People may work for 40 or more years prior to collecting a pension. It is during these years that couples acquire the wealth required for retirement. Minimizing the amount of tax that you pay during this 40-year period is an important component to financial planning. It is often said that it is never too late to start investing for the future. It could also be said that it is never too early to start income splitting.
The “Tax Fairness Plan” announced by the Federal government relates strictly to specified pension income. This is good news for many pensioners but primarily impacts individuals in their 60’s and older. What about those first 40 years? We encourage couples to take advantage of income splitting opportunities throughout their life.
Income Splitting
Pension and income splitting are similar concepts with the same goal of shifting income from an individual in a high tax bracket to a family member in a lower tax bracket (or not taxed at all if the family member’s income is low enough). The result for both should be a reduction in the amount of tax the household pays. Income splitting is more encompassing and may include pension splitting and other strategies. Income splitting is a term that may be used throughout your life at any age. Income splitting strategies may extend to your entire family.
