“A dollar’s value depends on the tax trail it travels.”

With our tax liabilities rising significantly over the decades (chart), tax planning continues to be an important part of wealth management. How and when you draw income can affect taxes, eligibility for government benefits and long-term financial health. Whether you’re building wealth, nearing retirement or already retired, a tax-efficient withdrawal strategy can make a meaningful difference. Here is a brief look at common income sources, with ideas to help you optimize withdrawals or manage income streams more effectively:

Non-Registered Accounts — Tax treatment depends on the type of income: interest (fully taxable), dividends (eligible for a dividend tax credit) or capital gains (50 percent is taxable). Tax-loss harvesting can offset capital gains to reduce your overall tax bill.

RRSP — Withdrawals are fully taxable and subject to withholding tax. Importantly, once funds are withdrawn, contribution room is permanently lost.

TFSA — Offers significant benefits as growth is tax-free and withdrawals are not taxed. This means withdrawals do not affect income-tested government benefits. Any amount withdrawn can be recontributed in the following calendar year.

Employment Income — If you continue to work while drawing income from other sources, consider how employment income will stack with taxable withdrawals. In high-income years, deferring benefits (if possible) or adjusting withdrawals may help reduce the tax burden.

Here are additional considerations for those nearing retirement:

Canada/Quebec Pension Plan (CPP/QPP) — CPP/QPP benefits are taxable income. Timing matters: starting early reduces benefits by 7.2 percent per year before age 65. Delaying increases payments by 8.4 percent per year after age 65, to a mximum of 42 percent by age 70. The total benefit received can impact income level and tax situation.

Old Age Security (OAS) — OAS is a taxable benefit starting at age 65. OAS is reduced by 15 percent of the excess if net income exceeds $93,454 (2025) and is fully clawed back at $151,668 (ages 65 to 74). Delaying OAS increases the benefit by up to 36 percent by age 70.

Registered Retirement Income Fund (RRIF) — Mandatory withdrawals begin the year after opening the RRIF, increasing taxable income. Some start RRSP withdrawals earlier to manage future tax exposure or reduce the risk of triggering the OAS clawback.

Company Pension — Pension income is taxable. After age 65, the pension tax credit may help offset the tax liability. Consider timing your pension’s start with other sources of income to manage the tax liability.

Income Splitting — Couples can sometimes lower their combined tax burden by splitting certain types of income when one has significantly higher income. For retirees, shifting eligible pension income may reduce taxes or the OAS clawback. For those still working, coordinating taxable income (particularly after 65) may yield tax savings over time.