Feds should eliminate mandatory minimum annual RRIF withdrawals: C.D. Howe Institute report | Page 2 | General financial discussion | Discussion forum

RRIF minimum annual withdrawal rates were dramatically decreased circa 2015 as I already linked. Enough with taxpayer funded interest free tax loans. Take out in-kind and keep it invested.

You forget you got a tax credit when you took your RRSP contribution way back when. That tax credit is a taxpayer funded interest free loan that you get to invest for a number of years until such time the taxpayer wants that tax loan paid back on previously agreed terms and conditions. It is that simple. There is no need to obfuscate the facts.

AltaRed said
You forget you got a tax credit when you took your RRSP contribution way back when. That tax credit is a taxpayer funded interest free loan that you get to invest for a number of years until such time the taxpayer wants that tax loan paid back on previously agreed terms and conditions. It is that simple. There is no need to obfuscate the facts.  

An OAS, GIS or even CERB handout is taxpayer funded, an RRSP is not. To call RRSP a taxpayer funded loan is some twisted logic…

Maths isn’t the issue at all.

The issue is that when an individual earns and saves from the money he earned, its not a handout from a mystical “taxpayer”. Its his own money, his earnings. Fundamentally different from the government taking a cut from Bill to pay Bob (and sometimes Bill too).

And Income Tax Act says zilch about “taxpayer loaning” anything in the context of RRSP. For a good reason: Its not a loan.

AltaRed said

You miss the point entirely. The tax credit portion of the contribution is a taxpayer loan. If an individual contributes $10,000 to an RRSP any given year and the individual's tax rate is 25%, then the taxpayer is loaning $2500 (through a tax credit) to the individual at no cost. The individual's share of that $10k contribution is $7500 and the taxpayer share is the tax loan of $2500. The taxpayer wants that $2500 back in increments from about age 71 to 100.

Good grief folks. If you don't believe it, google for dozens of examples where someone will show you the math.  

The $2500 is my money until I have to pay it out in tax at some point in time, either now (if I don’t contribute RRSP) or in the future (if I do).
If anything, my left pocket lends it to my right pocket. Yes I am THAT taxpayer, no one else

AltaRed said
Nothing you just said makes any sense as it pertains to the mechanics of RRSPs.

Added: Here is a very simple but clear analogy that surely you can understand:

1. Watch your manners. You talk like I am your dumb slave. Not ok. I’ve seen it from you before when you kept telling me to get out of Canada. You really have a problem.

2. Read slower. Starting with the Tax Act. Then what I said. Then runt all you want. This isn’t about maths or mechanics as already noted above more than once.

3. Talking of basic mechanics and maths, when you were making false claims on taxation and shown to be wrong, it would have been a good idea to admit it and take your tone down a notch in subsequent discussions. But that would be a smart thing to do.

Hope I am being clear.

Bye.

Mordko, to address your 3 points briefly....

1. Several forum members in another forum(s) have suggested to you based on a number of your posts in the past of what is so terribly wrong with Canada versus other countries that you think so highly of, that if you don't really like it here, there is nothing stopping you from making a change. The decision is always yours. No one I can recall has said otherwise, i.e. to get out. Regardless, I think it is unfair to single me out specifically.

2. The ITA and its regulations are not going to use anything other than legalese in describing the upfront tax credit mechanism for RRSPs. To put it in layman's terms though that draws a physical picture, how else would one describe 'taxpayer cash returned to you' that has strings attached? Immediate tax credit to be paid back at some future date? Deferred tax that must be paid back at some future date? What else is it in simple terms other than a taxpayer loan? In my example, an individual got the opportunity to invest $10k of taxable income for a net current cost of $7500. The $2500 would have never been yours otherwise. I cannot explain it in any other way, so I can only leave it at that. If I am motivated enough to find a spreadsheet example (RRIFmetic or otherwise on FWF) to show the full cycle example of RRSP/RRIF, I will link it sometime soon.

3. I stand behind my description of how taxation with respect to RRSPs/RRIFs works on a full cycle basis.

I have spent far too much time in this thread, being repetitive at a minimum. It appears to have been non-productive for the most part and readers will obviously continue to believe what they wish as regards RRSPs/RRIFs.

AltaRed said
That $2500 was never going to be yours. 

Wrong. I can keep every penny of that $2500 IF my income at withdrawal is below the taxable income threshold, at about $18k give or take right now, and not taken into account any senior credits etc.

So u still insist it is a loan even tho it may NOT need to be payback at all ? That immediately fails the definition of a loan.

Yes I fully understand how the math worked. As a high income individual during my career, I max it out every year, also knowing the mandatory withdrawal and all the RULES. That does not mean the rules are properly set.

To illuminate another dimension on this subject, what about the alternate path of converting RRSP into an annuity?

I did this with the bulk of my RRSP last year, benefiting from higher annuity rates, as well as tax deferred capital appreciation through deferring the annuity for around 5 years.

But I was told that once the payments start, 25% will be withheld for tax. So I guess the "loan" will be repaid in those deductions. The annuity is a fixed monthly payment for the rest of my life.

Would changes to minimum RRIF withdrawals affect annuity payments, going forward?

Norman1 said
An RRSP that has matured into an annuity is still an RRSP. So, RRIF rules don't apply.

The RRSP annuity payments will be fully taxable. The usual income taxes on those payments will be what buys out the government's interest in the RRSP.

The 25% tax withholding is not the taxes. It is just money withheld and goes towards the income taxes owed which can be more or less. Just like the income tax withholding on pay cheques.

According to Receiving income from an RRSP, you'll be receiving T4RSP slips for the annuity payments and taxes withheld:

You can use your RRSP funds to purchase an annuity.
…
Annuity payments are shown in box 16 of a T4RSP slip, Statement of RRSP Income. Report the income on line 12900 of your income tax and benefit return. Claim any tax deducted from box 30 of your T4RSP slip on line 43700 of your return.

  

Thanks for the thorough explanation.

Would it make any difference for tax purposes if the annuity was funded with assets held in an RRIF versus an RRSP?