Withdrawing from RRSPs before age 71? - Page 7
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Thread: Withdrawing from RRSPs before age 71?

  1. #61
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    I am 56 very interesting conversation,,, topic is one of value to me and us that are to retire before 60 ,,i will be 56 so there is lots of info I am not aware of,,,Thanks for the info,,,like I have explained very poor planning on my part,,having enough cash is only a small part of the plan,,,making the cash is the easy part,


  2. #62
    Senior Member GreatLaker's Avatar
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    Quote Originally Posted by gibor365 View Post
    but I still don't understand.... If you stopped working, even at age 50, why not transfer ALL RRSPs to RRIFs and withdraw minimums or whatever you want depending on RRIFs amounts?
    If a retiree has non-registered assets, withdrawing from those accounts will most likely be more tax effective. RRSP/RRIF withdrawals are taxed at full marginal rate. In non-registered accounts, dividends are taxed significantly less. And capital gains are taxed at half the rate on the gain only. So spending from non-registered assets means lower taxes therefore more left in the accounts to compound.

    The complication comes in the year you turn 72 when mandatory RRIF withdrawals start, which can bump up the tax rate significantly (in my case I expect to jump up 3 tax brackets and my marginal tax rate will increase 50%). Plus if your net income is over the OAS clawback threshold, you get taxed at 15% on income over the threshold.

    So the trick is to choose which accounts to spend from when, to optimize taxes and maximize your estate value. Withdrawing some funds from RRSP or RRIF before age 72 may do that by paying more tax earlier but less later.

    If all your savings are in tax-deferred accounts it's not an issue. It really depends on individual circumstances as you can see from the varied analysis by different posters.
    Eschew obfuscation. Espouse elucidation

  3. #63
    Senior Member GreatLaker's Avatar
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    Quote Originally Posted by pwm View Post
    It is a good question and I don't mind sharing. Here's the story: I couldn't drag myself into my job anymore, so I quit at 55. I was in IT tech support which entailed being on-call 24X7X365 with a pager, working weekends, no decent vacation and loads of stress. As a result, every year I waited for CPP added to my "no-earning" years. I decided that waiting to get more, was canceled out by the "no-earning" year reduction so I took what I could get at 60. If I hadn't hated my job I would likely have continued working until at least 62. If that had been the case, I probably would have delayed CPP for some time as well.
    Thanks very much PWM. I'm turning 60 and retiring this year. I won't have the full number of contributory years, so I need to be careful to not increase my zero contribution years too much.
    Eschew obfuscation. Espouse elucidation

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  5. #64
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    Quote Originally Posted by GreatLaker View Post
    If a retiree has non-registered assets, withdrawing from those accounts will most likely be more tax effective. RRSP/RRIF withdrawals are taxed at full marginal rate. In non-registered accounts, dividends are taxed significantly less. And capital gains are taxed at half the rate on the gain only. So spending from non-registered assets means lower taxes therefore more left in the accounts to compound.

    The complication comes in the year you turn 72 when mandatory RRIF withdrawals start, which can bump up the tax rate significantly (in my case I expect to jump up 3 tax brackets and my marginal tax rate will increase 50%). Plus if your net income is over the OAS clawback threshold, you get taxed at 15% on income over the threshold.

    So the trick is to choose which accounts to spend from when, to optimize taxes and maximize your estate value. Withdrawing some funds from RRSP or RRIF before age 72 may do that by paying more tax earlier but less later.

    If all your savings are in tax-deferred accounts it's not an issue. It really depends on individual circumstances as you can see from the varied analysis by different posters.
    To avoid the age 72 complication that you note (a jump in income as non-reg is joined by RRIF income), our current plan is to live off of our CPP (taken at 60) plus non-reg assets until age 72, then dispose of them (gift them), and be left with our RRIFs, CPP (OAS?), TSFA and home as assets for the balance of our life. We're at early 60's. Part of the plan includes crystalizing non-reg gains/losses over the next few years. Current spending and income projections support the plan. We can 'tweak' it if necessary.

    Re/ capital gains, I guess we'll know next week whether the Liberal Feds plan to take more of our money.
    Last edited by OnlyMyOpinion; 2017-03-17 at 07:37 PM.

  6. #65
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    If all your savings are in tax-deferred accounts it's not an issue. It really depends on individual circumstances as you can see from the varied analysis by different posters.
    Yes, majority of my saving in tax-deferred accounts, in non-reg I have only GIC/HISAs, as per today value interest I get is about $7,000
    If I switch SRRSP to SRRIF is 2 years, my RRIF minimum (at current market value) will be $7,000 and if I switch also RRSP to RRIF , RRIF minimum will be $4,800 ....
    Thus, as per calculator,
    You'll owe about $1,543 in tax: $1,099 in federal tax and $444 in provincial tax. Your after-tax income is $17,257. Your average tax rates are 8.21%
    If I switch both to RRIFs at age 60, my minimums will be $8,957 + $6,109, + $7,000 interest from GIC/HISA
    You'll owe about $2,198 in tax: $1,589 in federal tax and $609 in provincial tax.
    Your after-tax income is $19,868. Your average tax rate are 9.96%
    + more taxes if I start getting CPP.

    If I switch both to RRIFs at age 65, my minimums will be $10,749 + $7,331, + $7,000 interest from GIC/HISA
    You'll owe about $2,802 in tax: $2,041 in federal tax and $761 in provincial tax.
    Your after-tax income is $22,278. Your average tax rate are 11.17%
    + more taxes if I start getting CPP/OAS.
    Thus, from what I understand, the best case scenario is to start RRIFs at 52.... or am I missing something?

  7. #66
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    Can you move in kind from srrsp to sriff.

  8. #67
    Senior Member pwm's Avatar
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    Quote Originally Posted by Oldroe View Post
    Can you move in kind from srrsp to sriff.
    Yes. No need to sell anything, just transfer the contents of the RRSP to the new RRIF.

  9. #68
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    Quote Originally Posted by gibor365 View Post
    Yes, majority of my saving in tax-deferred accounts, in non-reg I have only GIC/HISAs, as per today value interest I get is about $7,000... Thus, from what I understand, the best case scenario is to start RRIFs at 52.... or am I missing something?
    Gibor, You may already have all this sorted out, and I'm not suggesting you post it all.

    What may be missing are:
    i) the balances remaining in your non-reg and rrsp/rrif accounts over time, depending which scenario you choose,
    ii) what total income you require and what % each of these income streams represent,
    iii) how long you need this income
    iv) other inc streams, tsfa assets, house, etc.

    I'm just saying that we can't really comment in a meaningful way with only the income streams you list. As GL noted, it really depends on each individual's circumstances.

    Frankly, the difference between paying $1.5k of tax at age 52 versus $2.8k at age 65 doesn't seem a compelling reason to make an irreversabe switch to rrifs at age 52 unless it is all part of a well considered plan.

    For example, if you start rrifs at age 52 you will compromise their tax-sheltered growth and have reduced amounts remaining at age 60, 65, or 72 - is this baked into your numbers? And if you draw $7k a year from your non-reg beginning at age 52, how much will be left at age 60 or age 65 and how long will it last? - you show $7k/yr still from non-reg). If you draw $14k instead and leave rrsp's untouched what is the result? Alternatively, if you take more from rrifs and leave non-reg untouched, etc .....

  10. #69
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    Have folks played with this or used something similar?
    http://www.taxtips.ca/calculators/rr...calculator.htm

    I played with the numbers assuming $500k to start, at age 60 with 6% ROR to withdraw $30k annually. Money seems to last until 93/94.
    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

  11. #70
    Senior Member pwm's Avatar
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    That's a good one. I created a similar Excel spreadsheet for myself that resembles it, but includes my wife's RIF in the calculations. Mine is not as pretty as the taxtips one but the numbers compare. Not very hard to build really, and I have lots of time on my hands.


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