# Should I collapse RRSP before 71 therefore no RRIF



## Brian K (Jan 29, 2011)

My FP believes that I should make regular withdrawals from my RRSP so that it is collapsed by the time I turn 71. She says swallow hard and pay the tax now and don't turn it into a RRIF. Other professionals disagree with this and say go the RRIF route.
Comments?


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## andrewf (Mar 1, 2010)

I would think that for most people this would be a bad idea. Why pay more tax now to avoid some tax later?

You didn't provide enough information about your income pre- and post- age 71 to really say, though.

Is she concerned about a big tax hit in the event of your death?


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## MoneyGal (Apr 24, 2009)

Well, what's her rationale?


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## steve41 (Apr 18, 2009)

The actual numbers would be useful. Also.... if you have some medical premonition of an early demise, this can factor into the decision. In general, it works out (after tax-wise) that continuing to shelter your RRSP is best.


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## Larry6417 (Jan 27, 2010)

You haven't given enough information for anyone to comment reasonably.

Some advisors do recommend a RRSP "meltdown" strategy, but that makes sense only to the individual in cases where the income is higher in retirement than before i.e. someone is winding down to retirement and in a lower tax bracket (which makes RRSP withdrawals more advantageous then) or if the RRSP is so large it pushes the person into a higher tax bracket - rare but possible.


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## steve41 (Apr 18, 2009)

Just to give you an idea....

a 65 yo, retiree with $300K in her RRSP.

Sheltering her RRSP as normal and allowing it to RRIF, will sustain her lifestyle out to age 95 before capital runs out.

In second scenario, she starts to attack/melt her RRSP at $50K per year out to age 71.

At the same ATI (lifestyle) her capital runs out at age 89. If you examine her net to estate, if she had died prior to age 75, her estate would have been better off in the 2nd scenario, otherwise, the 1st (shelter) strategy wins out estate-wise.

To attack or not?


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## FrugalTrader (Oct 13, 2008)

If the client is going to collect GIS during retirement, then it may make sense to collapse the RRSP early. Otherwise, RRIF withdrawals will reduce GIS payment drastically.


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## Karen (Jul 24, 2010)

FrugalTrader said:


> If the client is going to collect GIS during retirement, then it may make sense to collapse the RRSP early. Otherwise, RRIF withdrawals will reduce GIS payment drastically.


The decision would also affect eligibility for OAS, would it not? And possibly even the client's eligibility for the seniors' tax credit?


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## the-royal-mail (Dec 11, 2009)

What's FP?

Whoever it is, can the OP please come back and explain what their rationale was for suggesting that?

And I'm not sure if it would be technically possible? ie. are there not checks and balances in place for the gov't or someone else to flag this?


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## andrewf (Mar 1, 2010)

The government would love it if you did this. You are likely to pay more tax, sooner.


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## Karen (Jul 24, 2010)

Am I misunderstanding your question, TRM - why wouldn't it be technically possible to collapse one's RRSP before turning 71?


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## FrugalTrader (Oct 13, 2008)

OAS doesn't start to get clawed back until $67k of income. Over that, it's clawed back 15% of every dollar until it's eliminated completely.


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## steve41 (Apr 18, 2009)

If you are HNW, then OAS clawback is a concern, if LNW (low net worth) then GIS clawback is a concern. Otherwise, you need to supply the numbers.

BTW, there are a lot of FPs out there who don't have a clue about the math.


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> What's FP?


Financial Planner


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## the-royal-mail (Dec 11, 2009)

Thanks Harold. Wish the OP would have clarified that.

Karen, my understanding is that you MUST wind down your RRSPs by 71. I guess the OP came across as wanting to try and figure out a way to pay less tax on their RRSPs by not doing the RRIF thing. I'm just suggesting that may be the sort of thing the gov't is watching for? Consider the underlying motivation of the OP.

OP, if tax is your concern, wouldn't a RRIF be the BEST thing for you? You would only withdraw a little at a time, what you need. That in and of itself would keep your tax bill down without attracting unwanted attention.


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## DanFo (Apr 9, 2011)

Actually Royal you can continue contributing to your RRSP's until the year you turn 71, at which point your forced to convert them to RRIF's/annuities/even cash i think, with minimum withdrawl amounts each year after 71.


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## andrewf (Mar 1, 2010)

DanFo, I think TRM meant 'wind down' as 'convert to RRIF'.

TRM, you can withdraw from your RRSP at any time. With a RRIF, you need to withdraw a minimum percentage each year according to your age. For some reason the FP wants the OP to pay tax now by withdrawing from the RRSP to avoid paying likely similar amounts of tax later. The main difference would be where the OP dies early and the estate is taxed on the full account value.


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## DanFo (Apr 9, 2011)

I believe your right andrew i musta misread it the first time...... DOH!!!!


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## Brian K (Jan 29, 2011)

Thanks for the quick replys. (As pointed out FP - Financial Planner -sorry I didn't clarify that). After posting, I thought "why not ask my FP the same question" and this is her response:


"First and formost, most financial people never write a plan during their entire careers and that goes for accountants too. They just follow what they have been told. The concept behind an RRSP is to save tax when you are in a higher tax bracket and take it out when you are in a lower tax bracket. No one asks the question what if I am NOT in that lower tax bracket but rather in the same tax bracket or worse yet a higher tax bracket at retirement. What determines whether you take out your RRSPs sooner rather than later depends upon the tax bracket you will be in in every stage of your life. Unless you do a plan/projection you have no idea. So anyone saying do this or do that without looking at the overall financial and tax position of the individual over the course of their lifetime is just guessing or repeating what they heard. Not advice I woud like to take to the bank. The long term sales pitch if you could call it that really only looks at the here and now to pay less tax today. But there are many instances where paying a wee bit more today saves you a lot more in the long term simply because of our progressive tax system, differential tax rates on investment income and taxable income on death. The financial industry loves to say leave your RRSPs to and by the way we will sell you insurance to offset the taxes when you die....hhmmmm I wonder who is the winner here."

So I guess she is figuring that my income later on will be significant enough from a tax perspective to justify withdrawing the RRSP's earlier rather than convert to a RRIF at 71 and withdraw according to the rules at the time.


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## MoneyGal (Apr 24, 2009)

That's a pretty hilarious answer. NO ONE asks the question? She should really visit the multiple threads here and at other investing boards where this concept is discussed in exhausting detail. 

I don't think she really understands the time value of money equation. 

Also I note that (unless there's more to her message) it isn't as though she provided you with a plan, either. 

p.s. Final note - unless you have an estate motive, you really really don't care about the tax payable on your estate. Really. Saying "pay more now so you can maybe pay less after you are dead" is a very weak argument.


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## andrewf (Mar 1, 2010)

Due to tax free compounding, it could make sense to invest in an RRSP even if your tax rate is higher at withdrawal. Like most things in like, the answer is 'it depends'.

MG: it's scary who gets to call themselves a financial planner.


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## MoneyGal (Apr 24, 2009)

Tax-free compounding and TVM. (Sorry, TRM, that's the time value of money.)

What do you want to pay: $1 in tax today, or $1 in tax in 10 years? I know MY answer, and it's based on...math.


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## Larry6417 (Jan 27, 2010)

In Canada, there are restrictions on who can be called a _certified financial planner_, but few (or none?) on who can be called a "financial planner."

I wonder if the OP's "financial planner" is thinking about the *marginal effective tax rate* i.e. tax rate + effect of clawback of social benefits. It might make sense for some to collapse their RRSP *and* contribute the excess to a TFSA, but it's a wee bit risky to advise that without doing the numbers.


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## MoneyGal (Apr 24, 2009)

"Financial planner" is a regulated term in Quebec.


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## Charlie (May 20, 2011)

that was a pretty flippant response and rather dismissive of 'most' financial planners and accountants. I'd get a new FP. One who could explain the rational much better, taking into account the time value of money. 

The posts prior to mine have mentioned it -- but the time value of money over 20 yrs (if you're 71 the odds are pretty good that you, or your spouse will live another 20!) can often offset the higher rate. When I've reviewed RRSPs the deferral of tax almost always outweighs the tax rate going out. This is obviously a general comment. But the whole concept of an RRSP is certainly not just marginal rates. The true potential is usually in deferral.

I have seen situations where it makes sense to collapse the plan. So your planner may be right. But I'd hope the conclusions are based on a much more thorough analysis then simply your anticipated marginal tax rates. And I don't get what the RRIF date would have to do with anything. 65 is when the GIS and OAS clawbacks take effect, and post 71 you could always withdraw more then the minimum if that's the 'plan.' So unless you've some other source of income kicking in at 71, I don't see why your RRSP/RRIF has to be depleted by then.


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## kcowan (Jul 1, 2010)

One strategy is when you retire early, i.e. 55 or 60 and take money out of your RRSP each year to live on. Then at 65, take CPP and OAS and defer all other withdrawals until you must RRIF at age 72 (or later if you have a younger spouse). This gives you 7 years of unreduced withdrawals and the full age credit on your taxes. The age credit claws back starting at $33k and is fully clawed back depening on province by $55k or so. GIS claws back around $17k.


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## Brian K (Jan 29, 2011)

I guess I didn't clarify enough but assumed...My FP or CFP (is the correct term) did do an extensive plan showing total assets, withdrawals from RRSP, CPP and OAS income (as possible) and resulting tax liability using standard assumptions for ROR and Inflation (which or course is anyones best guess). I provided detailed expenses/assets and away she went and came back with a profile - quite detailed and quite good IMO. 
As far as I'm concerned, and based on 3 other "plans" that other CFP's have done - she is right - none of the others ran the actual numbers on a year by year basis or provided a truly comprehensive analysis with some advice when I asked "and just where do I put my money to make this 5.5%". Up till now I made most of my money by saving - investing wasn't working too well. Other CFP's (yes with the papers on the wall to prove it) just wanted to sell insurance - first whole life, then disability, then health - funny this one was in the Sun Life tower and the insurance she offered was more $$ than other insurance providers. The other CFP (Large Institution) didn't really do a bang up job either - but just wanted me to transfer 'the rest of my $$' to them to manage. I wonder who that benefits most. The 3rd was pretty much just offered generic advice you can get in a book and it of course wasn't specific enough to be much good - except the advice - based on your expenses you can retire comfortably. Thanks alot.
So while I agree the quote I provided was cutting and blunt and of course her opinion, and I know that her comments don't reflect all CFP, based on my experience, I tend to agree with what she said - again just based on my experience with 3 other CRP's. Enough of that.
My initial question "Should I withdraw/collapse (or what ever you want to call it) my RRSP prior to 71" - I guess the correct answer is it depends on what your income/tax situation looks like as you get older and I guess mine will be high enough that I should withdraw now while the MTR is lower than it might be later on. Comforting for me to know that. 

Also - I've heard from others that as it is time to move into 'a home' or assisted living facility, generally the costs are based on income. So with proper planning prior to moving in, (gifting some $$ to the kids or others and yes that brings it's own set of issues) will reduce the amount of visible income and that will in turn lower the apparent income and allow lower costs to live in the home. You can't do that if your $$ is in a RIFF. A long way down the road but I hear it comes sooner than you want it to.


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## carverman (Nov 8, 2010)

Larry6417 said:


> I wonder if the OP's "financial planner" is thinking about the *marginal effective tax rate* i.e. tax rate + effect of clawback of social benefits. *It might make sense for some to collapse their RRSP and contribute the excess to a TFSA*, but it's a wee bit risky to advise that without doing the numbers.


I don't understand that logic. If you collapse your 
RRSP, you are going to get hit with one douzy of a 
tax hit in the taxation year that you collapse it. 
20% withholding tax...and that can hurt you later on. 
I did it just before I retired at Nortel over 3 years, collapsing segments of my RRSP portfolio to pay off 
the mortgage. I was still making 80K at Nortel and
with the tax hit added to my income tax on salary,
it was a nasty blow to my finances, (besides divorce lawyers who were worse!).

I ended up paying a huge penalty and I mean a HUGE PENALTY for exercising that option, in order not to have mortage payments after retirement.

Ok, I have to say that one has to balance the tax hit against the mortgage over 20 years and what retirement income the banks would take from you anyway (and there is not tax relief on mortgage payments), so if you look at it that way..rather than give a big chunk of my pension to the banks..I gave it to the gov'ts. 

The other little "gotcha" is that if you are in the higher tax bracket, and you collapse your RRSP, in Ontario you will be paying another extra bit to the ONT gov't called a "surtax" on your taxable income..and collapsing an RRSP will more than likely put you in the high income bracket for that one taxation year.

Putting whats left in an TFSA..maybe.. 
but aren't there rules on how much you can contribute annually? I been reading about a game that one can play
with the TFSA where you take out most of your money before December 31st of one year and put it back in adding to the nominal $5k you are allowed to
invest without incurring penalties on the money you put in from the gov't, but this isn't going to get you anywhere unless you need that money for
something else...house repairs or buying a major item.

Besides, most TFSA accounts right now pay diddly squat..1.5 to 2%.
Banks get to use your money loaning it out at higher interest rates and your money doesn't even keep up with the rate of annual inflation.


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## MoneyGal (Apr 24, 2009)

Brian K said:


> Also - I've heard from others that as it is time to move into 'a home' or assisted living facility, generally the costs are based on income. So with proper planning prior to moving in, (gifting some $$ to the kids or others and yes that brings it's own set of issues) will reduce the amount of visible income and that will in turn lower the apparent income and allow lower costs to live in the home. You can't do that if your $$ is in a RIFF. A long way down the road but I hear it comes sooner than you want it to.


1. You are talking about publicly-funded long-term care homes, which you want to avoid if at all possible. There are plenty of retirement homes/seniors' residences that are not funded on the public dime. The option you are thinking of should be your option of last resort, not the outcome you plan for. 

2. You can take any amount of money out of a RRIF at any time for any reason. There is a minimum you MUST take, but there is no maximum.


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## carverman (Nov 8, 2010)

MoneyGal said:


> 1. You are talking about publicly-funded long-term care homes, which you want to avoid if at all possible. There are plenty of retirement homes/seniors' residences that are not funded on the public dime. The option you are thinking of should be your option of last resort, not the outcome you plan for.


Absolutely M.G. Those places have been known for "elder abuse"..forgetting about their meals, over medicating them, just very basic care in most cases, and they just sit around and sit around stairing into space, (their brains and bodies deteroriating away)..waiting for their time to come.

It's pretty sad really. I've seen one of them from inside for other reasons, but I would rather take euthanasia (even though it's illegal), than be stuck in one of those places. The staff treat you like well..s**t and you have no real say in what they do for you and besides there is a huge waiting list to get into the public funded seniors chronic care homes.


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## the-royal-mail (Dec 11, 2009)

MG, just curious, but can you tell me why you have that opinion about public care homes?


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## MoneyGal (Apr 24, 2009)

In Ontario, the province where I live, the publicly-funded option is long-term care. This is a completely different matter than "retirement homes" or seniors' residences. 

You are eligible for publicly-funded long-term care when you require 24-hour care and supervision in a secure setting. 

My point is that the publicly-funded LTC setting is the option of last resort. There are MANY options which can come before publicly-funded LTC. 

This has nothing to do with the quality of care, although I would personally not choose this for myself. For me, the OP is saying "I'm going to give away my assets/spend them early in retirement so I qualify for the biggest public benefit should I require it." 

I guess this is just a fundamentally different way to arrange your personal affairs than I would go for. If you have the assets, why wouldn't you choose the option that gives you the most control, the most customization, and the most personal benefit, as opposed to the cheapest, lowest-common-denominator option?

Editing to add the waiting lists are a huge issue as well. You don't want to be in the situation in which you have exhausted your personal assets, but no public spaces are available, and you die in a hospital ER ward or ICU or in poorly-managed emergency home care because you have nowhere else to go, and no way to buy an alternate solution. The stress that puts on your family members is enormous.


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## carverman (Nov 8, 2010)

M.G...your last paragraph drives the point home. If you are in that predicament, no retirement income, no income, except gov't pensions, and perhaps GIS,
(the "clawback handout" that is only available if you
are just on OAS, you don't have too many options, other than LTC ...or perhaps if you have family.
If you are lucky, someone from your family may take pity
on you and take you in..as long as you don't become a burden to their lifestyle or income.

While medicare may help in certain cases, where you need to be hospitalized because you are in such bad mental/physical shape that you are on your last legs,
I have seen people such as these, in our hospital corridors lying on gurneys because there is no space 
for them anywhere else, and they aren't able to take
care of themselves. 

My friend's mother was in one of these (LTC) and they OVERDOSED her and she died because of the overdose. It was hard to prove that they overdosed her on
pain medication (morphine derivative) because she had
some form of cancer, so an autopsy was not performed,
but my friend had a telephone meeting with the LTC
pharmacist and the "nurses" (and LTC director) that were
involved with the adminstration of pain killers, beforehand.

In the end it didn't help, she died because the LTC
staff were too busy to provide any personal attention
to her and just drugged her up to keep her from complaining.

For those of us who have a dream that the gov'ts will look after us in our "golden years"..I have a "gold pin"
to burst your balloon.
There is NO free lunch! You need to carefully plan and calculate what financial resources you will need to last you until it's time to go.

Public funded LTC is there as a last resort, because nobody likes to see bodies lying on park benches dead or alive, but budgets and caregivers are being cut to the bare minimum...because after all, anybody in LTC
is a drain on the public purse and not really helpful as taxpayers.

If you don't believe what I'm saying on LTC..read the report (dated but still applies).. especially the boxes containing comments from the "inmates".

http://www.web.net/ohc/LTC current state overview.ppt#278,21,Ontario Health Coalition Key Recommendations in 2008


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## Brian K (Jan 29, 2011)

I guess you're right aobut the LTC facilities I believe and will not want to ge in one of those as the private ones would probably be better (just an assumption based on "you get what you pay for") - so scratch that from a reason to get the $$ out of the RRSP prior to the RRIF.
Thanks for the psotings. Sure is making me think about what to do and I guess that is the point of planning.


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## kcowan (Jul 1, 2010)

As LTC facilities go, Extendicare in Guildwood is pretty good. They even have private rooms if you can afford it. My first MIL was there for 8 years.


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## OhGreatGuru (May 24, 2009)

There seems to be lot of unwarranted dissing of the FP's response. It was admittedly a generic statement of possible reasons why it might make sense to collapse an RRSP rather than roll it into a RRIF. It appeared to lack an explanation of why the FP thought it was an appropriate strategy for this particular client. But then the OP finally told us the FP had done an extensive study of his future cash flows before making this recommendation. Maybe FP was annoyed because OP's question made it seem as if he either hadn't paid any attention to, or hadn't understood, her analysis. Instead he asked a public forum if she was right, without giving the complete picture.


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## MoneyGal (Apr 24, 2009)

OGG, I appreciate what you are saying, and I was probably the loudest snarker. 

However. I am interested in a seeing a scenario in which collapsing the RRSP for anyone with a "large" RRSP actually, legitimately leads to a lower expected lifetime tax bill, especially if the person in the case study lives beyond 90 AND if they maintain the portfolio as an unregistered account (on which they would be paying taxes - as opposed to collapsing and spending the account). 

I believe, having engaged in exactly this kind of forecasting in the past, that the scenarios in which the total tax bill is lower are 1. rare and 2. based on a LOT of uncertainty. 

I agree that it sounds as though the OP isn't giving us the whole picture. I just suspect this is one of those cases in which the FP hears hoofbeats and expects a zebra. The chance of a zebra actually being afoot (the chance that the total tax bill, discounted to PV, is *actually* larger if the person RRIFs and takes minimum withdrawals over time) - rather than an ordinary horse (the NPV is either the same, or lower if the person takes RRIF minimum withdrawals) - is very low. 

This is why I'm suspicious: it's an extreme case, and nothing the FP wrote (as relayed by the OP) provides me with any evidence to the contrary. Instead, her(?) message is based on generalities - "most people" and "usually" - instead of suggesting that because of the OP's very specific set of circumstances, this is reasonable advice in his specific case.


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## andrewf (Mar 1, 2010)

Maybe the client has cancer or Alzheimers. That would change the expected mortality enough for collapsing the RRSP to make sense.


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## MoneyGal (Apr 24, 2009)

Examples of zebras, in the absence of any other information. 

In addition, this is only true if the person has no estate motive. If the only motivation is "pay less tax" (and that was the only argument given/repeated), I'm still not convinced.


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## Charlie (May 20, 2011)

To further MoneyGal's skepticism, I find the 'before 71' collapse puzzling. I could understand before 65 -- or a systematic withdrawal over time that may or may not straddle 71. But 71 is simply an age where RRSP's convert to RRIF's -- a common and painless process. Seems an odd cut off when there are no gov't programs/private pensions/tax benefits or deductions that kick in at that age. If it makes sense to take the 'hit' before 71, I'm unsure why a hit after 71 is such a burden. I'd think a taxable income target might make more sense.

I'll defer to the FP who has crunched the numbers -- and has the details. And accolades to him/her for doing that analysis. But I am still curious on the criteria and assumptions that led to his/her conclusions in this situation.


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## kcowan (Jul 1, 2010)

For every financial decision, there are always reasons. Some we may disagree with. But when they are not stated, it becomes a shadow-boxing exercise.


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## steve41 (Apr 18, 2009)

Remember. The optimum plan is one where the prevent value (PV) of all those future tax pmts (including the final pmt on death) is minimized. Melting your RRSP prior to age 71 is not borne out by the math. Unless you have a particularly wonky set of parameters, I suggest your FP isn't using a fully accurate projection tool.


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## financialnoob (Feb 26, 2011)

This is something that's been on my mind lately as my parents have been doing something similar.

It really depends on the numbers, but in general, it doesn't seem like the most efficient idea. There are always exceptions to every rule, but with the absence of hard numbers, hard to really say one way or another. 

I would want a second opinion on it though, as it is a bit unconventional.


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## square one (Jan 19, 2010)

I wonder how a defined benefit pension plan would play into this idea. If you retire at 55 with a full DB pension and the bridge benefit is a bit less than what you end up receiving in CPP at age 65 then income would be slightly higher after age 65 (not sure as mentioned previously why 71 is the magic number). In my personal situation I plan to be in this scenario. I wonder if I should withdraw from my RRSP after age 55 to, at the very least, use it to fund my TFSA while I live off of my pension. Then my RRSP can be slowly reduced over many yrs to minimize taxes. But my own thought was to reduce it over about 30 yrs. On the other hand, should I withdraw greater amts in the 10 yrs before I turn 65 to try to keep my OAS from being reduced. I expect my pension to be around 45,000 per yr incl the bridge benefit at age 55.

My plan is to live off of my pension for the day-to-day stuff and use the RRSP/TFSA money for vacations, vehicle replacement, one-time purchases -the not-necessities of life.

So, is a DB pension with maxed RSP/TFSA one example of how earlier withdrawal of RSP could be the best way to go? At least until age 65? Then perhaps after age 65 you would try to spread out the rest of the RSP over 20+ yrs (but not necessarily winding down before needing to convert to RRIF).


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## steve41 (Apr 18, 2009)

square one said:


> I wonder how a defined benefit pension plan would play into this idea. If you retire at 55 with a full DB pension and the bridge benefit is a bit less than what you end up receiving in CPP at age 65 then income would be slightly higher after age 65 (not sure as mentioned previously why 71 is the magic number). In my personal situation I plan to be in this scenario. I wonder if I should withdraw from my RRSP after age 55 to, at the very least, use it to fund my TFSA while I live off of my pension. Then my RRSP can be slowly reduced over many yrs to minimize taxes. But my own thought was to reduce it over about 30 yrs. On the other hand, should I withdraw greater amts in the 10 yrs before I turn 65 to try to keep my OAS from being reduced. I expect my pension to be around 45,000 per yr incl the bridge benefit at age 55.
> 
> My plan is to live off of my pension for the day-to-day stuff and use the RRSP/TFSA money for vacations, vehicle replacement, one-time purchases -the not-necessities of life.
> 
> So, is a DB pension with maxed RSP/TFSA one example of how earlier withdrawal of RSP could be the best way to go? At least until age 65? Then perhaps after age 65 you would try to spread out the rest of the RSP over 20+ yrs (but not necessarily winding down before needing to convert to RRIF).


Fire up some numbers and I will run it.


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## square one (Jan 19, 2010)

OK, here are some numbers I've been provided. I am still just over 15 yrs from turning 55 so I am expecting higher numbers (closer to 45,000 pension and bridge total) when I do retire as I plan to increase to full-time work in about 2 yrs. But for now:

age 55: DB pension of $25,267 plus bridge benefit of $8,242

at age 65: bridge benefit stops, CPP starts at ?$18,612

The plan is to also have approx $160,000 to $180,000 in RSP with another $100,000 in TFSA as well as some non-registered investments (perhaps $100,000 -not sure what those will look like yet -trying to increase RSP and TFSA first). So, it would seem that I will have at least $10,000 higher income when I reach age 65, not counting OAS, or investment/RSP income.

I expect that income splitting with my husband will be something to consider at the time as well.

Thanks for this very interesting exercise.


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## steve41 (Apr 18, 2009)

I prefer not to run 'partial plans'.... in this case, there are no pre-retirement numbers such as salary, etc, and the plan should ideally include hubby, however....

I am moving ahead and running this for a single 55 year-old individual with the RSP, Nonreg and TFSA as specified. Also, I didn't index your pension, and I set the rate of investment growth at 4%, so things may be a tad understated.

Square one's plan


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## MoneyGal (Apr 24, 2009)

So? What does your analysis suggest, Steves?


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## steve41 (Apr 18, 2009)

MoneyGal said:


> So? What does your analysis suggest, Steves?


Nothing in particular. If the individual follows a 'beer&groceries' lifestyle as indicated, then she should feel comfortable making it out to age 95. If 4% seems too ambitious, you would run it at a lower nominal rate.... if she lived in Quebec instead of BC, you would adjust it accordingly. This particular plan is merely a starting point. You could play around with melting the RRSP early, pulling the tfsa down under a different trajectory... I can predict fairly confidently that the $43K lifestyle wouldn't vary by much.


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## steve41 (Apr 18, 2009)

Sorry folks, I didn't notice the title of the thread. Here is the same run, except this time I attack the RRSP prior to 71. You can see the resulting ATI to 95 comes in very close, albeit slightly lower.

Same plan, partial RRSP melt


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## square one (Jan 19, 2010)

Sorry about that, I guess I should have realized you would need my spouse's details as well to get an accurate picture... I am still new and learning about personal finance. If you still want more info...

My husband also has a DB pension (of course I should have included that juicy detail!!) with the Ontario gov't and he makes about $84,000 per yr and has 13 yrs til retirement at age 56 with full pension. So far pension report estimates his annual pension to be $39,900 plus bridge benefit of about $9500 annually. That will increase with salary increases, usually approx 2% per yr.

My salary at present is $36,000 per yr working part-time at age 39 (I worked fulltime for several yrs before going part-time) and should increase in 2.5 yrs to about $50,000 when I increase my hours with about 13 yrs to go before age 55 when I will have 30 yrs in the plan (a good health care pension plan).

The investments mentioned previously will be our combined total. The RSP will be mostly spousal as I have not been contributing given my lower tax bracket. We have planned to live off of our pensions for day-to-day expenses and use the RSP/investments/TFSA for occasional vacations, vehicle replacement, extras. We will have no debt; our mortgage will be paid off in 2015.

I don't expect you to run the numbers again; I appreciate the time you already spent. I was originally just wanting opinions on whether drawing down RSP's between age 55 and 65 might reduce overall taxes later and prevent OAS from being reduced in the case of DB pensions and bridge benefits.

Thanks for your thoughts.


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## steve41 (Apr 18, 2009)

And here is a run where the RRSP is attacked with a vengence... ATI-til-95 still lower.... Uber-melt


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