# Need some advice from you tax experts on a lump sum settlement in 2017



## carverman (Nov 8, 2010)

As some CMF long term members may have read from the "Nortel Chronicles", a settlement has been (tentatively) reached to pay out claims to
Nortel retirees in 2017 from the Nortel estate. (see details in this link)

https://www.thestar.com/business/20...for-73b-of-bankruptcy-liquidation-assets.html

Being a Nortel retiree now for 13 years, I submitted a claim for $82K, assuming the payout of the lump sum is actually at 44% of my claim, from the
Star article above. because of this additional lump sum, my gross income pushed into the next higher tax bracket (31.15%) for just 
one year (Tax year 2017),
with additional taxes I would have to pay on about $26K of additional income added to my gross income for ONLY that one year.

*Here is a rough calculation I have made on my projected 2017 taxes*.

Normal gross income; $38,000 (minus $3600 ex-spousal indefinite support)= $34,400 net + some minor income from a couple GICs with PCF

*The settlement: *
Calculated at 44% of $82K = $36,000, *MINUS $10k already paid to me in 2016, out of the Nortel Hardship Fund *(I am disabled and in a wheelchair).

So that leaves about $26k of additional one time income that has to be added to my total income for that one year (2017) and that pushes me
into the middle income bracket for only that one year. 

With income tax collected on my pensions and 20% withheld from the lump sum payout of $26,000, I would be at the $62,000 net income level instead
of my normal $33K income level. 

Even with my disability tax credit + personal credits ($8560) + $2500 in Charitable donations each year, I still don't have enough tax deductions
to avoid paying some additional tax for 2017. 

*My calculations in the 31.15% tax bracket:*
$19,313 tax payable minus $8600 in personal non refundable tax credits = $10,713 net taxes payable... minus tax collected at source ($7600),
still leaves about $3,313 taxes owing that I would need to find to pay out of pocket.

I'll be turning 71 in March 2017, so it doesn't leave me an option to open an RRSP.
I probably will need some kind of tax shelter for that $26k additional lump sum. 

*What about if I open a RRIF in 2017 before the deadline (with $2k to start), and then putting in the entire lump sum mid year?*


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## Nerd Investor (Nov 3, 2015)

I have what is hopefully some good news for you. 
Based on your calculations, you seem to be under the impression that once you get pushed into a higher tax bracket, you pay that tax rate on all your income. That isn't how it works. You only pay that higher rate on the actual amount of income that is in that tax bracket. So on your first $40,000 of income for example, you are still only paying tax at 20%. Your next $5,000 or so, you pay at 24%, and then 29.7% after that. I'm rounding off on the threshholds a bit, but essentially you'd have something like this: 

first $40,000 x 20% = $8,000
next $5,000 x 24% = $1,200
next $17,000 x 29.7% = $5,050

Total tax $14,250 before any tax credits. Should be around $12,000 once you factor in even just the basic personal credits. 

As for tax sheltering, you can actually contribute to an RRSP the year you turn 71 (next year) you just have to convert it to a RRIF by Dec 31 of that year. And of course you have to have enough contribution room.


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## AltaRed (Jun 8, 2009)

Am I missing something here? Why wouldn't the payout be (or able to be) tax protected, i.e. able to be sheltered automatically in to a LIRA or similar? My reasoning: Pension plan contributions were based on the premise of a viable ongoing pension plan and the PA would have been based on that. But in actual fact, only a portion of those original contributions are now being paid out as pension lump sum. So retroactive PA should be adjusted considerably allowing a lot of 'new' unused RRSP room to shelter this payout. ????


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## twa2w (Mar 5, 2016)

Carverman, you can open and contribute to an RSP until the end of the year in which you turn 71. So in this case, if you turn 71 in Mar 2017, you can make a contribution until the end of 2017. But you do have to convert to a RIF by year end as well so allow enough time.
I am not familiar with all the various pieces of the settlement, 
I would assume if this settlement is from shortfall in pension proceeds, you should have the ability to transfer this directly to your rsp ( this could be transferred directly to a RIF as well if you have one.) This would work more as a pension transfer.

If the settlement is for benefits or wages, it would not be able to be put into an RSP unless you had contribution room and then it would be a contribution.

I am sure the documents you receive from the lawyers will outline your options.


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## twa2w (Mar 5, 2016)

Let me correct my abovecomment. AltaRed is right. If this was a pension settlement, it would be a LIRA/LIF not an RSP/RIF but the same age limits apply.


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## carverman (Nov 8, 2010)

Nerd Investor said:


> I have what is hopefully some good news for you.
> Based on your calculations, you seem to be under the impression that once you get pushed into a higher tax bracket, you pay that tax rate on all your income. That isn't how it works. You only pay that higher rate on the actual amount of income that is in that tax bracket. So on your first $40,000 of income for example, you are still only paying tax at 20%. Your next $5,000 or so, you pay at 24%, and then 29.7% after that. I'm rounding off on the threshholds a bit, but essentially you'd have something like this:
> 
> first $40,000 x 20% = $8,000
> ...


Didn't know that. i've always done my own taxes. What I find confusing is that on 2015 Sched 1 (Federal) it shows 32 columns and tells me to enter the amount
from line 260 of your return (this is your taxable income). 

Ok, I'm referring to the 2015 return as I won't know the 2016 return numbers until next February.

On the 2015 fed tax calculation sheet, it tells me to take the taxable income on line 36 (same as line 260) and to "enter the amount from line 36" in the appropriate
column ($44,701 or less @15%) ; more than $44,701 but less than $89,[email protected]%);etc.

I was under the impression I would have to put the entire amount of taxable income in the appropriate column, 
but you are saying I can split it up into two columns with the remainder (over $44,7010 in the second column,that will result in 
considerable tax savings for me. 



> Total tax $14,250 before any tax credits. Should be around $12,000 once you factor in even just the basic personal credits.


Based on the 2015 income, I had about $34K of taxable income and I got a full refund (including about $1100 from the Ontario Happy Homes renovation tax credit, but this is only for the 2015 year).

If I project my 2015 pension income to 2017 taxation year, I should realize a normal taxable income of 34K (basic pensions) + $26K from the settlement + a $6.5K pension adjustment (one time lump sum) due to conversion from Nortel pension plan to an annuity) for a total of (about) $60,000 of gross income * but for only the 2017 tax year.*

It will drop back down to about $34K gross in 2018. Last year, due to paying my medical/dental and other disability aids to continue living in my own home, I calculated a total tax credit of $4531 (income tax deducted at source $3378 + personal medical and disabilty tax certificate credit + Happy Homes renovation tax credit ($1153).

Other than paying the required $300 for Ontario (OHIP), the taxes that were collected in 2015,were reimbursed to me in a substantial refund.



> As for tax sheltering, you can actually contribute to an RRSP the year you turn 71 (next year) you just have to convert it to a RRIF by Dec 31 of that year. And of course you have to have enough contribution room.


Ok, so going by what you are saying and anticipation a lump sum settlement of at least $26k sometime in 2017, I should still open an RRSP in February with at least $1,000 to put in in. 
I will turn 71 in March 2017, so I will need to convert that to a RRIF by December 31 of the same year.


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## carverman (Nov 8, 2010)

AltaRed said:


> Am I missing something here? Why wouldn't the payout be (or able to be) tax protected, i.e. able to be sheltered automatically in to a LIRA or similar? My reasoning: Pension plan contributions were based on the premise of a viable ongoing pension plan and the PA would have been based on that. But in actual fact, only a portion of those original contributions are now being paid out as pension lump sum. So retroactive PA should be adjusted considerably allowing a lot of 'new' unused RRSP room to shelter this payout. ????


As I explained earlier (I think) , this settlement from the Nortel estate is only what they STILL owe me from the TRA (Transistional Retirement Allowance) and is not part of the registered pension plan.

It was equivalent to a severance at time of my retirement mid 2002 (due to 22.5 yrs of service and due to my health issues, I was
put on special leave (not having to report into work) from mid 2002 at full salary up to November 2003 when my 25 years of service
anniversary came due in order to increase my pension. My pension payments were to start November 2003, when I officially retired. 

Because of a big tax and divorce/support considerations, I didn't want to put this into an RRSP at the time because a large lump sum amount would still be considered a source of income for the courts for my indefinite (compensatory) support payment which are still
ongoing even to this day.

This complicated matters for me in receiving the lump sum of over $50k at the time. As I knew I had to go back to court on my retirement
to get the EX spousal support reduced or eliminated. So, I chose to take it out in monthly payments of $568 (after taxes) to ensure
that the courts did not see as extra income to continue to support her at a higher monthly support payment after I retired.

Since the TRA benefit was never guaranteed (like a pension), it came out of Nortel's general revenue and the payments to me stopped on Jan 2009, when Nortel declared bankruptcy after about 50 payments. I don't remember how much income tax was deducted at the time
from the $568 net payment, but this was calculated by Nortels appointed court monitor and when the settlement finally occurs in 201,
I will receive some of it in a lump sum (est. $36K).


I doubt then, that this one time settlement payment (paid out of the remains of the Nortel estate), will be tax sheltered, UNLESS I put it into a tax shelter myself. I definitely don't want to take a big tax hit at this point in my retirement life.


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## carverman (Nov 8, 2010)

twa2w said:


> Let me correct my abovecomment. AltaRed is right. If this was a pension settlement, it would be a LIRA/LIF not an RSP/RIF but the same age limits apply.


 No, it is NOT a pension settlement. I*t is a settlement of the balance of what Nortel owes me from my severance payment*, that I in retrospect, chose to take in 136 monthly payments instead of a lump sum in November 2003, when my Nortel pension officially began.

The TRA was an *extra retirement benefit paid only to long term RFT employees* that were not under a collective bargaining agreement and considered individual contributors/management. It was intended to ease the transition from a salary while working,
to a retirement pension. 

Due to ongoing spousal support , I decided in my mind, to "stretch out the TRA" rather than take it as a lump sum, 
which was also offered back in 2002..before Nortel steadily got deeper in financial trouble after that.

I never anticipated at the time (in 2002), that they would declare bankruptcy in Jan 2009.
As a lot of people thought..Nortel was too big to fail. History has proven that wrong!


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## carverman (Nov 8, 2010)

I looked at my 2015 assessment and I have $26.5K of available RRSP contribution room. if I open an RRSP in February, I can put in about $2k for starters (from savings) and then the rest ($25K) from my lump sum, if that is the final amount they give me.

That way I can tax shelter all of it, except the $10K given to me this year (2016) from the Hardship Fund, which they informed me will be deducted from the final settlement.

I have enough personal deductions to accommodate the extra $10k added to my income this year. They withheld 20% ($2,000) of that $10K one time payment from the special hardship fund that I applied for this year with the court appointed legal firm (monitor). 
So I ended up with just a $8k check. I preesume they will send me a tax receipt early next year.

I expect that with the additional $10k of income added to my normal income it will just be enough to keep me in the lowest tax bracket for 2016, especially if I open up an RRSP and put in $2k for starters. That should bring me a partial tax credit. 21% of $2000 is about $420.


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## Eclectic12 (Oct 20, 2010)

carverman said:


> Didn't know that. i've always done my own taxes.


There's been other threads about it.

In particular, I posted a while a go that where in a thread, the OP was using something like 43% x all income at the table said "43% for $90K through to $140K", I posted the response that plugging in the income number (I think it was $130K) in the tax software for that year means the total taxes due worked out to 30% x income.

The key is that one pays the lower % until one crosses into the larger range and only the $$$ within that range are taxed at the higher level. The end result is that using the % from the top income level means the "taxes owing" number estimated is substantially larger than what one will see on the tax return.




carverman said:


> Ok, I'm referring to the 2015 return as I won't know the 2016 return numbers until next February ...


One will have to wait for tax software to be released but the numbers are already available (assuming no last minute adjustments by the Ontario gov't).
http://www.taxtips.ca/taxrates/on.htm

The "Understanding the Tables of Personal Income Tax Rates" says the same thing as Nerd Investor in the "Trying to estimate your taxes from the tax tables?" subsection that walks through an $80K income example.
http://www.taxtips.ca/taxrates/understandingtables.htm




carverman said:


> I was under the impression I would have to put the entire amount of taxable income in the appropriate column ...


As others have said, this may not be true. I have not looked at the specifics but since I was able to rollover leaving a DB pension into a LIRA with no income to report on my tax return, I'd expect that at least part of the settlement would work this way, if not all.




carverman said:


> ... you are saying I can split it up into two columns with the remainder (over $44,7010 in the second column,that will result in considerable tax savings for me.


It's been a long time since I've done the paper forms. I don't believe there is any way to split it, other than the amount that can go into a LIRA or similar would be reducing the overall number to report.

The other point is that the paper forms have been setup to take into account the "20% x the first $41K, 24.15% x over $41K to over $45K". 




carverman said:


> ... Ok, so going by what you are saying and anticipation a lump sum settlement of at least $26k sometime in 2017, I should still open an RRSP in February with at least $1,000 to put in in ...


IMO, the RRSP question is can you benefit from reducing taxes now and have the opportunity to pull the money out in the future at a lower tax rate?


Cheers


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## Eclectic12 (Oct 20, 2010)

carverman said:


> As I explained earlier (I think) , this settlement from the Nortel estate is only what they STILL owe me from the TRA (Transistional Retirement Allowance) and is not part of the registered pension plan ...
> 
> I doubt then, that this one time settlement payment (paid out of the remains of the Nortel estate), will be tax sheltered, UNLESS I put it into a tax shelter myself. I definitely don't want to take a big tax hit at this point in my retirement life ...
> 
> No, it is NOT a pension settlement. *It is a settlement of the balance of what Nortel owes me from my severance payment ... *


If it is severance then according to this link, it may be eligible for part or all to be rolled over into an RRSP (assuming you no longer have concerns from the divorce).
https://retirehappy.ca/dealing-with-your-severance-allowance/


A key point from the article is that:


> *... The RRSP rollover is in addition to your normal RRSP contribution limit.*



Cheers


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## carverman (Nov 8, 2010)

Eclectic12 said:


> It's been a long time since I've done the paper forms. I don't believe there is any way to split it, other than the amount that can go into a LIRA or similar would be reducing the overall number to report.
> 
> The other point is that the paper forms have been setup to take into account the "20% x the first $41K, 24.15% x over $41K to over $45K".


You must be referring to the federal tax brackets?
For taxation year 2017, the two levels of income that I would have to file for the 2017 taxation year (based on income levels from the 2015 paper tax
form (T1 General) is: Line 36 (taxable income) is 44,701 OR LESS. The tax rate multiplier is 15% with 0.00 additional tax value. 

As soon as my income level is OVER $44,701 but LESS than $89,401, the remainder of taxable income is at 22% PLUS $6,705 additional
tax value.

That is a bit unfair to me since I'm just a bit over my normal income threshold at $33K PLUS $19K. and no way near $89,401 max in the
next tax level.

In fact after my normal deductions, (EX WIFE ongoing support of $3600 deducted off my gross income + some interest earned, I'm around $33K of taxable income before my personal deductions applied. (I have a Disabilty tax certificate as well).

The provincial tax payable is similar, with a $40,922 threshold @ 5.05% (lowest) and the excess income in the next tax bracket ($40,922 but less than $81,847) at 9.15% *PLUS the additional tax value added to this calculation of $2,067.00.*

So, *IF *I have to move some of my excess income into the next tax bracket, I will be penalized for an additional FIXED amount (Fed + Prov) = $8700 whiich would be the result of moving some of my income ($33k PLUS $19K additional lump sum) = $52k taxable approx.



After reading the Nortel document thoroughly on my submitted claim of $82,000, discounted to 44%, I would normally receive $36K approximately in a LUMP sum. 
HOWEVER, in the Nortel document, they mention that any future payment(s) would be REDUCED by payments made from the HEALTH AND WELFARE TRUST Fund (which is part of the Nortel overall estate), and any payments from the HARDSHIP FUND, which I had to submit to get this year (2016).

So in total, payments made to me from HWT fund and one payment ($10k minus $2k tax withheld) totals about $16K in payments that I have already received over 3-4 years, leaving only about $19K to be paid out as a final payment of my claim next year sometime. 

*I have to tax shelter this $19K+ one time payment.
*
Otherwise: 
This would have the effect of artificially blowing my yearly income out of the water for ONLY 1 year. Not only would I have to pay a lot
more tax on the excess, but my gov't benefits (HST rebate,Ont trillium benefit , and possibly ODB (Ontario Drug Benefit) would be reduced or eliminated entirely due to change in income threshold, until after the filing of the following year tax return, where my income is back to Pension "normal". 
Obviously I don't want this to happen.




> As I say, where the tables listed something like 43% for the total income the poster had, just the personal exemption plus the a bit of income at each tax level meant that where one wanted to apply a single % number instead of working through the various levels, that percentage number worked out to 30%.


I did a semi-detailed "modelling" calculation this weekend based on numbers from my 2015 tax return. 
If I shelter all, or most of the remaining $19K lump sum payment, I will get back a refund ALMOST equivalent to the income tax deducted on my 3 pension(s) and assuming 20% of the final $19K payment is witheld is ($3800),
I will get back pretty much most of that as well , IF I shelter it right away in an RRSP (which will be only good for 1 year for me..I will turn 71 in 2017.




> IMO, the RRSP question is can you benefit from reducing taxes now and have the opportunity to pull the money out in the future at a lower tax rate?
> Cheers


Yes. I have just opened up a RRSP with PCF this weekend. I will need to put some more money in it to get a more substantial refund for 2016, as the $10k payment (minus $2k witheld) is also added to my normal income for 2016. 

Obviously, I want to put in enough in the RRSP between now and Feb 28, 2017 to cancel any additional taxes I would have to pay from the $10K Hardship fund.

According to my CRA 2016 assessment, I have $26,500 of RRSP contribution room for 2016. i'm sure it will be the same in 2017 even if I put in about $2500 for the 2016 tax return.


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## Eclectic12 (Oct 20, 2010)

carverman said:


> ... I will get back pretty much most of that as well , IF I shelter it right away in an RRSP (which will be only good for 1 year for me..I will turn 71 in 2017 ...
> I have just opened up a RRSP with PCF this weekend ...


I am not following what the problem is.

From what you've written, you expect $26K of final payment in 2017, you have an open RRSP with $26.5K of contribution room and you don't have to convert the RRSP until Dec 2017. 

Some of the 2016 income may be "earned income" so there may be more than $26.5K RRSP contribution room, without doing anything.


Then too, this article says one can at times advantage to an over-contribution to one's RRSP in Dec of the year one turns 71.
http://www.taxtips.ca/rrsp/final-rrsp-contribution-age-71.htm


Or have I missed something?


Cheers


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## Eclectic12 (Oct 20, 2010)

carverman said:


> ,,, *What about if I open a RRIF in 2017 before the deadline (with $2k to start), and then putting in the entire lump sum mid year?*


I didn't see a response to this.

This Star article says a RRIF can be funded by transfers from an RRSP, not contributions.
https://www.thestar.com/business/pe...0/08/03/rrifs_10_things_you_need_to_know.html


So it's good that an RRSP has been opened.


Cheers


*PS*

CRA's link says pretty much the same.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrif-ferr/menu-eng.html


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## Nerd Investor (Nov 3, 2015)

carverman said:


> You must be referring to the federal tax brackets?
> For taxation year 2017, the two levels of income that I would have to file for the 2017 taxation year (based on income levels from the 2015 paper tax
> form (T1 General) is: Line 36 (taxable income) is 44,701 OR LESS. The tax rate multiplier is 15% with 0.00 additional tax value.
> 
> ...


So here is what they mean by that statement. That $6,705 "additional" tax is simply the 15% tax you pay on the first 44,701. Then you pay 22% on every dollar after that. So they are simply saying (again using the $60K example and just worry about federal tax), you pay 15% tax on your first $44,701 =$6,705. Then 22% on the remaining $15,299 = $3,365.78. So total federal tax on $60K of about $10,000 _before_ deducting any tax credits.


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## carverman (Nov 8, 2010)

Eclectic12 said:


> I am not following what the problem is.
> 
> From what you've written, you expect $26K of final payment in 2017, you have an open RRSP with $26.5K of contribution room and you don't have to convert the RRSP until Dec 2017.
> 
> ...


I have opened up an RRSP in 2016. I have $26.5k of contribution room according to my 2015 assessment. 

I presume I can carry forward this $26.5k of contribution room to 2016 and any used portion of it to 2017,
when I expect at least $19k left of the Nortel settlement coming to me. 

The article in the link you supplied tells me this:



> If you have earned income in the year you turn 71, which generates* RRSP contribution room for the following year, you can only use this room to contribute to the RRSP of a younger spouse or by making an excess contribution to your own RRSP in the year you turn 71*. This is because your RRSP must be converted to a RRIF by the end of the year in which you turn 71.


ok, so I know I have to convert my RRSP to a RRIF by Dec 31, 2017. Hopefully, the settlement check will be sent out sometime during the year.
Why can't I contribute the full $19K to my RRSP before I turn 71 in early March? I can always withdraw the 19K from my TFSA and contribute that
before I actually turn 71 which will fall in line with the deadline for RRSP contributions.

I am interpreting the contribution rules correctly?


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## carverman (Nov 8, 2010)

Nerd Investor said:


> So here is what they mean by that statement. That $6,705 "additional" tax is simply the 15% tax you pay on the first 44,701. Then you pay 22% on every dollar after that. So they are simply saying (again using the $60K example and just worry about federal tax), you pay 1*5% tax on your first $44,701 =$6,705.*
> *Then 22% on the remaining $15,299 = $3,365.78*. So total federal tax on $60K of about $10,000 _before_ deducting any tax credits.


Thanks for explaining that to me. I haven't been in the next tax bracket for several years now being on pension, so I interpreted that column as being taxed at* 22% on that amount* on top of the excess income that puts me in that tax bracket for one year only.


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## carverman (Nov 8, 2010)

Eclectic12 said:


> I didn't see a response to this.
> 
> This Star article says a RRIF can be funded by transfers from an RRSP, not contributions.
> https://www.thestar.com/business/pe...0/08/03/rrifs_10_things_you_need_to_know.html
> ...


That is what I am planning to do.


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## Eclectic12 (Oct 20, 2010)

carverman said:


> I have opened up an RRSP in 2016. I have $26.5k of contribution room according to my 2015 assessment.
> I presume I can carry forward this $26.5k of contribution room to 2016 and any used portion of it to 2017, when I expect at least $19k left of the Nortel settlement coming to me.


Not only that ... if you have any "earned income" in 2016, then 18% of that will be adding to the RRSP contribution room being carried over.




carverman said:


> ... The article in the link ...


Keep in mind that the article is focused on "earned income" that generates RRSP contribution room that becomes available in the year one is 72, where the conversion to a RRIF has already happened.

From what I can tell, it sounds like between the RRSP contribution room already in place and the potential 2016 earned income that would add more RRSP contribution room, you are already covered. 

Or to put it another way, the article amount is more to keep in mind should for some reason, more RRSP contribution room be needed.




carverman said:


> ... I know I have to convert my RRSP to a RRIF by Dec 31, 2017.
> 
> Hopefully, the settlement check will be sent out sometime during the year.
> 
> ...


If it looks like the settlement cheque will be later in the year - by all means. 
Keep in mind though that unless you have unused TFSA contribution room of $19K - the Nortel settlement $$$ likely would have to wait until 2017 to be contributed to your TFSA.


Unless there's some need to apply the RRSP contribution made in the first sixty days of 2017 to the 2016 tax year - I'm not sure why March 2017 seems to be important to you. As I understand it, as long as the RRSP is converted to a RRIF by Dec 31st, it is all good. So final RRSP contributions should be fine up until the conversion (though I'd set a deadline for myself of Nov to allow holds to clear, planning etc.).

Note that the warning in this high level link is about delaying one's RRSP contributions to the first 60 days of the following year.
http://www.rbcroyalbank.com/rrif/rrsp-strategies-at-71.html




carverman said:


> ... I am interpreting the contribution rules correctly?


As I say, the only part that is puzzling me is why what appears to be a self-imposed deadline of March 2017 for the $19K RRSP contribution. The downside I can see to making the preemptive RRSP contribution in March 2017 is that it looks like the use of the TFSA may be lost for the $19K plus any growth until 2018 (approximately 8 months, give or take).


Cheers


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## carverman (Nov 8, 2010)

Eclectic12 said:


> Not only that ... if you have any "earned income" in 2016, then 18% of that will be adding to the RRSP contribution room being carried over.


My earned income now is strictly pension income (Nortel pension, OAS and CPP). 
In 2015, my taxable income before deductions, ( aND after deducting $3600 of support payments for the ex), 
I was able to claim a substantial refund (around $4.2K) on $33K of taxable REDUCED after subtracting all my medical/dental/charitable, personal and DTC exemptions, 
I calculated $00.00 Federal tax payable and only $300 Provincial (the mandatory OHIP tax) while in the lowest tier tax bracket.

I want to maintain this next for year (2017), and will do whatever is necessary to offset the estimated final settlement of the $19K still left owing to me on my claim when it happens next year. 



> Keep in mind that the article is focused on "earned income" that generates RRSP contribution room that becomes available in the year one is 72, where the conversion to a RRIF has already happened.
> 
> From what I can tell, it sounds like between the RRSP contribution room already in place and the potential 2016 earned income that would add more RRSP contribution room, you are already covered.


That would be good for me for 2018.



> If it looks like the settlement cheque will be later in the year - by all means.
> Keep in mind though that unless you have unused TFSA contribution room of $19K - the Nortel settlement $$$ likely would have to wait until 2017 to be contributed to your TFSA.


I will have over $30,500 of TFSA contribution room for next year. I withdrew quite a bit from my PCF TFSA this year,($25K) put it into the Tang promotional HIS for 6 months. and put the remainder ($5K) in my new Tangerine TFSA , which just leaves me with about $400 of contribution room left for 2016. 

But on Jan 1 2017, I will have $26k contribution room ( from this years TFSA withdrawals PLUS $5500 of contribution room for 2017, 
for a max contribution of $30,500 for my TFSA held in both banks. I think I will be ok in that regard.

I made sure to check with my CRA account first to make sure I didn't over contribute into my TFSA account with Tang. 



> *Unless there's some need to apply the RRSP contribution made in the first sixty days of 2017 *to the 2016 tax year - I*'m not sure why March 2017 seems to be important to you.*


I turn 71 on March 2, 2017 and I thought that my final RRSP contribution in 2017 would need to be done before I turn 71?



> As I understand it, as long as the RRSP is converted to a RRIF by Dec 31st, it is all good. *So final RRSP contributions should be fine up until the conversion (though I'd set a deadline for myself of Nov to allow holds to clear, planning etc.).
> *
> Note that the warning in this high level link is about delaying one's RRSP contributions to the first 60 days of the following year.


Ok,so what I understand then, is that I can make my final contribution in 2017 ($19K) ANYTIME before December 31st (ie: November 1, 2017) , and then convert it to the RRIF right afterwards in November 2017. And this contribution can be used for the 2018 tax year to reduce my taxable income. Is this correct? 





> As I say, the only part that is puzzling me is why what appears to be a self-imposed deadline of March 2017 for the $19K RRSP contribution. The downside I can see to making the preemptive RRSP contribution in March 2017 is that it looks like the use of the TFSA may be lost for the $19K plus any growth until 2018 (approximately 8 months, give or take).


Yes, you are right, I won't do that until sometime in 2017 when I get the final settlement check.


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## Eclectic12 (Oct 20, 2010)

carverman said:


> .... on Jan 1 2017, I will have $26k contribution room ( from this years TFSA withdrawals PLUS $5500 of contribution room for 2017,
> for a max contribution of $30,500 for my TFSA held in both banks. I think I will be ok in that regard.
> 
> I made sure to check with my CRA account first to make sure I didn't over contribute into my TFSA account with Tang.


This likely means you are okay.

I personally prefer to track the TFSA contribution room like a chequing account balance. I know as each contribution is made and as each withdrawal is made what the TFSA contribution room is / will be the following year. CRA on the other hand is reported to collect the info once a year and has been reported to be behind the times.




carverman said:


> .... I turn 71 on March 2, 2017 and I thought that my final RRSP contribution in 2017 would need to be done before I turn 71?


In twenty plus years I have yet to see a reference to "stop contributing on age 71 birthday".

Add in that the Royal Bank reference gives Dec 31st of the year one becomes 71 (i.e. Dec 31st, 2017) as the last date to make an RRSP contribution. (As I say, that's cutting it too close for my liking.)




carverman said:


> ... I can make my final contribution in 2017 ($19K) ANYTIME before December 31st (ie: November 1, 2017) , and then convert it to the RRIF right afterwards in November 2017. And this contribution can be used for the 2018 tax year to reduce my taxable income. Is this correct?


That's what all the articles I can recall say. 

If it is a concern, you can check with CRA or other professionals. If you want to be bullet proof, as there's enough TFSA room, you can stick to the "before the birthday using a TFSA withdrawal, then deposit the settlement cheque to the TFSA".


Cheers


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