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Hubert RRIF Questions and Answers
April 26, 2019
8:52 pm
Loonie
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No, Briguy, I've never had to try that, but they won't commit to permitting non-mandatory withdrawals during the course of a GIC.
However, my experience has taught me that in future I would choose the very end of the year. It makes it easier to predict what the mandatory withdrawals will be for the next year, and it's just, overall, a cleaner process, with fewer moving parts, as the mandatory is based on value at end of previous year.
Previously, I had chosen a date near the beginning of the year on the theory that interest rates were now better so I could get a better rate for that money, but it really doesn't matter much and now it's not even true!

April 27, 2019
3:45 am
Briguy
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Loonie said
No, Briguy, I've never had to try that, but they won't commit to permitting non-mandatory withdrawals during the course of a GIC.
However, my experience has taught me that in future I would choose the very end of the year. It makes it easier to predict what the mandatory withdrawals will be for the next year, and it's just, overall, a cleaner process, with fewer moving parts, as the mandatory is based on value at end of previous year.
Previously, I had chosen a date near the beginning of the year on the theory that interest rates were now better so I could get a better rate for that money, but it really doesn't matter much and now it's not even true!  

I'm not sure if I understood you correctly about the once yearly discussion with Oaken about withdrawals. Assuming you originally set up your RRIF to have a much higher withdrawal rate than the minimum so that adjusting for mandatory withdrawals is not a factor each year, will Oaken allow you to change your withdrawal rate each year even if you only have a 5 yr GIC? Or are you required to close the RRIF and open a new RRIF to get the new withdrawal rate?
Thanks in advance Loonie !!

April 27, 2019
6:07 am
Doug
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Loonie said
No, Briguy, I've never had to try that, but they won't commit to permitting non-mandatory withdrawals during the course of a GIC.
However, my experience has taught me that in future I would choose the very end of the year. It makes it easier to predict what the mandatory withdrawals will be for the next year, and it's just, overall, a cleaner process, with fewer moving parts, as the mandatory is based on value at end of previous year.
Previously, I had chosen a date near the beginning of the year on the theory that interest rates were now better so I could get a better rate for that money, but it really doesn't matter much and now it's not even true!  

Good points. I would've thought the end of the year made more sense for determining one's RRIF withdrawal since, like you say, the end of the year balance determines your next year RRIF withdrawal amount. sf-cool

A downside to having equities in your RRIF is stock market volatility and having to withdraw 4-5% or whatever your minimum withdrawal is when your positions are down 20% or more. Similarly, having to withdraw that same amount when your positions have increased in value results in you having to take out more money than you need and a bigger tax hit.

When I resume working full time, hopefully with a college library that will have a pension, I will have less need for RRSPs, but even if not, I'm giving serious consideration to just maxing out my TFSA with my equities (ETFs, stocks, etc.) and adding very little to my RRSPs. The balance of my retirement savings would be in non-registered accounts. If you had to do it over again, Loonie, and had access to a TFSA at an early age, might you have considered that instead?

Cheers,
Doug

April 27, 2019
7:15 am
Briguy
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Doug said

Good points. I would've thought the end of the year made more sense for determining one's RRIF withdrawal since, like you say, the end of the year balance determines your next year RRIF withdrawal amount. sf-cool

When I resume working full time, hopefully with a college library that will have a pension, I will have less need for RRSPs, but even if not, I'm giving serious consideration to just maxing out my TFSA with my equities (ETFs, stocks, etc.) and adding very little to my RRSPs. The balance of my retirement savings would be in non-registered accounts. If you had to do it over again, Loonie, and had access to a TFSA at an early age, might you have considered that instead?

Cheers,
Doug  

If you get a good paying job you might as well buy more RRSPs and contribute enough to lower your tax bracket one or two notches, not necessarily your maximum RRSP contribution. The amount you get back in your tax refund is probably more than you will pay later in taxes on it since you will probably be in a lower tax bracket after retirement. If you are maxed out on your TFSA then this strategy is a no brainer. I think it makes sense to have at least one of your RRSPs invested in the stock market with XGRO or VGRO since you are young, and then later when you are 65 sell it within the RRSP and transfer the RRSP out to a FI that pays high interest on GICs or savings accounts. If you don't need to dip into your TFSA do the stock market there too. Whatever money you have left over pay down your mortgage and if you have any money left over keep your money liquid in HISA or GIC since you will dip into those first . This is the opposite of what advisors will tell you since you will incur the most taxes this way. I think this is what you are planning to do anyways.

April 27, 2019
7:23 am
Doug
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Briguy said

If you get a good paying job you might as well buy more RRSPs and contribute enough to lower your tax bracket one or two notches, not necessarily your maximum RRSP contribution. The amount you get back in your tax refund is probably more than you will pay later in taxes on it since you will probably be in a lower tax bracket after retirement. If you are maxed out on your TFSA then this strategy is a no brainer. I think it makes sense to have at least one of your RRSPs invested in the stock market with XGRO or VGRO since you are young, and then later when you are 65 sell it within the RRSP and transfer the RRSP out to a FI that pays high interest on GICs or savings accounts. If you don't need to dip into your TFSA do the stock market there too. Whatever money you have left over pay down your mortgage and if you have any money left over keep your money liquid in HISA or GIC since you will dip into those first . This is the opposite of what advisors will tell you since you will incur the most taxes this way. I think this is what you are planning to do anyways.  

You're also forgetting that my RRSP room would likely be greatly reduced by the pension adjustment. sf-cool

Given all the complications with RRIFs, I'm really wondering whether they're worth it. What is one actually saving in terms of taxes? And, my income would not be exceedingly high. At most, maybe $40-50,000, before my dividend and interest income. That still shouldn't but much of my income into the second tax bracket.

I don't own property, so no mortgage. But even if I did, I'd disagree, to a certain extent, as I don't believe in using a significant portion of one's wealth to pay down one's mortgage (at low interest rates) only to further tie up your wealth in an illiquid asset. I probably will never own property, preferring to rent.

Cheers,
Doug

April 27, 2019
7:40 am
Briguy
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Doug said

You're also forgetting that my RRSP room would likely be greatly reduced by the pension adjustment. sf-cool

Given all the complications with RRIFs, I'm really wondering whether they're worth it. What is one actually saving in terms of taxes? And, my income would not be exceedingly high. At most, maybe $40-50,000, before my dividend and interest income. That still shouldn't but much of my income into the second tax bracket.

I don't own property, so no mortgage. But even if I did, I'd disagree, to a certain extent, as I don't believe in using a significant portion of one's wealth to pay down one's mortgage (at low interest rates) only to further tie up your wealth in an illiquid asset. I probably will never own property, preferring to rent.

Cheers,
Doug  

If you own RRSPs and dont cash them in before age 71 you have no choice but to convert them to RRIFs or an annuity. I think rental is a smart choice in today's real estate market. Another advantage to renting is flexibility in moving for a new job and if you are single now you wont lose half your house if you get married and then divorced. If you can prove assets you owned entering the marriage they will be yours upon divorce.

April 27, 2019
7:47 am
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Briguy said

... and if you are single now you wont lose half your house if you get married and then divorced. If you can prove assets you owned entering the marriage they will be yours upon divorce.  

As the adage goes 'I'd be more optimistic if I thought it would help'

April 27, 2019
7:56 am
Doug
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Briguy said

If you own RRSPs and dont cash them in before age 71 you have no choice but to convert them to RRIFs or an annuity. I think rental is a smart choice in today's real estate market. Another advantage to renting is flexibility in moving for a new job and if you are single now you wont lose half your house if you get married and then divorced. If you can prove assets you owned entering the marriage they will be yours upon divorce.  

Yes, I certainly know that RRSPs must be converted to a RRIF by end of the year in which I turn age 71, but I'm just wondering, are they worth it? Given that I don't expect to go back to school to do my MLIS degree so that I can be a librarian, and even if I did, I'd have to do the MLIS degree + an undergrad degree, one course per semester while working full time, so it would take me a number of years (at least 10-15, I figure) before I'd have my MLIS and undergrad degrees. By then, I'd be 50, and only have ~15-17 years (perhaps less) of income earning potential at a librarian's salary (which would not be significantly higher, at between $60-80,000 per year versus $40-50,000 for a library technician).

I just wonder if, in the long run, maybe it'd be better to focus on maxing out my TFSA and supplementing the TFSA retirement savings with non-registered retirement account savings. I'd certainly end up with a much, much smaller RRSP balance to convert to a RRIF and I wouldn't have all of those headaches that go with RRIFs.

Cheers,
Doug

April 27, 2019
8:31 am
BillieBob
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This thread took a different tack after Post #7 and posts thereafter should probably be moved to a new thread.

April 27, 2019
8:39 am
Doug
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BillieBob said
This thread took a different tack after Post #7 and posts thereafter should probably be moved to a new thread.  

I would potentially agree with that, but it's still related to RRIFs. Nevertheless, I'd support splitting off the posts into a new thread, but believe that it should start with Briguy's post # 7 onward, not post # 8 onward.

Cheers,
Doug

April 27, 2019
9:11 am
Briguy
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Doug said

Yes, I certainly know that RRSPs must be converted to a RRIF by end of the year in which I turn age 71, but I'm just wondering,

Cheers,
Doug  

I know you know that, but I was just writing that to the forum as a whole. No offense intended.

April 27, 2019
9:23 am
Doug
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Briguy said

I know you know that, but I was just writing that to the forum as a whole. No offense intended.  

None taken, and no worries. sf-cool

Cheers,
Doug

April 27, 2019
9:44 am
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Doug said

Are the $3,000 GICs in separate RRIFs, or the same Oaken RRIF? If the latter, I hadn't considered that yeah, they probably would still want you to have $10,000 for each GIC. That is kind of high. It should be $5,000, I think, which seems more reasonable.

If they're in a separate RRIF, or RRIFs, then have you considered transferring them out when they mature? Usually the bank RRIF transfer fee is $40-50, so much less than the $150 that the discount brokerages charge (at least the receiving discount brokerage will rebate transfer fees to $150 with minimum $15,000 transferred, though). You'd avoid having to take the tax hit.

Cheers,
Doug  

I assume I only have one RRSP Account with Oaken but I do have multiple 3000 GICs which slightly exceed the mandatory withdrawal amount when they turn to RRIF. I am pre planning my needs once they turn to RRIF in a few years. Yes will transfer out all of the matured value. I will try to do multiple withdrawals 5000 or under to meet my needs. I understand that Oaken RRIF withdrawals are free. Oaken is a bit of a work around. And that is why I also have RRSP funds in other FIs.

I just moved 20,000 from RRSP to RRIF at Hubert and you have to do that over phone or chat. Then once in the RRIF Account you can move all on your own out of RRIF to non registered savings. Any amount can be chosen and the system will show the tax with hold amount.

So I will take the mandatory amount from Oaken and then take the rest of my needs out of Hubert as is much easier with them.

April 27, 2019
10:27 am
GICinvestor
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I always understood it that when they take money out of your GIC for your agreed upon withdrawals, that you'd only forgo future interest on that withdrawn amount.
The problem with Oaken is that since they don't have a RRIF HISA , you are forced to reinvest the money right away or cash in that GIC and take it out of the RRIF. If you change your mind on monthly or yearly withdrawal rate for their RRIF, I assume you'd have to close the RRIF and open a new RRIF with them. Not sure if Loonie has ever had to do that and how easy that process is.

Or when they send you a letter a month before hand advise them to reinvest, withdraw OR let them know you will transfer the RRIF or RRSP to another FI.

April 27, 2019
10:55 am
frugal lady
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GICinvestor said

I just moved 20,000 from RRSP to RRIF at Hubert and you have to do that over phone or chat. Then once in the RRIF Account you can move all on your own out of RRIF to non registered savings. Any amount can be chosen and the system will show the tax with hold amount.

So I will take the mandatory amount from Oaken and then take the rest of my needs out of Hubert as is much easier with them.  

You will also have to take the mandatory minimum withdrawal from the Hubert RRIF.

April 27, 2019
11:09 am
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Yes I realize that. But right now I am not of the age of mandatory RRIF and I only move RRSP through RRIF to withdraw and will leave a few dollars in the RRIF HISA. And realize any money in a RRIF has a mandatory RRIF withdrawal annually.

April 27, 2019
12:32 pm
frugal lady
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GICinvestor said
Yes I realize that. But right now I am not of the age of mandatory RRIF and I only move RRSP through RRIF to withdraw and will leave a few dollars in the RRIF HISA. And realize any money in a RRIF has a mandatory RRIF withdrawal annually.  

I might be missing something, but if you are under 71 why bother moving from RRSP to RRIF to withdraw rather then just withdrawing from your RRSP? The only reason I can think of is to create "pension income" to qualify for the $2000 pension income credit if you have no other income that qualifies as "pension income". It is my understanding that no matter what age you are when you create a RRIF, you must withdraw the minimum amount based on your age in the year after you open a RRIF.

April 27, 2019
1:06 pm
Briguy
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frugal lady said

I might be missing something, but if you are under 71 why bother moving from RRSP to RRIF to withdraw rather then just withdrawing from your RRSP? The only reason I can think of is to create "pension income" to qualify for the $2000 pension income credit if you have no other income that qualifies as "pension income". It is my understanding that no matter what age you are when you create a RRIF, you must withdraw the minimum amount based on your age in the year after you open a RRIF.  

You can also split the RRIF income with up to 50% becoming income of the lower earning spouse. This is even with your own RRIF, doesn't have to be a spousal RRIF.

And, totally separate from pension SPLITTING mentioned in previous paragraph, you can tell Canada Pension when you first start collecting CPP how you want to allocate CPP SHARING. You can cancel this pension sharing later as well if monetary circumstances change.

April 27, 2019
3:39 pm
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I might be missing something, but if you are under 71 why bother moving from RRSP to RRIF to withdraw rather then just withdrawing from your RRSP?

For income splitting and to draw down RRSP/RRIF to be in a lower income bracket 71 onwards. RRIF you can split and RRSP you cannot so I have been told. And for estate planning which is thinking about the future too much......RRSP and RRIF is totally taxable at death if you don’t have a successor. But if you do have a successor it makes things easier on them too, to be in a lower income bracket.

The only reason I can think of is to create "pension income" to qualify for the $2000 pension income credit if you have no other income that qualifies as "pension income".

True but I already have the pension income from my company pension as does my spouse. It is the splitting option I am after.

It is my understanding that no matter what age you are when you create a RRIF, you must withdraw the minimum amount based on your age in the year after you open a RRIF.

Yes but ie. if I move $15,000 and leave $300 after withdrawals this year then comes December 31 my RRIF will be $300 plus a bit of interest and I will have to take 5% or so as that as my mandatory withdrawal. Keep in mind I am only 68.

I control the amount from RRSP to RRIF and will continue to do so until I am into the mandatory conversion of RRSP to RRIF.

April 27, 2019
9:05 pm
Loonie
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Briguy said

I'm not sure if I understood you correctly about the once yearly discussion with Oaken about withdrawals. Assuming you originally set up your RRIF to have a much higher withdrawal rate than the minimum so that adjusting for mandatory withdrawals is not a factor each year, will Oaken allow you to change your withdrawal rate each year even if you only have a 5 yr GIC? Or are you required to close the RRIF and open a new RRIF to get the new withdrawal rate?
Thanks in advance Loonie !!  

I'm not sure if I can answer your exact question, but this is what I know:
I set my RIF for only the mandatory withdrawals on an annual basis. When I asked, speculatively, if they could accommodate a later decision on my part to withdraw an additional lump sum amount, they would not make a commitment and mumbled about how it would depend... They didn't say no, but they didn't say yes either. I had the impression this would be an unusual move and they would only do it if it was a good deal for them or perhaps if I were a hardship case.

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