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 clinical income, 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.”
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 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 favorable 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 ACOUNT TYPES
Balance withdrawals from RRSPs/RRIFs, Tax Free Savings Accounts (TFSAs), non-registered accounts, and if you have a holding company or Dental Professional Corporation (DPC). 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 Old Age Security (OAS) claw-backs later. The extra cash you need could come from a TFSA, non-registered accounts, or retained earnings in your DPC.
3. MAKE THE MOST OF SURPLUS ASSETS/STRATEGIC GIFTING
If you have more than you’ll need for your lifetime, you could use surplus funds to help family members now and reduce your estate’s future tax bill. This might mean funding a Registered Education Savings Plan (RESP) for a grandchild, gifting cash to an adult child for a home purchase, or buying a corporately owned life insurance policy to transfer wealth tax-efficiently.
4. KEEP CONTRIBUTING TO YOUR TFSA
There’s no age limit for TFSA contributions, and withdrawals are always tax-free. Even small amounts added each year can grow significantly over time, and using corporate dividends (after-tax) to fund TFSA contributions can be especially effective.
5. CONSIDER INCOME SPLITTING IN RETIREMENT
Once you turn 65, RRIF withdrawals and certain annuity payments qualify for pension income splitting rules. This allows you to shift up to 50% of that income to a spouse or common-law partner in a lower tax bracket, reducing your household’s total tax bill.
6. DELAY CPP AND OAS (IF IT MAKES SENSE)
If you have other income sources early in retirement, such as corporate dividends or non-registered investments, you might delay CPP and OAS to increase the monthly payments you’ll receive later and help keep your income lower in the early years.
7. MONITOR THE OAS CLAW-BACK THRESHOLD
If your income nears the annual OAS claw-back threshold, you could reduce RRIF withdrawals, postpone realizing capital gains, or draw instead from your TFSA to stay below the limit.
8. EXPLORE CHARITABLE GIVING
Making donations to registered charities, either personally or from your corporation, can generate valuable tax credits. Larger gifts can be planned in years when your taxable income is higher, such as after selling off investments or a practice.
9. INTEGRATE CORPORATE AND PERSONAL TAX PLANNING
As a professional corporation, align your compensation strategy with your personal financial goals. For example, consider paying yourself enough salary to maximize RRSP contribution room, while balancing dividends to access funds more tax-efficiently without pushing yourself into a higher tax bracket. TFSA contributions, meanwhile, can always be maximized regardless of your income mix.
10. REVIEW YOUR PLAN REGULARLY WITH EXPERT GUIDANCE
As you enjoy retirement your health, goals, or lifestyle might shift over time. Your retirement plan and investment approach should be flexible enough to pivot as your needs evolve.
Tax strategies in retirement aren’t one-size-fits-all. Your income mix, personal goals, and timing all play a role, and expert guidance can help you get it right.
An advisor from CDSPI Advisory Services Inc. can help you develop a personalized post-retirement plan that aligns with your complete financial picture—from insurance and investments to tax and estate planning. Through our partnership with MNP, you have access to trusted tax and accounting advice tailored to your needs. Additionally, our partnership with Scotiabank provides specialized banking solutions designed for healthcare professionals.
Speak with an investment advisor to review your income strategy and explore ways to manage your tax bracket more effectively in retirement.
This information is intended for informational purposes only. For specific situations you should consult the appropriate financial, legal, accounting or tax advisor.