# RRSP Withdrawal Question



## Gator13 (Jan 5, 2020)

My wife and I plan to retire in a couple years and we each plan to withdraw funds from our RRSP annually. We are comfortable with only making one withdrawal each per year and we want to establish the most effective way of accomplishing this. 

One option would be to each make one annual RRSP withdrawal, pay the withdrawal fee and have the financial institution withhold 30% of the funds for tax.

As an alternative, could we transfer the funds to a RRIF each year and then withdraw the funds from the RRIF and avoid the withdrawal fees? As mentioned, we would like to minimize fees if possible. We are less concerned with the withholding tax as we know we will have to pay it come tax time. We are both in our 50's, we will also have income from non-registered accounts and acknowledge this planning is for pre mandatory conversion of RRSP to RRIF. 

Any guidance would be appreciated. Thanks in advance.


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## like_to_retire (Oct 9, 2016)

Gator13 said:


> As an alternative, could we transfer the funds to a RRIF each year and then withdraw the funds from the RRIF and avoid the withdrawal fees?


There's no withholding tax on the minimum mandatory portion each year, but any funds withdrawn in addition to your minimum is subject to a 10% to 30% withholding tax. Either way, it's all taxable at tax time.

ltr


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## Gator13 (Jan 5, 2020)

We understand we will be subject to the 30% withholding for tax from either of the RRSP or RRIF withdrawal. We would like to minimize fees where possible.


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## AltaRed (Jun 8, 2009)

You can transfer RRSP funds to a RRIF and you should be able to take the withdrawal from the RRIF fee-free. You will have to probably maintain some residual minimum in the RRIF to keep it above zero balance. 

The thing you should investigate is the process to transfer cash or securities-in-kind to the RRIF from the RRSP each year Few institutions allow (or should not allow) one to do that online because of the 'administration' and 'registrations' required so there must be either a form, or an LOD (letter of direction) required to document the request. Query about that first to see whether it is worth saving the RRSP withdrawal fee. Penny wise and pound foolish type of thing......


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## Tostig (Nov 18, 2020)

I'm sure you already know this but the minimum required RRIF withdrawal is based on your age and the RRIF balance at the beginning of that year.

So if you're going to be 65 in 2022, you'll be required to withdraw 4% from your RRIF and the percent goes up each year from there. And if you want to stay in the lowest tax bracket, in Ontario that would be a total maximum taxable income just under $44,000.

Assuming no dividend income, no interest income, no capital gains and no other sources of income, your RRIF balance beginning of January 1, 2022 should be $1,097,650.

And if you still have an RRSP balance, you can top up the RRIF for the following year's RRIF withdrawal of 4.17% but bear in mind, your RRSP has be be completely converted by the age you are 71.

I don't know your situation but for me, the top taxable income of the lowest tax bracket appears to be well above the poverty-line in which I think I can live with.


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## Tostig (Nov 18, 2020)

I know your intent is to withdraw from you RRSP fee-free but not tax-free.

Here is a video I came across that you can access your RRSP tax-free just in case you're interested. It's not fee-free because I'm sure the financial institution that sets it all up will want a certain %.






And then there's the RRSP meltdown strategy in which you borrow money with interest so that the interest charges cancels the RRSP with-holding tax.


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## AltaRed (Jun 8, 2009)

Not sure what the previous two posts are getting at. The OP doesn't care about minimum annual withdrawals since they are in their 50s. They are looking at ways to take chunks of funds (well beyond annual minimums of RRIFs) out of a registered plan (currently RRSP) fee-free for cash flow spend purposes. 

Withdrawals from an RRSP are not tax free, nor are transfers from an RRSP to a TFSA. Anything taken out of an RRSP is 'de-registered' taxable income (to the extent one is taxable) and then one must have the contribution room to contribute to a TFSA.


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## Tostig (Nov 18, 2020)

AltaRed said:


> Not sure what the previous two posts are getting at. The OP doesn't care about minimum annual withdrawals since they are in their 50s. They are looking at ways to take chunks of funds (well beyond annual minimums of RRIFs) out of a registered plan (currently RRSP) fee-free for cash flow spend purposes.
> 
> Withdrawals from an RRSP are not tax free, nor are transfers from an RRSP to a TFSA. Anything taken out of an RRSP is 'de-registered' taxable income (to the extent one is taxable) and then one must have the contribution room to contribute to a TFSA.


Well, your post (#4) refers to transferring from their RRSP to RRIF.


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## Eclectic21 (Jun 25, 2021)

Tostig said:


> I know your intent is to withdraw from you RRSP fee-free but not tax-free.
> 
> Here is a video I came across that you can access your RRSP tax-free just in case you're interested ...


And there's a warning about this type of scheme ... Warning: Watch out for TFSA maximizer schemes - Canada.ca

Cheers


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## Gator13 (Jan 5, 2020)

AltaRed said:


> You can transfer RRSP funds to a RRIF and you should be able to take the withdrawal from the RRIF fee-free. You will have to probably maintain some residual minimum in the RRIF to keep it above zero balance.
> 
> The thing you should investigate is the process to transfer cash or securities-in-kind to the RRIF from the RRSP each year Few institutions allow (or should not allow) one to do that online because of the 'administration' and 'registrations' required so there must be either a form, or an LOD (letter of direction) required to document the request. Query about that first to see whether it is worth saving the RRSP withdrawal fee. Penny wise and pound foolish type of thing......


The penny wise, pound foolish is good advice. I don't want to create unnecessary administration for minimal savings. In Post #7 you refer to withdrawals from a RRSP as "de-registred". I believe I saw that Investorline charges $50 for Deregistration, so we would only incur about $250 per year. (withdrawals from 5 accounts between the two of us of which I might be able to combine 2 of them to get down to 4 total)


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## AltaRed (Jun 8, 2009)

Tostig said:


> Well, your post (#4) refers to transferring from their RRSP to RRIF.


The OP wants to access cash flow from the RRSP. Whether that comes directly out of an RRSP (deregistering of those funds that come out), or is transferred first to a RRIF and then is a "withdrawal" from a RRIF is the question. Either way still results in taxable income for the year. There is nothing said about a TFSA in the OP so that YouTube video is both off target and bogus.


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## bgc_fan (Apr 5, 2009)

Gator13 said:


> My wife and I plan to retire in a couple years and we each plan to withdraw funds from our RRSP annually. We are comfortable with only making one withdrawal each per year and we want to establish the most effective way of accomplishing this.
> 
> One option would be to each make one annual RRSP withdrawal, pay the withdrawal fee and have the financial institution withhold 30% of the funds for tax.
> 
> ...


Out of curiosity, why not convert a large chunk of RRSP into RRIF once to tie you up until the mandatory conversion until 71, instead of doing it on an annual basis? The mandatory withdrawal rate would be about 2-3% depending on your age. For example, I'll just take age 55 as an example, which gives you 16 years before mandatory conversion. Let's say you only want $10k annually, you can transfer $160k over and just gradually make the withdrawals over time. You can work out the numbers that you want, but I'm just wondering what the benefit is on doing this juggling on an annual basis as opposed to doing it twice: now and age 71.

Edit: Relevant article about having RRSP and RRIF. Can you have RRSPs and RRIFs at the same time? - MoneySense


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## Spudd (Oct 11, 2011)

Gator13 said:


> The penny wise, pound foolish is good advice. I don't want to create unnecessary administration for minimal savings. In Post #7 you refer to withdrawals from a RRSP as "de-registred". I believe I saw that Investorline charges $50 for Deregistration, so we would only incur about $250 per year. (withdrawals from 5 accounts between the two of us of which I might be able to combine 2 of them to get down to 4 total)


Why withdraw from all 5 accounts every year? Just pick one for each spouse and withdraw entirely from that one. That's $100/year.


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## Tostig (Nov 18, 2020)

AltaRed said:


> The OP wants to access cash flow from the RRSP. Whether that comes directly out of an RRSP (deregistering of those funds that come out), or is transferred first to a RRIF and then is a "withdrawal" from a RRIF is the question. Either way still results in taxable income for the year. There is nothing said about a TFSA in the OP so that YouTube video is both off target and bogus.


Gee, looks like I hit a nerve with you.
Forgive me, Father for I have sinned. I didn't mean to start a fight. I only provided the OP with another option with his choice if he wanted to look at it or not.


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## Gator13 (Jan 5, 2020)

Spudd said:


> Why withdraw from all 5 accounts every year? Just pick one for each spouse and withdraw entirely from that one. That's $100/year.


Our plan to is to to only withdraw the income produced by the holdings in the accounts. (dividend investment strategy)


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## AltaRed (Jun 8, 2009)

Gator13 said:


> Our plan to is to to only withdraw the income produced by the holdings in the accounts. (dividend investment strategy)


You can finesse that with a single withdrawal. If the aggregate of all the income generated in a year from 5 accounts is $10k, just pretend it is all from one account and pull $10k from one account. It pretty much means the same thing, i.e. 10x$20 bills in the left pocket is the same as 20x$10 bills in the right pocket.

OTOH, why 5 accounts unless they are not all RRSPs, i.e. they include LIRAs, etc? Consolidate them into 2, one each for spouse and self. There is no particular reason to have more than 1 of each type of account.


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## Gator13 (Jan 5, 2020)

At bit more background on our situation. We will go into retirement as follows:

Wife has a RRSP & a spousal account. I believe these can be combined 3 years after I make the last contribution to the spousal account. The withdrawals would attributed back to me if combined sooner. Income generated from account(s) would be withdrawn annually and used to backfill current cash account used for expenses/spending.

I will have a RRSP and a LIRA. I will most likely transfer my LIRA to a LIF, and at that time I will be eligible to transfer 50% of the LIF to a RRSP. I would then combine the two RRSP's. Income generated from RRSP account and prescribed LIF withdrawal amount would be withdrawn annually and used to backfill current cash account used for expenses/spending.

Dividend income from individual and joint non-registered accounts would be used to backfill current cash account used for expenses/spending.

We are about 80/20 equities and a large portion of the 20 is cash in HISA's. (Cash in HISA's is a buffer/safety net with no plans to use)

TFSA's have been invested in REIT's since inception and have done quite well and also throw off some decent distributions. TFSA's are also a buffer/safety net with no plans to use

CPP will be deferred until 71 and is also a buffer/safety net.

The income generated from our current investments will afford us a comfortable retirement, but once we are a few years into retirement and have settled into a spending routine (read: adjust to spending more instead of saving) we will start tapping the capital. (Spend more, gift, donate) We also want to ensure we are tax efficient with our decisions and move towards a simple structure and consolidate some holdings to VBAL, XBAL, MAW104, or the likes of.

Thanks to all for the advice.


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## AltaRed (Jun 8, 2009)

I think you can only transfer a portion of a LIF into a RRIF, not a RRSP, but now understand why the number of accounts.


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## Eclectic21 (Jun 25, 2021)

Jurisdiction seems to be the key as I have seen references to Saskatchewan allowing a 100% unlock of LIRA to a RRIF.

Multiple jurisdictions seems to require the LIRA to be converted to a LIF before the 50% to an RRSP happens.

"For pensions in Ontario, you can transfer out 50% of pension funds that are in a Schedule 1.1 Life Income Fund into a RRSP or RRIF."









Unlocking LIRAs: How to get money out of your pension - Retire Happy


Unlocking pension or LIRA money is complicated. Here are all the opportunities you need to know about unlocking your LIRA and getting money out of your pension.




retirehappy.ca





*Edit: * Alberta seems to be another example

Cheers


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## Gator13 (Jan 5, 2020)

Eclectic21 said:


> Jurisdiction seems to be the key as I have seen references to Saskatchewan allowing a 100% unlock of LIRA to a RRIF.
> 
> Multiple jurisdictions seems to require the LIRA to be converted to a LIF before the 50% to an RRSP happens.
> 
> ...


I read the same article as well as one or two others on the topic. I also saw Alberta & Ontario as allowing a 50% transfer to a RRSP. I will definitely inquire as I get closer.


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## fireseeker (Jul 24, 2017)

Gator13 said:


> The penny wise, pound foolish is good advice. I don't want to create unnecessary administration for minimal savings. In Post #7 you refer to withdrawals from a RRSP as "de-registred". I believe I saw that Investorline charges $50 for Deregistration, so we would only incur about $250 per year. (withdrawals from 5 accounts between the two of us of which I might be able to combine 2 of them to get down to 4 total)


In case it applies to you, Investorline waives RRSP deregistration fees if you are a Platinum five-star client ($2M+).


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## Gator13 (Jan 5, 2020)

fireseeker said:


> In case it applies to you, Investorline waives RRSP deregistration fees if you are a Platinum five-star client ($2M+).


Thanks for sharing! I have Platinum five star status so this is great to know.


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