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RSP GIC does not mature until I am 73
May 24, 2024
6:39 pm
Norman1
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National Bank Direct Brokerage charges significantly for lump-sum RRIF withdrawals:

Description Fees
Lump-sum withdrawal from an RRSP⁴, RRIF, LIF $50/operation*
* Fees subject to GST and provincial sales taxes
4. Including Lifelong Learning Plan (LLP) and/or Home Buyers’ Plan (HBP) withdrawals.

Scotia iTRADE may also do the same under its $50 registered account partial de-registration fee.

May 24, 2024
6:45 pm
AltaRed
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That is definitely news. I find a few of their other fees in that link preposterous as well BUT I guess that is how they make money....if they are not making any from trading commissions.

It would be interesting to know if they have made an error in that link. Clearly RRSP withdrawals should attract a fee, but it is clearly unacceptable to charge for RRIF withdrawals, and especially a regulated mandatory amount, lump sum or otherwise.

May 24, 2024
7:06 pm
Bill
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Thanks, Norman1. But what do they mean by "lump sum"? If you take out the mandated minimum amount once a year is that a lump sum?

The fee makes no reference to a distinction between taking out the minimum mandated amount vs a greater amount, as it reads it applies to any lump sum, whatever that is.

May 24, 2024
7:07 pm
AltaRed
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I agree. Someone here with a NBDB account should perhaps flag that with NB and ask them to clarify it. It would be preposterous to charge for a mandated withdrawal.

May 24, 2024
8:37 pm
Norman1
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Someone on RedFlagDeals.com asked in October last year and shared this response from NBDB:

I asked NBDB about this and this was their response:

"Please note that NBDB allows you to have one free withdrawal every year from your RRIF account once a minimum withdrawal amount has been generated. It can be a systematic withdrawal or a lump sum withdrawal, and the amount as well as the withholding tax percentage can be determined by you. For extra withdrawals, we charge a fee of $50 plus tax.

(Please also note that you are allowed to set up a systematic withdrawal and change your mind later to do a lump sum. The lump sumwill be free of charge if you are also withdrawing the minimum amount required.)"

My guess is that

  1. NBDB allows one free withdrawal every year from your RRIF account after the minimum withdrawal amount is calculated.
  2. That allowance is consumed by the next lump sum withdrawal or by the next scheduled systemic withdrawal.
  3. The scheduled systemic RRIF withdrawals are free even after that allowance has been consumed.
  4. The lump sum RRIF withdrawals are $50 each after that allowance has been consumed.
May 25, 2024
7:01 pm
Loonie
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It only stands to reason that they will charge a fee in future, even if they don't now. We all know that fees keep being introduced and boosted for everything under the sun.

A number of years ago I sent an inquiry to TD, wondering whether there was a fee for something-or-other related to a registered plan, as it seemed likely that there might be, considering all their other fees. They responded, after consulting another department, that, no, there was no such fee.
Within about six months they issued a new fee list which included one for the transaction I'd inquired about. I always wondered if I inadvertently triggered it, by asking.

I read somewhere a little while ago that one of the major US banks attributed a whopping percentage of its profits to fees. I think it was around 30%. Unfortunately, I don't know where I put that reference, but even I was shocked.
So it seems obvious to me that we can expect more of the same, and that these fees will gradually rise to be just as bad as transfer fees - which are also constantly rising.

When you choose to cash out extra RIF money, two things will happen. First, CRA will immediately take a good sized chunk of it. Second, the cash you receive (including, in some cases, a CRA refund on the taxes taken at withdrawal), will be freely available to you, to do with as you wish - including giving it away or spending it.
Banks hate it when your funds deplete without hope of more contributions, and that is what RIFs are all about. Either way, whether you take optional withdrawals or not, they will deplete, either gradually or quickly.

From my vantage point of 77 years, I've noticed a change in the attitude of FIs to RIFs over perhaps the last fifteen years or so. Ten or fifteen years ago, most CSRs seemed to barely have heard of RIFs. They tended to know next to nothing about them, which was frustrating to me. They were all about selling RSPs, and seemed never to have thought about what came after. I assume this reflected the view of their employer. With RSPs, they could take in more money for the bank, but with RIFs they had to let it go, so there was less value for them in knowing anything about it. Over time, that has perforce changed somewhat. They are more aware of RIFs now. But I don't think the transition is completed. They are still trying to figure out how to wring more money out of RIFs for the FI, and fees are an excellent choic3 from that perspective. Thus, I anticipate more and higher fees, and more clever "products" etc designed to encourage you to keep your money in your RIF as long as possible. If they don't do this, they are missing an "opportunity". There are still a few FIs that don't charge such fees. I'm hoping they maintain this competitive advantage.

May 26, 2024
11:18 am
Bill
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Boomer bulge moving from RRSP to RRIF land, many with fairly large portfolios if they've been in the markets for last 35 years or so & contributed their max yearly, might be more focus on RRIFs by FIs over the next little while.

In my case it'll be going from RRIF to unregistered account at same discount brokers, they'll retain my balances just in another account, probably more folks will be doing the same.

May 26, 2024
11:31 am
Norman1
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Loonie said

I read somewhere a little while ago that one of the major US banks attributed a whopping percentage of its profits to fees. I think it was around 30%. Unfortunately, I don't know where I put that reference, but even I was shocked.
So it seems obvious to me that we can expect more of the same, and that these fees will gradually rise to be just as bad as transfer fees - which are also constantly rising.

That depends on the bank. If all the bank does was bank accounts and payment handling, then near 100% of the profits would be from service fees.

With Bank of Montreal, the total "deposit and payments services charges" last year was $1.517 billion of its $31.199 billion total revenue. In contrast, its net interest income was around $18 billion.

May 26, 2024
12:25 pm
RetirEd
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Aside from "creative and innovative" fees, I suspect the most lucrative lines for most financial institutions (who have them) will be the credit cards (and their fees, too).

RetirEd

May 26, 2024
8:10 pm
Loonie
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Norman1 said

Loonie said

I read somewhere a little while ago that one of the major US banks attributed a whopping percentage of its profits to fees. I think it was around 30%. Unfortunately, I don't know where I put that reference, but even I was shocked.
So it seems obvious to me that we can expect more of the same, and that these fees will gradually rise to be just as bad as transfer fees - which are also constantly rising.

That depends on the bank. If all the bank does was bank accounts and payment handling, then near 100% of the profits would be from service fees.

  

As I said, it was a MAJOR US bank, not just handling bank accounts etc. I didn't specify which one because I wasn't completely sure now, but it was something like Chase or JP Morgan or whatever they are called these days. The figures referred to 2006, I believe, so not sure about today but hard to imagine a major change, considering recent trends.

May 27, 2024
11:07 am
Norman1
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It is not the case these days with JPMorgan Chase.

Their 2023 annual report has "deposit-related fees" at $5 Billion of the bank's $158.1 billion total net revenue. Of that total net revenue, $89.3 billion is net interest income.

May 27, 2024
11:29 am
AltaRed
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It kind of is a moot point because we do not know the associated A&G that comes with providing the services. Does the fee cover 100% of the fee on average, 200% of the fee on average, or in some cases a mere fraction of the cost because of a process gone wrong. I have no idea but here is a US centric link that generally supports what Norman1 posted. https://www.depositaccounts.com/blog/banks-income-fees.html but to recognize this link is for deposit account related fees, when may, or may not, include transfer out fees.

May 27, 2024
6:16 pm
Loonie
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I

Norman1 said
It is not the case these days with JPMorgan Chase.

Their 2023 annual report has "deposit-related fees" at $5 Billion of the bank's $158.1 billion total net revenue. Of that total net revenue, $89.3 billion is net interest income.  

That sounds a little more likely, at least for deposit-related fees, but perhaps there are other kinds of fees as well.

Five billion is nothing to sneeze at, however. I'm sure they will be looking at how they can increase it!

May 27, 2024
7:41 pm
AltaRed
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My bad with a proofread. A sentence in my last post should read....

Does the fee cover 100% of the cost on average, 200% of the
cost on average, or in some cases a mere fraction of the cost because of a process gone wrong.

For all we know, deposit related fee revenue may not be all that much over the A&G costs to provide the services.

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