Why you should focus on retirement cash flow more than retirement income

By Stephanie Holmes-Winton | June 23, 2025 | Last updated on June 20, 2025
5 min read
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We need to stop making assumptions about things clients know based on how well they’ve saved for their future. Having a high income may let clients automate their savings and put significant amounts of money towards retirement. But having a larger balance or a high income doesn’t mean that clients have vast knowledge about all areas of their finances. Net worth is not evidence of financial literacy. It only shows your client’s current financial capacity.

Many of those we see in our employee financial wellness program share their financial beliefs and current knowledge through surveys and polls. This has allowed us to spot numerous knowledge gaps that could cost participants if they don’t gain new information and make changes before it’s too late.

Check out these frequent misassumptions among highly paid professionals, most of whom have an advisor. Verify that your clients don’t have any of their wires crossed when it comes to these issues. And make sure you’re not making your own mistaken assumptions.

1. RRSP or RRIF withdrawals are taxed at a lower rate

One of the most common misassumptions is the belief that RRSPs and RRIFs are taxed at a lower rate when withdrawals are made over a certain age. This may be because during the sales process, clients are told that they’ll likely have a lower marginal tax rate in retirement. The truth is no one knows what marginal tax rate your client will pay in retirement.

When I ask questions to see where this belief comes from, it seems to be a misinterpretation of the age rules regarding when an RRSP becomes an RRIF. But the age someone is when they make an RRSP or RRIF withdrawal has nothing to do with how taxable the income is.

Sure, some people will pay significantly less tax on a dollar withdrawn from their retirement account than they were paying on a dollar of income when they worked, but that’s only if their income is quite a bit lower.

Clients who have a pension, or have done a really good job maxing out their RRSP, aren’t likely to see tax rates much lower than they were when they were working. Even if it’s lower, it’s not likely to be zero. It really depends on how much income they keep, which is the only income that really matters to a retiree.

Still, plenty of well-educated, intelligent people with great jobs and large RRSP accounts do not realize that every dollar they ever take out of that account will be 100% taxable, just like a salary or any other regular income. This is an inaccurate, dangerous and expensive assumption.

One strategy I like to teach people is what I call retirement income stacking. Use a charting tool (any spreadsheet software can do this). Enter all your client’s sources of income in retirement. Include whether they are taxable or not, to see how much fully taxable income is stacking up during any given year of retirement.

2. A TFSA is best for emergency savings

This knowledge gap is the result of how TFSAs were marketed in the early days. They were often promoted for short-term savings, though the penalties for withdrawal and redepositing make it clear that these accounts are not great for this purpose.

For instance, a client with a maxed out TFSA would be frustrated trying to top their funds back up after taking out money for an emergency, and then getting hit with a penalty for not waiting until the following year to recontribute those funds. 

Many people in our programs have TFSAs full of cash, and think of them as emergency savings accounts. They are wasting the most impressive feature of TFSAs. It makes more sense to use their account for investments that have the best chance of long-term growth to maximize future tax-free income.

The TFSA can also be added to retirement income stacking because it’s a tax-free layer that can fill in gaps, or sit on top of their taxable income sources. They can increase their cash flow without increasing their total taxable income.

3. Everyone should take CPP and OAS as early as possible

When we teach people about life insurance, nobody thinks they’re going to die prematurely. But those same people want to withdraw from their CPP or OAS as early as possible because they’re worried about dying young and missing out on payments.

This is hyperbolic discounting (present basis). People want their CPP and OAS payments as soon as they can get their hands on them, not because they have done the math to determine optimal timing.

When your clients take government benefits can have a drastic impact on how long their investable assets last. This is a personal decision, but clients need you to help them avoid getting sucked into their own present bias.

Once again, my retirement income stacking strategy can help map out the timing of when to start CPP or OAS. Taking the time to help your clients see a visual of when they start taking what, and how it could affect their total cash flow, is crucial. You can also help clients with employer pension plans better understand CPP integration.

4. I will spend less in retirement

When we ask employees how much they’ll spend in retirement, they tend to underestimate what they’ll need. We take them through an exercise in which they note what expenses go up, down, away and stay the same. They also have to add new expenses.

Their reaction is almost always the same. They are shocked by how many expenses are going to go up, and how few will go away.

Longevity trends make this misassumption even more dangerous. Many of your clients would be well advised to plan for a retirement that is almost as long as their working life.

Adding cash flow advice to your process when clients are in their accumulation phase will build up habits that protect them during their decumulation phase. It will also provide you with a more accurate retirement income need, and help clients find the money to fund their retirement.

These misassumptions are exceedingly common. Check in with every client to ensure they understand how all these factors impact their retirement cash flow. Don’t let mistakes go unaddressed. It will cost you and your clients a fortune.

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Stephanie Holmes-Winton

Stephanie Holmes-Winton is the founder of CacheFlo and the creator of the Certified Cash Flow Specialist program. She can be reached at sholmes@cacheflo.co.