# RRSP or RRIF at early Retirement Age?



## habsfan59 (Oct 23, 2012)

I am presently 53 yrs and toying with the idea to retire at 55 yrs old. I will have an pension from my employer when I am 60 yrs old. When I get to 55, I intent to "live off my savings" i.e. RRSP. I know about "withdrawal/administration fees" with RRSP account and I intent to minimize "withdrawal visits to my RRSP Account. Also,I am fully aware of the withholding taxes with RRSP withdrawal..! Now here is my dilemna, as I have few RRSP accounts with few banks (all under my name) should I could convert one of these RRSP account into an RRIF, which will provide my with steady income or leave into an RRSP account and make "yearly RRSP withdrawn" according to needs? Any pros/cons? Anyone made similar decision and have lesson learned?

Thanks,


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## Retired Peasant (Apr 22, 2013)

Some financial institutions will charge you a fee to withdraw from RRSP, but no fee on a RRIF. Keep in mind that you don't have to convert an entire RRSP into a RRIF; so you could just convert a portion of your RRSP to RRIF, and withdraw from it.


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## 6811 (Jan 1, 2013)

Retired Peasant said:


> Some financial institutions will charge you a fee to withdraw from RRSP, but no fee on a RRIF. Keep in mind that you don't have to convert an entire RRSP into a RRIF; so you could just convert a portion of your RRSP to RRIF, and withdraw from it.


Thank you R.P. You've just answered a question I had about converting an entire RRSP into a RIF.


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## Karen (Jul 24, 2010)

Another thing to keep in mind is that if you leave your money in an RRSP, you can withdraw it as you need it and withdraw only the amount that you need in any given year. Once you convert it to a RRIF,, you lose that flexibility because you are required to withdraw at least the minimum amount, depending on your age.


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## kcowan (Jul 1, 2010)

Karen
The idea is to create an RRIF that just meets a tax need. e.g. create a RRIF with $16k in it and withdraw $2k/yr for 8 years to get the pension deduction of $2k so the money is tax-free.


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## Charlie (May 20, 2011)

I think your pension income has to come from a life annuity or death of a spouse to claim the pension credit if you're under 65.

The advantage to a RRIF for the under 65 set is that there are no withholds for the minimum withdrawals. So you can potentially withdraw less and stay under a tax bracket depending on your avail registered capital, cash needs and actual tax rates.

As an aside, if you have several RRSPs at various institutions, you may consider consolidating some of these...for simplicity and potentially to min fees?


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## MoneyGal (Apr 24, 2009)

Charlie said:


> I think your pension income has to come from a life annuity or death of a spouse to claim the pension credit if you're under 65.


It does. http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/pension-credit/


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## kcowan (Jul 1, 2010)

Well I though Karen might be approaching 65 and 8 years would get her to the 72 mandatory age for withdrawal of the whole shooting match. It would seem to be a great strategy...after all, was it not Belguy who failed to do this?

Or did he take our advise but not acknowledge it?

The point I was making is that, once a RRIF is created, you can withdraw any amount that makes your taxes better. The minimums mean nothing. And you don't need to convert all your RRSPs.

I think these concepts cannot be stated too often.


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## My Own Advisor (Sep 24, 2012)

What are the best options to keep U.S. stock holdings, once you decide you want to start converting RRSP > RRIF? Just keep U.S. stocks in the RRIF?

Suck up the 15% withholding taxes and put U.S. stocks in TFSA?

@kcowan, thanks for the reminders. I've been reminding my parents they can create a small RRIF (up to $16 K), with part of their RRSP now, and they'll pay minimum taxes and, if they don't need the money to pay off debt (which they have) they can use the money to fund a non-existent TFSA.


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## Karen (Jul 24, 2010)

What I was thinking, kcowan, is that, since the OP stated that he/she wants to "minimize withdrawal visits" to his RRSP, he might want to retain the greater flexibility of leaving the money in his RRSP. Once he converts it to a RRIF, of course, he would have to take the minimum withdrawal every year whether he needed it or not. So, in that sense, the minimum withdrawal from from his RRIF would only mean "nothing" if he needs at least the minimum amount each year.


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## Guban (Jul 5, 2011)

Charlie said:


> The advantage to a RRIF for the under 65 set is that there are no withholds for the minimum withdrawals. So you can potentially withdraw less and stay under a tax bracket depending on your avail registered capital, cash needs and actual tax rates.
> QUOTE]
> 
> The withholding can be recovered in part or entirely when it filing taxes for that year. In the same way, RRIF payments can attract taxes payable upon filing taxes; the withholding amounts will all even up at tax time. Of course there is a delay in reconciling this, and this may be important to someone facing the RRSP/RRIF choice.


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## Four Pillars (Apr 5, 2009)

Guban said:


> The withholding can be recovered in part or entirely when it filing taxes for that year. In the same way, RRIF payments can attract taxes payable upon filing taxes; the withholding amounts will all even up at tax time. Of course there is a delay in reconciling this, and this may be important to someone facing the RRSP/RRIF choice.


And to add on to this good point - you can also request a specific higher withholding rate when making withdrawals. Most people don't like owing money at tax time, so they might want to increase the withholding on the withdrawal to an appropriate amount. This also applies to RRSP withdrawals.


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## Four Pillars (Apr 5, 2009)

zylon said:


> I take this to mean that there is NO qualification or restriction required for the first $2k withdrawal from RRIF to qualify for the pension income. Am I wrong?


Anyone can take any amount out of their RRIF as long as they meet the minimum annual amount. You don't need to convert all your RRSP money to RRIF - you can just move say $10,000 which will cover five years of $2000 annual withdrawals.


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## Four Pillars (Apr 5, 2009)

zylon said:


> Question for anyone.
> 
> I'm thinking of delaying conversion to RRIF as long as possible. However, in the meantime I want to drawdown my RRSP by way of transferring assets *in-kind* to my TFSA within the allowable limit. If I do this, it should mean there will be *no withholding tax* ... just a straight forward transfer from one account to another.
> 
> Or am I missing something?



There will be withholding tax. Any money removed from an RRSP is considered a withdrawal.


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