# Withdrawing from RRSPs before age 71?



## jargey3000 (Jan 25, 2011)

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?


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## pwm (Jan 19, 2012)

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.


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## heyjude (May 16, 2009)

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.


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## Eclectic12 (Oct 20, 2010)

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


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## GreatLaker (Mar 23, 2014)

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/What-Account-Should-I-Draw-From-First-In-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.


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## Dilbert (Nov 20, 2016)

heyjude said:


> 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!


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## like_to_retire (Oct 9, 2016)

GreatLaker said:


> 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


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## GreatLaker (Mar 23, 2014)

Dilbert said:


> $2000.00 pension tax credit? Hey, please tell me more!


This is a good explanation:
https://retirehappy.ca/are-you-taking-advantage-of-the-pension/


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## yyz (Aug 11, 2013)

Dilbert said:


> $2000.00 pension tax credit? Hey, please tell me more!


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


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## heyjude (May 16, 2009)

Dilbert said:


> $2000.00 pension tax credit? Hey, please tell me more!


http://www.taxtips.ca/filing/pensiontaxcredit/eligibleincome.htm


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## carverman (Nov 8, 2010)

Eclectic12 said:


> 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.
> 
> ...



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.

www.cbc.ca/news/canada/ottawa/nortel-workers-disability-bankruptcy-court-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?


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## OnlyMyOpinion (Sep 1, 2013)

like_to_retire said:


> 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.


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## carverman (Nov 8, 2010)

[B said:


> 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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## pwm (Jan 19, 2012)

heyjude said:


> 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.


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## like_to_retire (Oct 9, 2016)

carverman said:


> 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


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## pwm (Jan 19, 2012)

carverman said:


> 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.


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## gardner (Feb 13, 2014)

carverman said:


> 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.


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## OnlyMyOpinion (Sep 1, 2013)

carverman said:


> ... 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.:miserable:


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## carverman (Nov 8, 2010)

pwm said:


> 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.:chargrined:

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


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## carverman (Nov 8, 2010)

OnlyMyOpinion said:


> 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.:miserable:


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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## jargey3000 (Jan 25, 2011)

OP here . Thanks for all the good info. (...kinda sucks getting old, don't it?...)
Can someone clarify: Is there any difference -from a tax point of view - in withdrawing funds from an RRSP vs getting a payment from an RRIF (or a LIF, in my case)? Aren't they both taxed the same as income???


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## gibor365 (Apr 1, 2011)

> 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.


 True! 



> 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.


 If I decide to retire completely in couple of years, I'm planning to convert my Spousal RRSP into SRRIF and depends on income probably also convert RRSP to RRIF. 
First of all , there is no attrition rules for Spousal RRIFs for minimum withdrawals, so those withdrawals will be against my income, and not against my working spouse. My spouse will open another SRRSP and will continue to contribute all RRSP room available there.
Thus before I hit 65 , my RRIFs will be smaller ... to avoid possible claw-back.
What I don't understand.... there is no withdrawal maximum for RRIF, so what the difference if you withdraw from RRSP or from RRIF?

p.s. while was typing,jargey ask same question


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## heyjude (May 16, 2009)

pwm said:


> 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.


Well, I am single and do not have a pension, so I make it my business to take advantage of any little break available to me, even if it is only $2000.


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## heyjude (May 16, 2009)

gibor365 said:


> What I don't understand.... there is no withdrawal maximum for RRIF, so what the difference if you withdraw from RRSP or from RRIF?


My understanding is that you can't withdraw from an RRSP unless you cash the whole thing in. I have done this with a GIC. But to set up recurring payments, you have to convert your RRSP to a RRIF. Of course, you could just take a chunk of your RRSP and convert it to a RRIF, and then you would have both.


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## gibor365 (Apr 1, 2011)

heyjude said:


> My understanding is that you can't withdraw from an RRSP unless you cash the whole thing in. I have done this with a GIC. But to set up recurring payments, you have to convert your RRSP to a RRIF. Of course, you could just take a chunk of your RRSP and convert it to a RRIF, and then you would have both.


Not really, you can withdraw from RRSP any amount you want, the difference between RRIF and RRSP withdrawals that in RRIF case you HAVE TO withdraw every year at least minimum (and you won't pay withholding tax), in RRSP case you can withdraw any amount in any time period you wish (and you will pay withholding tax). But the bottom line both withdrawals will generate taxable income.


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## gibor365 (Apr 1, 2011)

Ideal case , to withdraw minimum from RRIF that you will stay in the lowest tax bracket, and supplement this income with TFSA (but Trudeau reversed nice TFSA room increase)


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## jargey3000 (Jan 25, 2011)

pwm said:


> 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.


sooo....with RRIF you transfer 50% income to spouse, but if you take income out of RRSP it's all yours - is that correct???
what about general 'income-splitting' rules?


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## jargey3000 (Jan 25, 2011)

FWIW...wifey & I have been drawing income out of our RRSPs for couple years now. With RBC-DI. They deduct 20% withholding tax, but there's no 'withdrawal' fees. What a great bank!


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## heyjude (May 16, 2009)

gibor365 said:


> Not really, you can withdraw from RRSP any amount you want, the difference between RRIF and RRSP withdrawals that in RRIF case you HAVE TO withdraw every year at least minimum (and you won't pay withholding tax), in RRSP case you can withdraw any amount in any time period you wish (and you will pay withholding tax). But the bottom line both withdrawals will generate taxable income.


True, but if you withdraw money from your RRSP on a one time basis, you will usually pay a fee to your financial institution, like $50. If you withdraw something every year, or more frequently, those fees might be material. And a one time withdrawal from your RRSP will not qualify you to receive the pension tax credit.


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## zylon (Oct 27, 2010)

jargey3000 said:


> Can someone clarify: Is there any difference -from a tax point of view - in withdrawing funds from an RRSP vs getting a payment from an RRIF (or a LIF, in my case)? Aren't they both taxed the same as income???


If you want to qualify for the $2,000 pension income credit, I believe it must come from RRIF. 
RRSP withdrawal won’t give you this credit.

I don't know about LIF.


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## heyjude (May 16, 2009)

zylon said:


> If you want to qualify for the $2,000 pension income credit, I believe it must come from RRIF.
> RRSP withdrawal won’t give you this credit.
> 
> I don't know about LIF.


See the linked reference in post #8. A LIF must be annuitized to qualify.


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## gibor365 (Apr 1, 2011)

jargey3000 said:


> FWIW...wifey & I have been drawing income out of our RRSPs for couple years now. With RBC-DI. They deduct 20% withholding tax, but there's no 'withdrawal' fees. What a great bank!


Are you sure?! as per https://www.rbcdirectinvesting.com/pricing/fees.html 
every RRSP withdrawal is $50


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## gibor365 (Apr 1, 2011)

heyjude said:


> True, but if you withdraw money from your RRSP on a one time basis, you will usually pay a fee to your financial institution, like $50. If you withdraw something every year, or more frequently, those fees might be material. And a one time withdrawal from your RRSP will not qualify you to receive the pension tax credit.


That what I was talking about .
I just don't see what is advantage to keep RRSP (and not convert to RRIF) after I fully retire (way before 65 )


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## GreatLaker (Mar 23, 2014)

gibor365 said:


> That what I was talking about .
> I just don't see what is advantage to keep RRSP (and not convert to RRIF) after I fully retire (way before 65 )


Once you convert to a RRIF you will be required to withdraw the minimum amount annually. If you leave it in a RRSP you have total flexibility to withdraw whatever amount you want, or not withdraw at all. Minimum RRIF withdrawal factors are listed in this table.

Advantage of RRIF is 1) no withholding tax on withdrawals up to the annual minimum withdrawal, and 2) some banks (like TD) charge a partial deregistration fee (around $25) for RRSP withdrawals, but no deregistration fee for RRIF withdrawals.


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## gibor365 (Apr 1, 2011)

> Once you convert to a RRIF you will be required to withdraw the minimum amount annually.


 I understand it , but some people who needs to withdraw cash, prefer to do it from RRSP and not from RRIF ... I don't see a reason why I would like to stop RRIFs minimum withdrawals... Also,if you withdraw from RRSP , you pay withholding tax right away, from RRIF - you don't...
btw,if you withdraw more than RRIF minimum, should you pay withholding tax right away?


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## pwm (Jan 19, 2012)

jargey3000 said:


> sooo....with RRIF you transfer 50% income to spouse, but if you take income out of RRSP it's all yours - is that correct???
> what about general 'income-splitting' rules?


Yes, RRSP income does NOT qualify for income splitting, only RRIF payments.


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## AMABILE (Apr 3, 2009)

I am single with no pension income
since age 65 , i withdraw only $2000
from my RRSP into my RRIF
beginning of December, so that BMO INVESTORLINE
can transfer $1800 from my RRIF to my non-registered acct
on December 10 with no fees involved.


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## OnlyMyOpinion (Sep 1, 2013)

Good strategy Amabile.


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## steve41 (Apr 18, 2009)

Look..... you are all missing a major point. It depends when you actually die. If you choose to melt down your RRSP and you die prematurely, then your estate will benefit. If you live to a ripe old age, your estate loses. The reverse is true, if you max/shelter your RSP and live to a ripe old age, your estate benefits.... if you die early your estate loses. It is (not) simple math.


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## OnlyMyOpinion (Sep 1, 2013)

gibor365 said:


> That what I was talking about .
> I just don't see what is advantage to keep RRSP (and not convert to RRIF) after I fully retire (way before 65 )


If you are planning to 'melt down' your RRSP/convert to RRIF early, just make sure you have modeled your various retirement income streams and don't find yourself short in your later years. The tax-sheltered growth within your RRSP until age 72 can be very helpful.


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## Eclectic12 (Oct 20, 2010)

gibor365 said:


> .. Also,if you withdraw from RRSP , you pay withholding tax right away, from RRIF - you don't...
> btw,if you withdraw more than RRIF minimum, should you pay withholding tax right away?


Where the RRIF withdrawal exceeds the minimum, the financial institution is required to withhold tax at the same rate as a similar sized RRSP withdrawal. For example if the minimum RRIF withdrawal is $3K where one withdraws from the RRIF $7K, the minimum withdrawal is fine but the additional $4K will have the 10% withholding tax applied to it.

So for that part that is subject to the withholding tax, one is paying the withholding tax as the withdrawal happens ... only difference for the RRIF is that part of the withdrawal is not subject to the withholding tax.



> No tax is withheld when the minimum amount is withdrawn from a RRIF.* *When withdrawals in excess of the minimum amount are made, the above RRSP lump sum withholding tax rates apply.*


http://www.taxtips.ca/rrsp/withholdingtax.htm


Cheers


*PS*

Or to put it another way, YMMV where being over the RRIF minimum withdrawal = withholding taxes being deducted.


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## GreatLaker (Mar 23, 2014)

I think this is difficult to model and evaluate without considering investment returns and tax rates and how they change over time. Tax rates don't change that much, but investment returns can vary widely. And lifespan is a wild card for most people.

IMO if you withdraw from RRSP/RRIF earlier than required:

Costs: additional taxes from retirement to year you turn 71, plus lost investment returns on those funds.
Benefits: 1) avoid 15% OAS recovery tax (aka clawback) if your income is in the clawback range (~$75-121k for 2017); 2) possible lower tax rates - I expect my marginal tax rate will jump up significantly the year I hit 72 and mandatory RRIF withdrawals start so money withdrawn earlier is taxed less.

Calculate the net present value of costs and benefits for various withdrawal amounts to estimate breakeven age.


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## GreatLaker (Mar 23, 2014)

steve41 said:


> Look..... you are all missing a major point. It depends when you actually die. If you choose to melt down your RRSP and you die prematurely, then your estate will benefit. If you live to a ripe old age, your estate loses. The reverse is true, if you max/shelter your RSP and live to a ripe old age, your estate benefits.... if you die early your estate loses. It is (not) simple math.


I have no pension (other than CPP/OAS) so I prefer to minimize the likelihood of me running out of money in the event that I do live a very long life. Even if my estate gets less as a result of it. Not unusual in my family to live to 90 unless succumb to disease. 

So steve41 in the scenarios where my estate loses does that mean I win? Or does the tax man win?


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## gibor365 (Apr 1, 2011)

> Costs: additional taxes from retirement to year you turn 71, plus lost investment returns on those funds.


In my case if I convert both SRRSP and RRSP to SRRIF and RIFF, my income in today's portfolio values will be respective $7,300 + $5,000 , interest income maybe around 7-8K (very difficult to calculate as GIC mature in different years). Thus my average tax will be below 10%. I'm thinking first to convert only SRRSP to SRIFF and see what taxes I should pay....from my estimation it's only 5$.
And my wife will continue to contribute into new SRRSP (after pension adjustment she has about $6,500 room annually) , so she gonna shelter the highest possible margin tax rate (as she has big salary) ... The rest SRRIF withdravals I will put into TFSA , sothere won;t be any loss of investment return.
Thus, at 65 (if I still will be alive), I may even to qualify for some GIS


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## carverman (Nov 8, 2010)

So far, nobody has given me some ideas on how to convert my RRSP to a RRIF. I'm being conservative here setting up a RRIF by years end.
Should I be looking to an insurance company to set it up as an annuity? 

http://www.taxtips.ca/rrsp/convertrrsptorrif.htm

and here is the calculator in my case
http://www.taxtips.ca/calculators/rrsp-rrif/rrsp-rrif-withdrawal-calculator.htm

Due the the small amount of money (Nortel settlement and my current RRSP) , calculating a modest safe growth of 3% and withdrawals of $3k per year starting in 2018, 
I'm good to age 91....if I withdraw more, only to age 85.


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## carverman (Nov 8, 2010)

gibor365 said:


> The rest SRRIF withdravals I will put into TFSA , so there won;t be any loss of investment return.
> Thus, at 65 (if I still will be alive), I may even to qualify for some GIS


Wishful thinking, you do realize that there is a threshold for your income to qualify for the GIS?

https://www.canada.ca/en/services/b...guaranteed-income-supplement/eligibility.html

The maximum allowed income levels for these four different rate tables effective January 2016 through March 2016 are as follows:

Rate Table	Maximum Allowed Income(combined income if a couple)	Maximum monthly GIS
1	$17,376 $856.39
2	$22,944 $515.53
3	$41,664 $856.39
4	$32,160 $515.53

https://www.canada.ca/en/services/b...ranteed-income-supplement/benefit-amount.html


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## steve41 (Apr 18, 2009)

GreatLaker said:


> So steve41 in the scenarios where my estate loses does that mean I win? Or does the tax man win?


No..... this assumes you live exactly the same after-tax lifestyle in each case.


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## gibor365 (Apr 1, 2011)

> Wishful thinking, you do realize that there is a threshold for your income to qualify for the GIS?


 If income considered for couples, we never gonna get GIS (unless we getting divorced) 
Typical government bullshit, the taxes is calculated as per individual income (even puny $2,000 split was cancelled), but GIS qualification is calculated as per family income... Ridiculous!


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## agent99 (Sep 11, 2013)

carverman said:


> So far, nobody has given me some ideas on how to convert my RRSP to a RRIF. I'm being conservative here setting up a RRIF by years end.
> Should I be looking to an insurance company to set it up as an annuity?


If your RRSP is at an on-line brokerage, all you have to do, is open a new RRIF account with them, then transfer whatever amount you wish into that account from your RRSP (they should have forms for you to do this - talk to them). This can be stocks, cash, GICs etc. There is not much difference between an RRSP and a RRIF and once 71 the RRSP turns into a RRIF anyway. (You can do same if you have your RRSP elsewhere) Then you draw at least the minimum amount each year. No withholding on minimum, but there will be on any excess over minimum. Not a problem, because withdrawals are income and taxable anyway. If you are over 65, that withdrawal counts as pension income and you get the $2000 pension deduction when you file your taxes. With interest rates low, annuities are not attractive. 

By the way, in your example you chose 8% return and 2% inflation. (6% Real Return) That would be nice, but not realistic. 2-3% real return might be more realistic (4-5% today)


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## My Own Advisor (Sep 24, 2012)

I'd be curious to hear from you (retirees) about your RRSP withdrawal strategies that include the following...so far...great insight....

1. convert some RRSP to RRIF in early 60s?
2. keep some RRSP until forced into another RRIF in 70s?
3. the balancing act between 1. and 2. 50/50? 25/75? 75/25? I suppose it "depends" on the income you need but also how long you might expect to live - as per Steve41.

Not easy to predict! Kudos to those that have figured out a great strategy working for them...


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## agent99 (Sep 11, 2013)

My Own Advisor said:


> I'd be curious to hear from you (retirees) about your RRSP withdrawal strategies that include the following...so far...great insight....
> 
> 1. convert some RRSP to RRIF in early 60s?
> 2. keep some RRSP until forced into another RRIF in 70s?
> .


It depends on just how much you have in RRSP. In our case, we had a lot more in RRSP than we had out.

We retired or more accurately, stopped working, because we were self employed, when I was about 64. No pension, so other than CPP/OAS and unregistered investments, no income. We took this opportunity to start drawing from our RRSPs. To do this, we opened RRIFS and transferred part of RRSPs to RRIFS. We didn't want too large a mandatory minimum (at that time, required was higher than now), so just added more to RRIF each year. 

Our aim was to keep our taxable income in a lower tax bracket. Something like $30k each if I recall correctly. Because of CPP/OAS/other income, this limited amount we could draw from registered accounts. One other thing we did to reduce investment income (and allow larger RRIF withdrawal) was to invest in funds or equities that included a fair % of ROC in their distributions (ROC is not immediately taxable but can be as CG down road) In the end, our RRIFs still grew, albeit at a lower rate than if we hadn't withdrawn anything. And of course we could claim the $2000 pension deduction. 

You do need to do the math. Rather than a spreadsheet, I played with one of the free tax programs to determine just how much we could withdraw. If you have CPP/OAS/Investment income, it is not much if you want to stay in a lower tax bracket than you will be in at 71.


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## My Own Advisor (Sep 24, 2012)

Thanks agent. Great insight.


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## pwm (Jan 19, 2012)

My Own Advisor said:


> Thanks agent. Great insight.


Yes, a fine example of good planning. My plan actually has two parts. I'm aggressively reducing my RRIF until I hit 70 at which point I apply for OAS and reduce the payment to just over the minimum from then on. The other part of the plan is to convert my wife's spousal RRSP to a RRIF in the same year and begin drawing hers down at a fairly aggressive rate. That way I get 50% of my RRIF and 100% of her RRIF on her tax return. Mine drops in the same year hers kicks in with the same combined income from both RRIFs. 

If I had a do-over the only thing I would do differently would be to have put all my contributions into the spousal RRSP and not even bothered with one in my name. That way 100% of the RRIF income would have been on her tax return. I had roughly equal amounts in each RRSP.

My advice to one-income couples: Make good use of the spousal RRSP. (That is assuming you plan to stay married.)


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## My Own Advisor (Sep 24, 2012)

So pwm, you've delayed OAS for both of you until age 70?

Are you taking CPP now?


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## pwm (Jan 19, 2012)

My Own Advisor said:


> So pwm, you've delayed OAS for both of you until age 70?
> 
> Are you taking CPP now?


We took OAS for my wife when she turned 65. I started CPP at 60 which I also split with her.


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## like_to_retire (Oct 9, 2016)

My Own Advisor said:


> So pwm, you've delayed OAS for both of you until age 70?


I looked at delaying OAS for myself and it worked out better to take it at 65. Disregarding the 'bird-in-the-hand' argument, I found that at the exact time when my income was going to experience an increase as a result of mandatory RRIF withdrawals, the pumped up OAS payment (as a result of waiting until age 70) caused even greater clawback. I think if someone wants to take OAS later, they have to take into account the income they will receive later. For many, their incomes will rise just as they receive the delayed OAS causing more clawback.

ltr


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## GreatLaker (Mar 23, 2014)

My Own Advisor said:


> So pwm, you've delayed OAS for both of you until age 70?
> 
> Are you taking CPP now?





pwm said:


> We took OAS for my wife when she turned 65. I started CPP at 60 which I also split with her.


Will you share your reasons for taking CPP at 60 but delaying OAS to 70? Especially since the increase for taking CPP at 70 vs. 65 is +42%, whereas the increase for delaying OAS to 70 is +36%. I turn 60 this year, and am still mulling over those decisions.

It's different for everyone so I appreciate your thoughts. Thanks.


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## pwm (Jan 19, 2012)

GreatLaker said:


> Will you share your reasons for taking CPP at 60 but delaying OAS to 70? Especially since the increase for taking CPP at 70 vs. 65 is +42%, whereas the increase for delaying OAS to 70 is +36%. I turn 60 this year, and am still mulling over those decisions.
> 
> It's different for everyone so I appreciate your thoughts. Thanks.


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.


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## carverman (Nov 8, 2010)

agent99 said:


> If your RRSP is at an on-line brokerage, all you have to do, is open a new RRIF account with them, then transfer whatever amount you wish into that account from your RRSP (they should have forms for you to do this - talk to them). This can be stocks, cash, GICs etc. There is not much difference between an RRSP and a RRIF and once 71 the RRSP turns into a RRIF anyway. (You can do same if you have your RRSP elsewhere) Then you draw at least the minimum amount each year. No withholding on minimum, but there will be on any excess over minimum. Not a problem, because withdrawals are income and taxable anyway. If you are over 65, that withdrawal counts as pension income and you get the $2000 pension deduction when you file your taxes. With interest rates low, annuities are not attractive.
> 
> By the way, in your example you chose 8% return and 2% inflation. (6% Real Return) That would be nice, but not realistic. 2-3% real return might be more realistic (4-5% today)


Thanks. i'm planning to just use some kind of safe invest,ent even if the ROI is only 3%, as I won't have that much in my RRIF..maybe $50k,with the Nortel settlement if it happens this year. 
I just want somewhere safe to stash those funds as I need them every year from now on. 
If invested as cash, I could draw out $2700 at AGE 72, declining every year to last withdrawal at age 91.($2122)


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## gibor365 (Apr 1, 2011)

My Own Advisor said:


> I'd be curious to hear from you (retirees) about your RRSP withdrawal strategies that include the following...so far...great insight....
> 
> 1. convert some RRSP to RRIF in early 60s?
> 2. keep some RRSP until forced into another RRIF in 70s?
> ...


Probably I'm stupid  , 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?



> To do this, we opened RRIFS and transferred part of RRSPs to RRIFS. We didn't want too large a mandatory minimum (at that time, required was higher than now), so just added more to RRIF each year.
> 
> Our aim was to keep our taxable income in a lower tax bracket. Something like $30k each if I recall correctly


 I just run RRIF calculator... So if you switch RRSP to RRIF at age 50 , in order to have <30K annual income from RRIF min payments, your RRIF should be less then $1.2M, at age 64 - it will be $780,000.
So my understanding that if you stopped working and have RRSP more than 1M, it's better to convert RRSP to RRIF ASAP.


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## 1980z28 (Mar 4, 2010)

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,


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## GreatLaker (Mar 23, 2014)

gibor365 said:


> 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.


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## GreatLaker (Mar 23, 2014)

pwm said:


> 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.


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## OnlyMyOpinion (Sep 1, 2013)

GreatLaker said:


> 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 7*2 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.
> 
> ...


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.


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## gibor365 (Apr 1, 2011)

> 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?


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## Oldroe (Sep 18, 2009)

Can you move in kind from srrsp to sriff.


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## pwm (Jan 19, 2012)

Oldroe said:


> 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.


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## OnlyMyOpinion (Sep 1, 2013)

gibor365 said:


> 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 .....


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## My Own Advisor (Sep 24, 2012)

Have folks played with this or used something similar?
http://www.taxtips.ca/calculators/rrsp-rrif/rrsp-rrif-withdrawal-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.


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## pwm (Jan 19, 2012)

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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## steve41 (Apr 18, 2009)

My Own Advisor said:


> Have folks played with this or used something similar?
> 
> 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.


$500K starting at age 60 (6% ROR and 2% inflation, living in BC) results in a $36.8 K lifestyle, dying broke at age 95.


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## 1980z28 (Mar 4, 2010)

My Own Advisor said:


> Have folks played with this or used something similar?
> http://www.taxtips.ca/calculators/rrsp-rrif/rrsp-rrif-withdrawal-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.



nice


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## gibor365 (Apr 1, 2011)

> Gibor, You may already have all this sorted out, and I'm not suggesting you post it all.


OnlyMyOpinoin, I have just plan and I'd like to know if I miss something in my estimations


> 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 ....


$7K from non-reg is only annual interest , I don't intent to withdraw this money , maybe some small portions , but definitely not 7K per year.

I also will not really miss RIFFs " tax-sheltered growth", as my wife (who has high income) will open new Spousal RRSP and will be contribution annually 6-7K (all room left after her pension adjustments) - thus I will pay on my income very small tax (very low tax bracket) and my wife will pay much less taxes es she is in the highest possible bracket.
I also intend first to withdraw from RRIFs cash portion that give me only 0.75% interest, this cash I can deploy in non-reg HISA and get at least 2% interest.


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## My Own Advisor (Sep 24, 2012)

@Steve, thanks as always. Your software is probably more accurate.


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## redsgomarching (Mar 6, 2016)

Going through this with my mom who plans to retire at 55. Has around 600k In her RRSP at this moment. Will get a pension from work, oas, cpp, etc. Basically, to minimize her tax burden she may as well deplete her RRSP starting as soon as she retires without converting to a RRIF.

Figure she would take out 30k per year, 9k in withholding tax, her marginal rate would be minisicule on 30k and she would most likely get around a 6k refund. therefore nearly 3k in taxes. She can do this until she has depleted this and take her work pension when she gets old enough (70) and this way she can minimize taxes during those years nearly would be less than 10% overall tax she would be paying + income from her TFSA which she can generate and this would allow her to minimize her tax burden later on when she receives her pension from work + cpp and oas and minimze the OAS clawback.


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## carverman (Nov 8, 2010)

steve41 said:


> $500K starting at age 60 (6% ROR and 2% inflation, living in BC) results in a $36.8 K lifestyle, dying broke at age 95.


If you manage to make it to 95 with dementia setting in, you won't be worrying whether you are broke or not.:congratulatory:


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## My Own Advisor (Sep 24, 2012)

@reds,

Wow, seems like your mom is in great shape depending upon expenses = 1) $600k RRSP + 2) workplace pension + 3) CPP + 4) OAS. 

Before tax I would assume _conservatively_ 1) $30k + 2) $20k (?) + 3) $5k + 4) $5k.


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## redsgomarching (Mar 6, 2016)

My Own Advisor said:


> @reds,
> 
> Wow, seems like your mom is in great shape depending upon expenses = 1) $600k RRSP + 2) workplace pension + 3) CPP + 4) OAS.
> 
> Before tax I would assume _conservatively_ 1) $30k + 2) $20k (?) + 3) $5k + 4) $5k.


she is pretty set yeah, and not to mention the house, etc. my parents did really well in terms of planning for the future and utilized what they worked so hard for. 

i am glad that she will be able to enjoy herself. she has worked full time 25 years + and raised 4 kids while my dad worked his *** off to build his business.


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## gibor365 (Apr 1, 2011)

> Going through this with my mom who plans to retire at 55. Has around 600k In her RRSP at this moment. Will get a pension from work, oas, cpp, etc. Basically, to minimize her tax burden she may as well deplete her RRSP starting as soon as she retires without converting to a RRIF.


 She can also deplete her RRIF with converting RRSP to RRIF abd saving on redemption fees


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## redsgomarching (Mar 6, 2016)

gibor365 said:


> She can also deplete her RRIF with converting RRSP to RRIF abd saving on redemption fees


she works at the bank i she wont get redemption fees. the withholding taxes will still be there. the thing about the RRIF is it will be mandatory withdrawals which will give her more than what she needs and increase her tax liability.


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## gibor365 (Apr 1, 2011)

redsgomarching said:


> she works at the bank i she wont get redemption fees. the withholding taxes will still be there. the thing about the RRIF is it will be mandatory withdrawals which will give her more than what she needs and increase her tax liability.


My wufe also works ib the bank and she's not exemp from redemption fees.... also, I dpn't get... in one post you say that she wants to deplete caputa; and ib otjer post that RRIFs minimum witdrawal (that is just couple of %_ is too big for her


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## heyjude (May 16, 2009)

gibor365 said:


> My wufe also works ib the bank and she's not exemp from redemption fees.... also, I dpn't get... in one post you say that she wants to deplete caputa; and ib otjer post that RRIFs minimum witdrawal (that is just couple of %_ is too big for her


My thoughts too. She can't have her cake and eat it!


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## gibor365 (Apr 1, 2011)

heyjude said:


> My thoughts too. She can't have her cake and eat it!


True! The only advantage I can see in "RRSP flexibility" withdravals that one year she can withdraw 0 (for example if some huge GIC is matured) and in other year to withdraw more, but it's hardly can be considering as "depletion"


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## redsgomarching (Mar 6, 2016)

gibor365 said:


> My wufe also works ib the bank and she's not exemp from redemption fees.... also, I dpn't get... in one post you say that she wants to deplete caputa; and ib otjer post that RRIFs minimum witdrawal (that is just couple of %_ is too big for her


she wont get redemption fees lol. the RRIFS are mandatory, the other way is not. not sure what is so hard to understand lol.


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## gibor365 (Apr 1, 2011)

redsgomarching said:


> she wont get redemption fees lol. the RRIFS are mandatory, the other way is not. not sure what is so hard to understand lol.


Probably you don't understand . Mandatory is only RRIF minimums that is couple of %, if she gonna withdraw even less that RRIF minimums, she won't deplete her funds for next 120 years


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## redsgomarching (Mar 6, 2016)

gibor365 said:


> Probably you don't understand . Mandatory is only RRIF minimums that is couple of %, if she gonna withdraw even less that RRIF minimums, she won't deplete her funds for next 120 years


I do understand, we know the plan and we've run the numbers. She doesn't want to have to make mandatory withdrawals she will take out what she needs at the beginning of each year in hopes to deplete as much as she can by the time she hits 65 where she can take her pension, cpp, oas. this will minimize her tax over the years.


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## agent99 (Sep 11, 2013)

gibor365 said:


> Probably you don't understand . Mandatory is only RRIF minimums that is *couple of %*, if she gonna withdraw even less that RRIF minimums, she won't deplete her funds for next 120 years


Minimum RRIF withdrawal is more than a "couple of %" Until a couple of years ago it was even higher.

https://www.woodgundy.cibc.com/wg/r...maturity-options/rrif-minimal-withdrawal.html


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## gibor365 (Apr 1, 2011)

agent99 said:


> Minimum RRIF withdrawal is more than a "couple of %" Until a couple of years ago it was even higher.
> 
> https://www.woodgundy.cibc.com/wg/r...maturity-options/rrif-minimal-withdrawal.html


Yes, it depends on age,but minimum payments are scheduled this way that it will last until owner turn 90+, so if somebody wants to deplete registed funds and want to withdraw less than RRIF minimum, it's unrealictic


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## Eclectic12 (Oct 20, 2010)

redsgomarching said:


> she wont get redemption fees lol. the RRIFS are mandatory, the other way is not. not sure what is so hard to understand lol.


Hmmm ... if the redemption fees are waived - does this mean withdrawal fees as well?

The RRSP does have the ability to schedule withdrawals but for non-bank employees - there's usually a withdrawal fee, in addition to the withholding tax.

The RRIF avoids this but does have minimum withdrawal amounts.




agent99 said:


> Minimum RRIF withdrawal is more than a "couple of %" Until a couple of years ago it was even higher.
> https://www.woodgundy.cibc.com/wg/r...maturity-options/rrif-minimal-withdrawal.html


Unless one has hit 71 - can't one transfer a small amount to the RRIF, providing some control over what the minimum amounts will be?


Cheers


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## heyjude (May 16, 2009)

Eclectic12 said:


> Hmmm ... if the redemption fees are waived - does this mean withdrawal fees as well?
> 
> The RRSP does have the ability to schedule withdrawals but for non-bank employees - there's usually a withdrawal fee, in addition to the withholding tax.
> 
> ...


Yes. Assuming the objective is to take a withdraw a small, specified amount annually, while leaving the remainder intact, the most efficient strategy would be to use the desired annual payment as the minimum withdrawal amount, to calculate the principal required in an RRIF to pay out that amount every year, and to transfer that principal from the RRSP to an RRIF, leaving the remainder of the RRSP to grow until age 71. As long as RRIF payments are minimums, no tax will be withdrawn at source, though of course it will all be reconciled at tax time. And there should be no annual fees attached to these RRIF withdrawals.


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