# Spouse with no income - RRSP withdrawals



## Saniokca (Sep 5, 2009)

Hi,

It is very likely that my spouse will not have any income this year (she is staying home with our daughter). She has over 300k invested inside an RRSP. I remember reading in a few places that it may be more advantageous to pull some money out of the RRSP and just invest in a non-registered account.

We are in our 30s and have about 900k invested (540k in RRSPs/LIRAs, 142k in TFSAs and 187k in non-registered) and I expect that we will be quite a high income in retirement.

Cons:
1) growth will be taxable.
2) money will be less protected in the event of lawsuits? Not sure about this one.


Pro - when the money was going in it was taxed at a high rate (so the deduction was high as well) and if we withdraw now it will be taxed at a lower rate (depending how much we withdraw obviously).

Question: Is it worthwhile to convert and if so - how much? I realize that the answer to the second question more complicated and depends on many factors but I'm trying to get some insight from others.

Thanks!


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## Saniokca (Sep 5, 2009)

Don't jump all at once


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## mordko (Jan 23, 2016)

You need to provide more information to get a proper answer, but in any case... For questions like this, whatever anonymous people tell you on the internet is going to be pretty useless. How do you know it's correct? And if you don't what use is the response?

Googling can help a bit http://business.financialpost.com/personal-finance/when-withdrawing-money-from-your-rrsp-makes-sense. If you are not satisfied with what you find, you should really talk to your accountant and pay him a few dollars.


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## Eclectic12 (Oct 20, 2010)

Saniokca said:


> Don't jump all at once


Part of the challenge is to think through the variables and make some assumptions as to how high is "high income in retirement".




Saniokca said:


> ... It is very likely that my spouse will not have any income this year (she is staying home with our daughter). She has over 300k invested inside an RRSP. I remember reading in a few places that it may be more advantageous to pull some money out of the RRSP and just invest in a non-registered account ... I expect that we will be quite a high income in retirement ...


Question is ... what assumptions were made in the write-ups or what assumptions make sure there is a worthwhile benefit?




Saniokca said:


> ... Cons:
> 1) growth will be taxable.
> 2) money will be less protected in the event of lawsuits? Not sure about this one.


For the "less protected" - it seems to be depend on the province as well as any actions taken on your part. Or to put it another way, the RRSPs might be the same as the taxable account or only partly protected from lawsuits.
http://www.theglobeandmail.com/glob...ent-funds-from-creditor-claims/article549663/
http://www.advisor.ca/tax/tax-news/protecting-rrsps-from-creditors-2902
http://torontotalks.org/money-talks/how-to-keep-your-rrsps-creditor-proof/

There's also potential cons the larger investment income drives up the total income during the future RRSP/RRIF withdrawals.




Saniokca said:


> ... Pro - when the money was going in it was taxed at a high rate (so the deduction was high as well) and if we withdraw now it will be taxed at a lower rate (depending how much we withdraw obviously).


There's also the potential pro that there may be more control over when investments are cashed in versus the schedule required for a RRIF.





Saniokca said:


> ... Question: Is it worthwhile to convert and if so - how much? I realize that the answer to the second question more complicated and depends on many factors but I'm trying to get some insight from others.


Maybe ... depends on the plan, what "high income in retirement" is plus how likely the retirement scenario is.


Cheers


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## gardner (Feb 13, 2014)

Generally, I am a believer in using periods of low/no income to siphon money out of the RRSP at the advantageous tax rates. Whether this makes sense for you will depend on whether you anticipate being in a high tax bracket during retirement and whether you have something useful to do with the investments once its out if the RRSP. If you have room in your TFSA, RDSP, RESP, then this is a no-brainer -- move as much as possible from RRSP to these other registered accounts. This will get you out from under the tax liability and keep the money in a tax-free account for future growth.

If the investment will be non-registered once it's out of the RRSP, then you will have to weigh the value of the tax savings in using a low/no income period to withdraw versus the future cost of taxes while the investment generates capital gains, dividends and interest. If the future income will be mostly tax advantaged capital gains and dividends, then the tax savings on the initial withdrawal could well be a win.


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