# converting large or small RRSP to RRIF: which one?



## cashmoneyflow (Jun 13, 2015)

Hi there,

My mom is turning 64 this year and has been withdrawing about $15k/year pre-tax total from 2 different RRSPs over the last couple of years to supplement her income. She also has a company pension (~$25k/year with minimal withholding) and CPP ($9k/year with minimal withholding).

Since she withdraws so often, she is considering changing one of her RRSPs to a RRIF to avoid all the appointments/hassle of going to the bank everytime she needs a withdrawal.

One account is with a brokerage and is about $150k whereas the second account is with a bank at about $50k. 

Assuming each one is similarly invested, which of the accounts is it more advantageous to covert to a RRIF today (i.e. is it better to 'finish off' the small account first? or start with the larger account?)

Thank you very much for your help.


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## gibor365 (Apr 1, 2011)

Why she doesn't want to convert both RRSP accounts? Or she want to contribute at some point?
If she hold registered accounts in discount brokerage, she is not going to pay trading fees on scheduled RIF payments


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## AltaRed (Jun 8, 2009)

Personally, I would consolidate the 2 RRSPs ($200k) in one place, e.g. brokerage,and RRIF it. Minimum withdrawal at 65 would be 4% http://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm and your mother is already withdrawing at a considerably higher rate. The brokerage (if of the same institutional family as the bank) should be able to set up a 'withdrawal plan' to transfer $1200/month to her bank account.


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## heyjude (May 16, 2009)

Other things being equal, she would have more flexibility by starting with the smaller account. By the time she exhausts those funds (3+years) she will have a better idea of her ongoing needs as she starts on the brokerage account.


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## wendi1 (Oct 2, 2013)

Once she is 65, she gets the $2000 pension amount on her taxes for RRIF withdrawals - this is reason enough to make one of the RRSPs a RRIF. She doesn't have to make the other a RRIF until she is 71. I might keep one RRSP just in case I wanted to contribute before then.

Given what you have told us, I have no preference for which one she draws down first. I would check the fees, then make my decision on that basis.


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## OhGreatGuru (May 24, 2009)

If she has a company pension of $25K/yr, she's already entitled to the maximum $2K pension income deduction. So this doesn't come into consideration for her RRIF withdrawals. I would be more concerned about sustainable withdrawal rates. 

I agree with Wendi about fees though - you want your regular withdrawals to be from something that doesn't have sales charges ever time you make a withdrawal. Also an account with an asset allocation that isn't too volatile.

At her current withdrawal rate she is going to empty the smaller account in 4-5 yrs. Then she will have to decide what to do with the other account.


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## RBull (Jan 20, 2013)

Also if she is eligible for OAS next year her withdrawals can be reduced by this amount ~6K to extend the funds available, unless she is looking for more money now. 
I would agree to consolidate the 2 accounts and then establish an RRIF with withdrawal for the amount needed. RRSP withdrawal fees are $50 each time at most institutions.


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## AltaRed (Jun 8, 2009)

heyjude said:


> Other things being equal, she would have more flexibility by starting with the smaller account. By the time she exhausts those funds (3+years) she will have a better idea of her ongoing needs as she starts on the brokerage account.


All other things being equal, her withdrawal is well above the mandatory minimums (on the aggregate of both accounts). She would have more flexibility by withdrawing selectively from a larger account. If she withdraws from the smaller account, the assets cannot be in anything other than HISAs or GICs timed and sized to match the withdrawals. At least with the larger single account, some of the assets could be into a balanced mutual fund such as Mawer or a monthly income fund for a period of time.


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## OhGreatGuru (May 24, 2009)

AltaRed said:


> ... If she withdraws from the smaller account, the assets cannot be in anything other than HISAs or GICs timed and sized to match the withdrawals. ...


Any mutual fund with no transaction fees (as most bank mutual funds are) would do as well.


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## AltaRed (Jun 8, 2009)

OhGreatGuru said:


> Any mutual fund with no transaction fees (as most bank mutual funds are) would do as well.


Not if said mutual fund has equities in it and a substantial sale must be made (potentially at a terrible time) to fund the withdrawal. The point of HISA or GIC in the smaller account is to provide some certainty of preservation of capital in an account that can only last circa 3 years. Why would someone risk having to crystallize a sale if equities dropped 20% later this year?

That said, if you were thinking a bond mutual fund, well, the returns on those things are no better either.


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## Dufresne (Mar 4, 2015)

She would be getting the $2,000 pension income credit already, well before age 65, if she is drawing from an RPP which generates the PIC at any age.


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## cashmoneyflow (Jun 13, 2015)

Hello all - apologies for the delayed follow-up but thank you very much for your advice and thoughts. It's very helpful. cheers


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