# Looking for tax sheltering idea for one year



## birdman (Feb 12, 2013)

I was fortunate in being able to retire fairly early at age 55 and as part of my retirement I received a SERP (supplemental retirement plan) which paid me $55,000. PA (before tax) til age 71. This worked out very well, particularly when the mandatory RSP withdrawal age was increased to age 71. This is not my only income as I also have a small pension income of about 22,000. PA, along with CPP and OAP and OAP for my wife. Also have dividend and interest income and money is really not much of a problem. Anyways, the year I reach 71 not only will I have my SERP income along with my other income but I will be forced to withdraw a portion of my RSP's which will probably be $25,000. or thereabouts. I certainly won't need the income that year and was just wondering if anyone had any ideas, suggestions, or strategy to defer some of my income for this one year?


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## Four Pillars (Apr 5, 2009)

frase said:


> I was fortunate in being able to retire fairly early at age 55 and as part of my retirement I received a SERP (supplemental retirement plan) which paid me $55,000. PA (before tax) til age 71. This worked out very well, particularly when the mandatory RSP withdrawal age was increased to age 71. This is not my only income as I also have a small pension income of about 22,000. PA, along with CPP and OAP and OAP for my wife. Also have dividend and interest income and money is really not much of a problem. Anyways, the year I reach 71 not only will I have my SERP income along with my other income but I will be forced to withdraw a portion of my RSP's which will probably be $25,000. or thereabouts. I certainly won't need the income that year and was just wondering if anyone had any ideas, suggestions, or strategy to defer some of my income for this one year?


I really hate when people use the term 'forced' when talking about mandatory RRIF withdrawals. The mandatory withdrawal rules were in place when you made the RRSP contributions - nobody 'forced' you to contribute.

Anyway - your solution is to do nothing. The RRSP has to be converted to a RRIF by the end of the year you turn 71, but the first mandatory withdrawal is the year you turn 72. 

Problem solved.

More details on converting RRSPs to RRIFs: http://www.moneysmartsblog.com/how-to-convert-your-rrsp-to-a-rrif/


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## Guban (Jul 5, 2011)

Don't forget that you may be able to reduce the amount taken from your RRIF by basing withdraws on your spouse's age.


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## andrewf (Mar 1, 2010)

I don't see why people think of RRIF withdrawals as a disaster. You don't have to spend the money. You can choose to save it in non-reg or add it to your TFSA. If anything, the government is helping you out by not letting you keep your RRSP until death, with your estate taking a large tax hit on deemed disposition.


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## Guban (Jul 5, 2011)

I could be wrong, but personally, I believe that people think that RRIF withdrawals are a disaster because they may attract taxation and people don't like to pay income taxes. The memory to the tax deduction on money going into the RRSP is ancient history, and people often forget that RRSP's are a form of tax deferral, not avoidance.


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## birdman (Feb 12, 2013)

Thanks everyone for your comments. I certainly don't mind taking the money out and expect to need it to meet my living expenses. I just didn't want to start taking it out take it out til I was 72 when my income will be a lot lower than when I'm 71. Four Pillars set me straight on that - Thanks.


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## andrewf (Mar 1, 2010)

Guban said:


> I could be wrong, but personally, I believe that people think that RRIF withdrawals are a disaster because they may attract taxation and people don't like to pay income taxes. The memory to the tax deduction on money going into the RRSP is ancient history, and people often forget that RRSP's are a form of tax deferral, not avoidance.


Yeah, but at 75 or 80, you (or your estate) are going to be taxed on that money sooner or later (probably sooner).


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## fraser (May 15, 2010)

Be especially vigilant if you are looking at tax shelters. Our experience is there is always much more emphasis on the tax savings or tax deferral than there is on the investment itself.

We bought a tax shelter from our broker when we lived in BC. The only reason we did not loose money is that we moved to Alberta. We took the tax savings over several years in BC, and took the subsequent tax hit when we lived in Alberta. In both instances we were in the top marginal tax bracket. At the time we took the tax hit, about eight years later, the Alberta marginal rate was 12 or 13 points less than the BC rate. We were able to make a little, plus we deferred about 60K of taxes for seven years. It was dumb luck. Looking back, it was a very high risk investment. The same plans in the two years prior to ours, and three years after ours were not so fortunate. They all realized losses after adjusting for time value of money. The brokers made the money.


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## alingva (Aug 17, 2013)

_Looking for tax sheltering idea for one year_ - mattress


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