# How to plan for early retirement



## Causalien (Apr 4, 2009)

So most of the retirement articles are for people nearing 50 and 60. I am planning my retirement in the next couple of years and is way younger than the usual age. Is there any resource for that? I don't even know if I ca use RRIF or if I can withdraw rrsp. 

Most of the formula also don't factor in my case. So did anyone happen to come by blogs of people who did it? or articles on it? Do I get CPP?


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## Eclectic12 (Oct 20, 2010)

I can understand that there's not a lot of information for your situation.

For "can I withdraw from your RRSP" ... surely the many threads here on CMF talking about withdrawing early from an RRSP have let you know that one can withdraw from an RRSP at any time. 

The RRSP withdrawal amount is reported as income on one's tax return for the year the withdrawal is made. The financial institution is obligated to withhold a certain amount of tax. This is to minimise the tax bill if you owe.

The tax return will determine what the income level was for the year and if the withholding tax was too much, there will be a refund. If the withholding tax was too little, one will owe taxes.

http://www.getsmarteraboutmoney.ca/...thdrawals-before-you-retire.aspx#.VO3gNi4gpyE


Where one will have a problem is if the RRSP is a Locked In Retirement Account (LIRA), which includes employer pension money as part of it. As I understand it, there is an age limit for withdrawals, unless one qualifies under the exceptions.

http://retirehappy.ca/unlocking-pension-money-getting-money/


For the RRIF, wiki says:


> The option exists to convert a RRSP into an RRIF anytime on or before an individual reaches their 71st year.


http://en.wikipedia.org/wiki/Registered_Retirement_Income_Fund

So it would seem that a RRIF is available at any time up and including the 71st year.

I recall a post on CMF where someone indicated they converted part of their RRSP to a RRIF early so that more of the plan value would be withdrawn before the minimum withdrawals started.

More RRIF tips, including the comment that one can start a RRIF early:
http://www.thestar.com/business/per...0/08/03/rrifs_10_things_you_need_to_know.html


For CPP, you have to be sixty ... just bear in mind that starting it at this age will mean a reduced payout.
http://retirehappy.ca/how-to-get-your-cpp-early/


Cheers


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## Jon_Snow (May 20, 2009)

Well there is all sorts of info on early retirement out there. Google is your friend. 

Thumbnail version of how I retired at 42...saved and invested 70-80% of my income (and wife's) over a ten year span into largely dividend paying stocks. Once dividend income was comfortably above my expenses I walked away from a high paying career. Done.


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## Causalien (Apr 4, 2009)

Jon_Snow said:


> Well there is all sorts of info on early retirement out there. Google is your friend.
> 
> Thumbnail version of how I retired at 42...saved and invested 70-80% of my income (and wife's) over a ten year span into largely dividend paying stocks. Once dividend income was comfortably above my expenses I walked away from a high paying career. Done.


Yeah, but did you have to do anything else to take all the benefits of retirements? I faintly remember I have pensions from a company I worked for. Have no idea how to check up on it or get it paid out.

For the RRSP, I was more referring to RRIF and LIRA


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## Spudd (Oct 11, 2011)

You can withdraw from your RRSP any time, as mentioned above. For RRIF, if you have one, you will have mandatory annual withdrawals based on your age. For LIRA, you cannot withdraw until age 55, I think. 

You will get CPP and OAS according to your work history and time lived in Canada once you reach the correct age. For CPP you can choose to take it starting at 60 (reduced benefit) or the default age is 65. For OAS it will come at age 67 (assuming you are still relatively young... they recently increased it from 65 to 67 and grandfathered in people over a certain age). For these you would contact Service Canada once you are the right age. 

For your old company pension, you can likely phone the HR department at that company to find out the details of how it works. I would suspect that for that one there will also be an age limit.


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> Causalien said:
> 
> 
> > Yeah, but did you have to do anything else to take all the benefits of retirements? I faintly remember I have pensions from a company I worked for. Have no idea how to check up on it or get it paid out...
> ...


The links I am finding are vague as they say "retirement age". They do say that 71 is the latest to convert the LIRA to one of the other options.

http://canadianfinanceblog.com/what-is-a-locked-in-retirement-account-lira/
http://www.boomerandecho.com/do-you-have-a-locked-in-rrsp/

Wiki says:


> ... the investment held in the locked-in account is "locked-in" and cannot be removed until either retirement or a specified age outlined in the applicable pension legislation (though certain exceptions exist).


http://en.wikipedia.org/wiki/Locked-In_Retirement_Account

So it sounds like one would have to determine what legislation (i.e. provincial or federal) the LIRA is under and check that. For example, Ontario is listed as allowing conversion at age 55. 
http://www.startingovertoronto.com/blog/2012/04/29/pensions-ontario/

Though the link says the age is set by province of residency ... whereas I thought it was determined by the authority the pension plan was registered with (ex. live in Ontario, work in Manitoba ... pension registered with Manitoba sets the LIRA rules).


Cheers


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## GreatLaker (Mar 23, 2014)

Eclectic12 said:


> So it sounds like one would have to determine what legislation (i.e. provincial or federal) the LIRA is under and check that. For example, Ontario is listed as allowing conversion at age 55.
> http://www.startingovertoronto.com/blog/2012/04/29/pensions-ontario/
> 
> Though the link says the age is set by province of residency ... whereas I thought it was determined by the authority the pension plan was registered with (ex. live in Ontario, work in Manitoba ... pension registered with Manitoba sets the LIRA rules).


Does any one know how someone can determine this for their own specific locked-in account? I would think the financial institution that holds the account would have access to it since they have to administer the minimum and maximum annual withdrawals.


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## Eclectic12 (Oct 20, 2010)

^^^^

Bahahahaha ... (sorry .... :biggrin.

I had to prove to the financial institution that the bank LIRA that I was transferring to my brokerage LIRA was under the Ontario provincial legislation before they'd allow me to combine the two LIRAs into one. I remember the paperwork with the bank clearly identifying it as an Ontario company/pension but somehow over the years - that detail dropped out of their records.


As for determining for a specific account ... I depend more on the paperwork from the transfer into the account. That way if the financial institution makes a mistake, I can prove it.

By all means, phone the financial institution and see what they have listed on the LIRA account (hopefully it matches with one's records ).

I haven't done any withdrawals yet ... so I expect the the financial institution will have to be on top of the min/max as well. Maybe someone with a LIRA that is paying out can comment.


Cheers


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## OldPro (Feb 25, 2015)

I retired at 43 casaulien. That was 25 years ago. Here's what I can tell you. Whatever your plan is today, it won't stay intact for 25 years. There's this little thing called life that gets in the way and causes things to change. The only thing you can know for sure is that change will happen.

You might want to say what age you are, what net worth you have and then just ask how likely does anyone think it is that you can make it if you quit now. It's all just a guess anyway no matter what, unless you are seriously underestimating how much income you need to get by and be happy. 

Are you single or married for example? What do you want to do in your retirement? Someone happy to sit at home and become an amateur expert on Mediaevel 12th century life in France through online research for example, will probably need far less income than someone who wants to visit every country in the world over the next 10 years. Factors like that affect how much YOU as an individual need to have in income. Figuring out what you need is the tricky part. Whatever it is though won't be the same forever. You can only ever KNOW what you need today. Like I said, it's all a guess after that.

I know that a single guy who owns his own home and is content with his life can be happy on $20k per year. I know because I know at least one person who fits that profile. A couple who own their home can be happy on $30-40k per year. I know because I know several couples and am sure many many more exists, who are happy on that.

There is a minimum amount of income that anyone needs to be happy(studies have been done) but having more money than that does not make you MORE happy. You just spend more.


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## livewell (Dec 1, 2013)

OldPro said:


> I retired at 43 casaulien. That was 25 years ago. Here's what I can tell you. Whatever your plan is today, it won't stay intact for 25 years. There's this little thing called life that gets in the way and causes things to change. The only thing you can know for sure is that change will happen.
> 
> You might want to say what age you are, what net worth you have and then just ask how likely does anyone think it is that you can make it if you quit now. It's all just a guess anyway no matter what, unless you are seriously underestimating how much income you need to get by and be happy.
> 
> ...


Those are very wise words. For someone to retire at 43 in 1990 I think you are a very rare bird, I would love to know a little more about your circumstances and what (financially) impacted you over the last 25 years. 

For myself I am 55 and I think am retired for two years now but keep questioning myself that I have enough (Should I find a new job for a few years or some supplemental income) though 
now 2 years in I am getting more comfortable with the idea.


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## GreatLaker (Mar 23, 2014)

Eclectic12 said:


> As for determining for a specific account ... I depend more on the paperwork from the transfer into the account. That way if the financial institution makes a mistake, I can prove it.
> 
> By all means, phone the financial institution and see what they have listed on the LIRA account (hopefully it matches with one's records ).
> 
> I haven't done any withdrawals yet ... so I expect the the financial institution will have to be on top of the min/max as well. Maybe someone with a LIRA that is paying out can comment.


Thanks,
I just transferred my 20 year old LIRA to TD Direct. My previous broker confirmed the applicable pension legislation so the associate at TDDI could set it up. No problems at all. I lost track of the old paperwork, so now I have proper documentation that it is an Ontario LIRA.:smilet-digitalpoint

I believe minimum withdrawals are the same as RIFs so should be easy. Hopefully max withdrawal will be irrelevant since I don't plan on withdrawing any more than the minimum.


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## Causalien (Apr 4, 2009)

OldPro said:


> I retired at 43 casaulien. That was 25 years ago. Here's what I can tell you. Whatever your plan is today, it won't stay intact for 25 years. There's this little thing called life that gets in the way and causes things to change. The only thing you can know for sure is that change will happen.
> 
> You might want to say what age you are, what net worth you have and then just ask how likely does anyone think it is that you can make it if you quit now. It's all just a guess anyway no matter what, unless you are seriously underestimating how much income you need to get by and be happy.
> 
> ...


Let's just assume before 50 and enough money to live those years. I am more interested in the condition at which I can start to enjoy all the social benefits I've paid into. So far it looks like there's an age at which these triggers. So. I am looking at having to support myself until that age comes.

For succession planning, I know that in canada I can gift to family member freely. So does it make sense to establish a trust fund? Or should I establish a hold corp and have each family member hold voting shares?

Thanks for all the reply so far. Google search turns up junk info as always.


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## Eclectic12 (Oct 20, 2010)

From the links I'm finding, if it's social benefits, as I understand it - CPP is like a DB pension where the expected age is 65 but one can start a reduced one at age 60.

OAS is 65 if one is old enough or 67.
http://www.moneysense.ca/retire/when-can-you-get-oas-that-depends


As for trusts or a holding corp ... YMMV dramatically, so I'd expect any links to be slanted to one or another type situation. Like so many other financial matters ... one size does not fit all.


Cheers


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## My Own Advisor (Sep 24, 2012)

I think there are some key milestones to be aware of....

Anytime: RRSP > RRIF, either all of it, some of it or very little of it.
Anytime: Withdraw from RRSP but there are withholding taxes when you start cashing-out your RRSP:
http://www.myownadvisor.ca/cha-ching-cash-rrsp/

Age 55, can draw on your LIRA.
Age 60, earliest you can apply to get CPP (recall this is a contribution plan, so if you're not contributing (i.e., retired early), money to you will be less)
Age 65, until 2023 or something, earliest you can apply for OAS. It will move to age 67 and likely higher for people my age in the years to come.

TFSA - keep intact as long as possible! Tax-free income!
Non-registered, I think you want to move tax-deferred money (RRSP) to non-reg. when your income is lowest and then put tax-advantaged investments inside non-reg. account (e.g., dividend stocks or dividend ETFs) to take advantage of dividend tax credit.


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## OldPro (Feb 25, 2015)

Livewell, what's your name? That is a rhetorical question. The point being, if you want to live well, then you need to stop worrying about what you cannot control. There are 2 rules to a happy life I believe and they are the same in retirement. 

Rule 1: Don't sweat the small stuff.
Rule 2: It's all small stuff.

I used to do some rock climbing. Anyone who climbs knows that everyone falls sometimes. But if you have put the right 'protection' in place, you only fall a short distance and then your fall is stopped by the rope and anchors. What a climber also knows is that there comes a moment in time when you KNOW you are going to fall. It's there every time. A split second before you fall when you KNOW it is going to happen.

Now imagine you are climbing and that moment comes. No matter how sure you are logically that your protection will save you, you cannot stop the illogical fear that arises. That fear in the case of climbing, is the fear of dying. There is no greater fear than that in life. Go back to you are climbing and the moment arrives. IF in that moment I asked you ANY question and by answering it you KNEW you would NOT fall, there is no question you could not or would not answer INSTANTLY. If I asked, should you get married; should you change jobs; should you buy a house; should you retire on what you have; should you get a divorce; etc. etc. All the seemingly MAJOR questions we can agonize over in life, you could answer any one of them in that split second. Why? Because compared to dying, they're all small stuff.

Re supplementing your income. Nothing wrong with that if you WANT to. I've never gone looking for a job since retiring but I have 'fallen in' to several part time situations over the years. Now that I count, there have been five. Each lasted as long as I chose to have them last. The advantage to be financially independent is having that ability to say, 'screw this, I'm getting bored'.

One example came about as a result of a friend's birthday. I was living on a Greek island and a friend who owned a hotel and was from Australia had a birthday. As you might imagine, it isn't that easy to find Birthday cards on a Greek island and especially in English. So I decided to make one using a desktop publishing program on my computer. The card turned out quite nice and my friend was impressed. She asked me if I could design and print menus for her hotel bar and restaurant. I said I supposed I could but since the idea didn't thrill me, I quoted her what I thought was a high price. She ordered the menus. 

After I delivered them to her, I got a call from a guy who knew her and had seen them. He had a bar and asked me to do menus for him as well. Suddenly, I was in the menu design and printing business. Word of mouth alone was all it took from then on. Fortunately, there were 2 factors that limited the business. One, there is only about a 6 week window just before the beginning of the tourist season when anyone is interested in getting new menus. Second, a printer can only print so many pages per hour. You could argue that you could add printers and go out looking for more orders rather than just relying on word of mouth but I was content to let the 'limits' dictate how much work I took on. I did that each year for 3 years and in the 3rd year was turning business down as I had reached the printer's limits. That year I earned around $10k for 6 weeks work. Not bad supplemental money.

Casuelin, if you are only looking at having enough to live on till you reach CPP/OAS benefits, will you still have that income AFTER you reach that point or will you expect to live solely on those pensions plus the other benefits that kick in at age 65? If they will be your sole income, you are going to have to live quite frugally. Will you own your home or be renting after 65? Will you want to do anything such as travel or play golf or something? You aren't providing enough info for people to comment on. You can't keep things secret and expect people to just guess what you plan.


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## OnlyMyOpinion (Sep 1, 2013)

I skipped the rest of the book, but I do agree with OldPro's comment "_You aren't providing enough info for people to comment on_".


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## Jon_Snow (May 20, 2009)

Yep, I agree...Causalien, we need more numberzzzzz. Like, what is the current status of your retirement savings?


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## peterk (May 16, 2010)

I highly doubt the enigma known as Causalien is going to give up his info, and sully the existential aura that he has created, with hard facts. "under 50" and "enough money" is by far the strongest evidence we have to-date that he is in fact a human man and not an alien! :biggrin:

I think MOA has answered the original questions, though.


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## gibor365 (Apr 1, 2011)

in theory you can unlock your LIRA earlier, it depends on LIRA legislature (FED or Prov) and on every specific province... but in practice I don't believe you can unlock 
http://www.taxtips.ca/pensions/rpp/unlockingrpp.htm


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## gibor365 (Apr 1, 2011)

> Someone happy to sit at home and become an amateur expert on Mediaevel 12th century life in France through online research for example, will probably need far less income than someone who wants to visit every country in the world over the next 10 years


 you are taking extreme situations  , also one may need to have 15 implants done, and other doesn't need to go to dentist at all....,the question is what on average?! Lets say 1 Carribean vacation and 1 Europe long-term vacation per year.... and also study 12th century French history


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## janus10 (Nov 7, 2013)

First, I have really enjoyed OldPro's sensible and direct posts.

Second, I haven't been here long enough to figure out why Causalien with almost 1,500 posts since almost six years ago created this thread. I would have thought there would have been sufficient content over the years to provide a lot of the guidelines and personal case studies one could use.


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## Causalien (Apr 4, 2009)

OldPro said:


> Livewell, what's your name? That is a rhetorical question. The point being, if you want to live well, then you need to stop worrying about what you cannot control. There are 2 rules to a happy life I believe and they are the same in retirement.
> 
> Rule 1: Don't sweat the small stuff.
> Rule 2: It's all small stuff.
> ...


Thanks and forgive me for wanting to keep some part of my life in the dark. It will only remain this way for just a little bit.

I can tell you this. My income after 65 will probably eclipse whatever the government can give me and government generosity will not be my sole income. I have planned my life believing that by the time I reach 65, there will be no governmental tits to suck on. 

However, I also understand that life is unexpected and there's a chance that I will be broke when I reach 65 as well. I am a capitalist pure and pure. So if I contributed to something I want to enjoy its benefits. Whatever I can get in my life, will be put into endeavors that I will create. So if there's a safety net then I will charge that much harder ahead.

I am asking this only after having done some google search and coming to you guys since this is a Canadian specific question. Having residency status in 3 countries means that I do not have as much time and cannot dig as deep as others in any one particular country. There are also alot of things that you'd consider fact, but I will have doubts because it is not the norm in the rest of the world. My concerns are about 3 times more than most people in addition to international tax and money transfer issues. Add on different law systems and how they interact with one another and I end up having to I ask directly and shamelessly even if the questions are probably repeated before.


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## OldPro (Feb 25, 2015)

Well you cannot get relevant answers to any direct question if you do not provide the relevant background casuelien. You ask if you will get CPP.

The only true answer given the info you have 'divulged' so far, is MAYBE. It depends not on having residency but on how much you have contributed in to CPP. 

OAS on the other hand IS based on residency. Specifically, how many years after age 18 you have been resident in Canada. To get the maximum you need 40 years residency. You also need a minimum of 10 years to get anything at all.

You are not the only person who has legal residency or even citizenship in more than one country. I have more than one myself. The impact that has on things like income taxes and exchange rates etc. are well known. You seem to think your situation is somehow unique. Everyone's situation is of course unique to a degree but if you take any individual part of your situation, that part is not unique. Only the combination is unique.

As for going broke. Yes, you might and so what? Are you looking for someone here to tell you there is some safety net that will catch you? Do you want a guarantee? Obviously, no such thing exists. You make your bet (retire)casuelein and let the chips fall where they may. The only thing you can count on is that things will change.

Are you familiar with MacGyver? A fictional tv series personality who got into all kinds of dangerous situations and would then improvise out of chewing gum, duct tape and whatever else was around, a way out of the danger. That may be the single biggest plus an early retiree needs to have, the ability to improvise and adapt to change.


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## Causalien (Apr 4, 2009)

Yes I agree. There are certainly people who have the same problems. It is one of them that warned me to start planning on the consequences of multiple residency now. Like the 40 year thing. I didn't know about it until I started researching. I also found out that I've owned one of the government 10 years worth of health care and Pension fund payment because I accidently activated residency it by passing by the airport and entering the country. 

On a side note. Anybody know any detailed account of how to execute the "Mortgage in your own RRSP" thing?

Big thanks to all. I think I got a good idea on how to plan for Canada now.


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## gibor365 (Apr 1, 2011)

> I also found out that I've owned one of the government 10 years worth of health care and Pension fund payment because I accidently activated residency it by passing by the airport and entering the country.


But you also left country ... it's strange...so what, if you were resident of specific country, you cannot visit as a tourist?
How did you figured out that it was activated?


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## Eclectic12 (Oct 20, 2010)

Causalien said:


> On a side note. Anybody know any detailed account of how to execute the "Mortgage in your own RRSP" thing?


http://www.theglobeandmail.com/glob...a-niche-product-for-investors/article8310944/
http://wheredoesallmymoneygo.com/holding-your-own-mortgage-inside-your-rrsp/

Apparently it is a five step process ...
http://www.andrewcmacdonald.com/blog/2010/12/15/rrsp-mortgage-basics-part-2-a-5-step-how-to-guide/

From what I've read, find a financial institution that is willing to do it is a good part of the battle.


Cheers


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## My Own Advisor (Sep 24, 2012)

Why put the mortgage inside RRSP? 

Why not just kill mortgage and grow/contribute to RRSP at same time? Seems easier to manage.


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## lightcycle (Mar 24, 2012)

Causalien said:


> if I can withdraw rrsp.


If you have sufficient funds in non-registered accounts, wouldn't it be beneficial to keep the money in your RSPs until forced to withdraw? That way any gains are tax-sheltered?


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## Eclectic12 (Oct 20, 2010)

gibor said:


> in theory you can unlock your LIRA earlier, it depends on LIRA legislature (FED or Prov) and on every specific province... but in practice I don't believe you can unlock  ...


Why would you think that in practice, it does not work?

Some of the blog posts I've read that outlined what the exceptions were - indicated that the blogger had just unlocked their small LIRAs. 

Now there were a lot more people commenting who had skipped over their province's criteria for allowing unlocking ... I doubt they were able to unlock their LIRA. :biggrin: 


Cheers


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## Eclectic12 (Oct 20, 2010)

Causalien said:


> ... I am asking this only after having done some google search and coming to you guys since this is a Canadian specific question ...


Maybe some terms need to be changed in the Google search? 
Google plus other threads here on CMF are providing most of what I'm finding.




Causalien said:


> ... Having residency status in 3 countries means that I do not have as much time and cannot dig as deep as others in any one particular country ...


Mentioning this probably would have enticed some of those in similar multi-residency situations to comment on what they are receiving from Canada as well as any other tidbits on the other issues.




Causalien said:


> ... There are also alot of things that you'd consider fact, but I will have doubts because it is not the norm in the rest of the world...


Then it sounds like you are adding to your workload because if what happens in other parts of the world is the criteria ... there is going to be a lot of variation (ex. Canada taxes world-wide income based on tax residency, the US taxes world-wide income based on citizenship as well as other factors such as number of days in the US or holding a green card).

If there is a significant amount of doubt ... is an anonymous message board like CMF, where anyone can post anything the way to go to settle the issue? 


Cheers


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## Davis (Nov 11, 2014)

In Ontario, when you roll your employer DC plan into a LIRA, I think you can unlock 50 percent of the amount (which generally corresponds to your share of the contributions), so that what is locked-in is only the employer's share. But you have to do this when you do the rollover. I think you generally transfer it into a regular RRSP or RRIF.


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## Eclectic12 (Oct 20, 2010)

My Own Advisor said:


> Why put the mortgage inside RRSP?
> Why not just kill mortgage and grow/contribute to RRSP at same time? Seems easier to manage.


True ... though some look at the low GIC/HISA rates and figure that their mortgage in their RRSP is a nice safe investment that will pay better returns. It also reduces any pressure to pay of the mortgage early as the RRSP will make the profit.


Of course, I'm not sure I'd want to be holding a mortgage while retired at say 50 ... but that's a personal preference.

Cheers


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## My Own Advisor (Sep 24, 2012)

Eclectic12 said:


> Of course, I'm not sure I'd want to be holding a mortgage while retired at say 50 ... but that's a personal preference.


I hear ya. I want to slay the mortgage beast sooner than later!


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