Withdrawing from RRSPs before age 71?
Page 1 of 9 123 ... LastLast
Results 1 to 10 of 90

Thread: Withdrawing from RRSPs before age 71?

  1. #1
    Senior Member
    Join Date
    Jan 2011
    Posts
    1,623

    Withdrawing from RRSPs before age 71?

    Looking for some comments. When & how does it make sense to start withdrawing income from RRSPs prior to age 71 - when presumably, one has to convert them to RRIFs? Say, in the years age 65-70? Just a matter of doing some calculations on your tax bracket(s)? OR...better to just let it sit there 'til you have to convert?


  2. #2
    Senior Member pwm's Avatar
    Join Date
    Jan 2012
    Location
    Headingley MB
    Posts
    646
    When I hit 65 I converted my RRSP to a RRIF and started aggressive withdrawals. Two reasons:

    1). You can transfer 50% of the payment to your wife. You need to be 65 and it must be a RRIF to do so. She did not work and I'm trying to get as much income in her name as possible.
    2). I'm delaying OAS until 70. I'm well into claw-back territory and I want my RRIF to be very small at that time so as to minimize the penalty.

  3. #3
    Senior Member heyjude's Avatar
    Join Date
    May 2009
    Location
    BC
    Posts
    902
    I am withdrawing some RRSP funds early as well. If I don't, RMDs will force me into the highest tax bracket at age 71. Instead, I choose to pay some tax now in a lower bracket. Another reason to create a RRIF at age 65 is to take advantage of the $2000 pension tax credit.

  4. Remove Advertisements
    CanadianMoneyForum.com
    Advertisements
     

  5. #4
    Senior Member
    Join Date
    Oct 2010
    Posts
    7,921
    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.


    Cheers

  6. #5
    Senior Member GreatLaker's Avatar
    Join Date
    Mar 2014
    Location
    Toronto, Ontario
    Posts
    603
    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.

    Another factor is for a couple when the first spouse passes away the RRSP/RRIF passes to the surviving spouse. Depending on the size of both RRIFs that may cause the tax rate of the surviving spouse to go much higher due to larger mandatory RRIF withdrawals. This one is very difficult to model, since lifespan can only be guessed at.

    The article at this link explains it in a lot of detail.
    http://www.rgafinancial.com/articles...Retirement.pdf

    Note the above article is a couple of years old, so it does not mention the possibility of deferring OAS to 70. The tax rates mentioned are from Alberta. Taxtips.ca is a good site to get current tax rates by province.
    Eschew obfuscation. Espouse elucidation

  7. #6
    Senior Member
    Join Date
    Nov 2016
    Location
    Toronto Area
    Posts
    101
    Quote Originally Posted by heyjude View Post
    I am withdrawing some RRSP funds early as well. If I don't, RMDs will force me into the highest tax bracket at age 71. Instead, I choose to pay some tax now in a lower bracket. Another reason to create a RRIF at age 65 is to take advantage of the $2000 pension tax credit.
    $2000.00 pension tax credit? Hey, please tell me more!

  8. #7
    Senior Member
    Join Date
    Oct 2016
    Posts
    281
    Quote Originally Posted by GreatLaker View Post
    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.
    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

  9. #8
    Senior Member GreatLaker's Avatar
    Join Date
    Mar 2014
    Location
    Toronto, Ontario
    Posts
    603
    Quote Originally Posted by Dilbert View Post
    $2000.00 pension tax credit? Hey, please tell me more!
    This is a good explanation:
    https://retirehappy.ca/are-you-takin...f-the-pension/
    Eschew obfuscation. Espouse elucidation

  10. #9
    Senior Member
    Join Date
    Aug 2013
    Posts
    401
    Quote Originally Posted by Dilbert View Post
    $2000.00 pension tax credit? Hey, please tell me more!
    http://www.taxplanningguide.ca/tax-p...ension-credit/

  11. #10
    Senior Member heyjude's Avatar
    Join Date
    May 2009
    Location
    BC
    Posts
    902
    Quote Originally Posted by Dilbert View Post
    $2000.00 pension tax credit? Hey, please tell me more!
    http://www.taxtips.ca/filing/pension...ibleincome.htm


Page 1 of 9 123 ... LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •