is taxed at the higher tax rate—not your entire income.

    So, I suppose it is possible for someone to decide that being in a certain tax bracket on their next dollar of income is a deterrent from continuing to work in the year they retire. Practically speaking, this is probably not going to apply for most people, Laf.

    If someone has large, deferred employment compensation, for example, they might retire closer to the end of the year to push that income into the following year. Specific types of bonuses for senior executives like deferred share units (DSUs) might become payable within a certain number of days of retirement. Employee stock options might also need to be exercised within a certain time limit after retiring, like 90 or 180 days, though some stock option plans allow normal 10-year expiry dates, for example, to apply under certain retirement criteria.

    Read the full article on Money Sense >> 

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