Withdrawing from RRSPs before age 71? - Page 2
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Thread: Withdrawing from RRSPs before age 71?

  1. #11
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    Quote Originally Posted by Eclectic12 View Post
    I would think a starting point would be to add up all of one's income for that age to see how much income from all sources (don't forget investments, all forms of pension etc.).

    Then there's looking at scenarios ... for example, some have posted they converted half or more of the RRSP to a RRIF at or before 65 to have low RMDs as well as spread out the income.


    One thing to watch out for is that a direct RRSP withdrawal may have a withdrawal fee where other's have posted that their financial institution does not charge fees for RRIF payments.

    I opened up an RRSP last year (age 70) and will have to convert it to a RIF by end of this year as I have already turned 71.

    The problem I have now is that the reason that I opened up my RRSP last year, was to have a tax sheltered vehicle for my Nortel settlement lump sum, estimated to be around
    ($24k-40K).

    Unfortunately, the early settlement I was expecting in Apri, l is not going to materialize because two former employees on LTD, have filed a lawsuit against the
    Nortel estate in Ontario court of Appeal, which was waived by the appeal court judges.

    The two employees are now considering hiring a constitution lawyer and taking it to the SoC as a human rights issue.

    http://www.cbc.ca/news/canada/ottawa...ourt-1.3950833


    I was wondering if this case is accepted by the SoC, what should I do with my RRSP conversion ($2500) before December 31st.
    I would like to avoid paying a bigger tax hit for just ONE year when I finally receive my settlement.

    Anybody have some viable ideas what to do?


  2. #12
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    Quote Originally Posted by like_to_retire View Post
    Every case is different of course. In my case, I spreadsheeted the scenario you point out, and when I included the loss of tax deferred compounding from retirement to age 71, the results ended in a wash. No amount of manipulating the data worked in my favour to any degree that would make me take the leap to start withdrawing from those tax deferred funds. I also had to include the taxes now created from those new funds withdrawn that were now in a taxable account. The introduction of the TFSA helped a bit with the situation, but never enough to make me pull the trigger. Every scenario I tried usually resulted in an advantage in my favour after age 90, so I decided I would wait until they force me to convert. Lots of things can happen by then, the least of which has already started by the lowering of the percentage of mandatory withdrawals.
    But again, every case is different, so if anyone thinks this tactic is a slam dunk should do some detailed examination.
    ltr
    Very good points. That is where we have landed at this point as well, although we do plan a minimum RRSP>RRIF conversion at 65 to take advantage of the pension tax credit (we have no other pension income).

    It is also possible for OAS rules to be changed by future governments as payouts increase and federal debt grows. So planning your retirement income streams on the basis of maximizing OAS carries that risk.
    Last edited by OnlyMyOpinion; 2017-03-16 at 11:43 AM.

  3. #13
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    Quote Originally Posted by [B
    GreatLaker;1508586]Same here. In first year of retirement I plan to transfer some RRSP funds to a RRIF, then from retirement to age 71 I will withdraw a set amount ($ 5 figures) from RRIF each year in order to minimize OAS clawback when mandatory conversion of all RRSP to RRIF takes place.
    What "clawback" are we talking about here? I'm not aware of any clawback of OAS just because you decided to take ($10k) out of your RRIF/
    Certainly the $10k you take out of the RRIF will have some withholding tax (20%) but that is just viewed as taxable income, same as OAS which is taxable as well.

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  5. #14
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    Quote Originally Posted by heyjude View Post
    Another reason to create a RRIF at age 65 is to take advantage of the $2000 pension tax credit.
    Good point. I have a company pension, so I already qualify for that, but the RRIF payment is also considered by CRA to be "Pension Income". Also, bear in mind that the $2,000 is really $4,000 for a couple, because each person claims it.

  6. #15
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    Quote Originally Posted by carverman View Post
    What "clawback" are we talking about here? I'm not aware of any clawback of OAS just because you decided to take ($10k) out of your RRIF/
    Certainly the $10k you take out of the RRIF will have some withholding tax (20%) but that is just viewed as taxable income, same as OAS which is taxable as well.
    The RRIF withdrawal is viewed as taxable income, which will bring you closer or take you further over the OAS threshold where you'll pay 15% extra tax in clawback of the OAS benefit. They call it recovery tax now to soften the blow.

    ltr

  7. #16
    Senior Member pwm's Avatar
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    Quote Originally Posted by carverman View Post
    What "clawback" are we talking about here? I'm not aware of any clawback of OAS just because you decided to take ($10k) out of your RRIF/
    Certainly the $10k you take out of the RRIF will have some withholding tax (20%) but that is just viewed as taxable income, same as OAS which is taxable as well.
    We're referring to the dreaded "Social Benefits Repayment" which is line 235 on your tax return. It's 15% tax on income over $73,756 this year.

  8. #17
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    Quote Originally Posted by carverman View Post
    Anybody have some viable ideas what to do?
    If you're married and your wife is younger, maybe you can opt for it to be a spousal RRSP deposit. You can still do spousal for a spouse < 71.

  9. #18
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    Quote Originally Posted by carverman View Post
    ... I was wondering if this case is accepted by the SoC, what should I do with my RRSP conversion ($2500) before December 31st. I would like to avoid paying a bigger tax hit for just ONE year when I finally receive my settlement.
    Anybody have some viable ideas what to do?
    You obviously have no choice but to convert it to a RRIF and take first payment in 2018.
    Why wouldn't you just set it up to withdrwal the minimum (5.28% or $132 if you are age 71 at start of 2018)? You are only required to withdraw the minimum, but you can take out more if you choose to.
    I'm not certain - but I believe once the settlement does come in, you will be able to have it go into the RRIF (or LIF)?

    Boy, ex-CEO Dunn's claim for $120MM must make him popular. A guy's got to look after his retirement after all.
    Last edited by OnlyMyOpinion; 2017-03-16 at 12:26 PM.

  10. #19
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    Quote Originally Posted by pwm View Post
    We're referring to the dreaded "Social Benefits Repayment" which is line 235 on your tax return. It's 15% tax on income over $73,756 this year.
    Whew! Not an issue for me.. Normally, I'm well below $40k in total income, thanks to my support payments to my ex.

    Most years, its well under $36K. For 2016, with my one time Nortel Hardship fund payment, I just made it to $46K total income.

  11. #20
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    Quote Originally Posted by OnlyMyOpinion View Post
    I'm not certain - but I believe once the settlement does come in, you will be able to have it go into the RRIF (or LIF)?

    Boy, ex-CEO Dunn's claim for $120MM must make him popular. A guy's got to look after his retirement after all.
    Yes, he's the one that I consider committed fraud, which wasn't proven satisfactorily in court, so he escaped jail and having to pay back some of his bonues that
    he didn't deserve. The old story continues...the rich get richer and the poor (disabled) get poorer.


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