How Do the Accumulation/Decumulation AI Strategies Work?

The Accumulation and Decumulation AI Strategies optimize the order of contributions and withdrawals across various account types (TFSA, RRSP, and non-registered accounts) to maximize tax efficiency and retirement income.

Accumulation Strategy

The default accumulation order in the platform is as follows:

1. TFSA Contributions: Prioritize tax-free savings accounts for their tax advantages.
2. RRSP Contributions: Next, use available RRSP contribution room.
3. Non-Registered Accounts: Lastly, contribute any excess savings to non-registered accounts.

Customizing Accumulation Order:

• The strategy may adjust the order based on specific factors, such as:
  • Higher Income: Prioritizing RRSPs for immediate tax deductions.
  • Lower Income: Favoring TFSAs or non-registered accounts to avoid future tax burdens from RRSP withdrawals, which may affect benefits like GIS (Guaranteed Income Supplement).
• If manual overrides for contributions are set, the platform cannot optimize the strategy dynamically.

Decumulation Strategy

The default decumulation order in the platform is:

1. Non-Registered Accounts: Draw from these accounts first to reduce taxable investment income.
2. Registered Accounts (e.g., RRSPs/RRIFs): Deplete these next.
3. TFSAs: Withdraw from TFSAs last to preserve tax-free growth.

Customizing Decumulation Order:

• The strategy evaluates scenarios where altering the order may be advantageous, such as:
  • Avoiding OAS Clawbacks: Drawing from registered accounts earlier to minimize taxable income later in retirement.
  • Maximizing GIS Benefits: Avoiding RRSP withdrawals that increase income and reduce eligibility.
  • Tax Efficiency: Managing withdrawals to reduce overall taxes or smooth out taxable income over time.