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Hubert RRIF Questions and Answers
April 30, 2019
7:30 pm
Doug
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Loonie said

but Peoples doesn't offer RIFs, which is under discussion.  

What's under discussion? Peoples is considering it?

But yeah, I (a) didn't realize they didn't have RRIFs and (b) was meaning they topped the leaderboard in terms of non-registered GICs.

Cheers,
Doug

April 30, 2019
7:48 pm
Loonie
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christinad said
Yes definitely if you are in the same tax bracket, I would go with tfsa. I make 60,000 and i find it hard to believe i will be in the same tax bracket. Who knows? I feel like only a financial planner can do these types of calculations but i'm too cheap to pay for one.  

You may not need a planner to figure this out.

Consider the Federal tax brackets; don't bother with the provincial ones as provincial tax is normally smaller, and the brackets aren't that different normally anyway.

For 2019, if over age 64:
1st bracket: 19,563 to 47,630
2nd bracket: 47,630 to 95,259.

In addition, you start to lose the age credit at 37,790.
You won't have to worry about OAS clawback under current rules.

Brackets rise with inflation annually, but their parameters are subject to change - and this is part of the problem. Brackets used to be more plentiful and narrower, so that it was easy to imagine you'd be further ahead with an RSP. But then they changed the brackets, making them much broader, so that this is not as easy any more, and those of us who had reason to think we'd be in lower brackets in retirement now find that we're not, even if our projections were more or less accurate.

You can't count on rules remaining the same. In fact, you can count on them changing.

April 30, 2019
8:03 pm
Doug
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Loonie said

You may not need a planner to figure this out.

Consider the Federal tax brackets; don't bother with the provincial ones as provincial gtax is normally smaller, and the brackets aren't that different normally anyway.

For 2019, if over age 64:
1st bracket: 19,563 to 47,630
2nd bracket: 47,630 to 95,259.

In addition, you start to lose the age credit at 37,790.
You won't have to worry about OAS clawback under current rules.

Brackets rise with inflation annually, but their parameters are subject to change - and this is part of the problem. Brackets used to be more plentiful and narrower, so that it was easy to imagine you'd be further ahead with an RSP. But then they changed the brackets, making them much broader, so that this is not as easy any more, and those of us who had reason to think we'd be in lower brackets in retirement now find that we're not, even if our projections were more or less accurate.

You can't count on rules remaining the same. In fact, you can count on them changing.  

That's part of what you were alluding to, I think, with respect to your earlier comments about governments changing the "rules of the game" down the road, I think. There are other potential rule changes they could make, but this would be one of this subtle, less obvious ones. sf-smile

Cheers,
Doug

April 30, 2019
8:29 pm
Loonie
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Doug said

Right, and I agree with you completely, but my understanding is the OAS clawback doesn't even begin to kick in until you get $75,001.00 per person (too high in my opinion; should be $50,000.00 per person as it is senior welfare after all 😉 ).

GIS is also for very low income seniors. If you're getting that, you need it and, arguably, this should be increased (believe there are plans to do so). We shouldn't be trying to get GIS or its cousin, the Spouses Allowance. 😉

Cheers,
Doug  

OAS clawback for 2019 begins at 77,580 .
This means that people with incomes well above that are still drawing from OAS. Politicians of both stripes have not had the guts to change it.

I doubt very many people who don't need it can get GIS, or at least not very much of it. The cut-off is low - not sure of exact amount, but it's in the mid-20's for a single person. Even if you had cashed in all your RSPs, you would likely not be eligible unless you had no work pension and little savings.

Some people enjoy complaining about government spending on the one hand and taking all they can get from same government on the other even if they know they don't need it.

These things should be needs-based, not income-based, but too many would blk at that and it would be too difficult to administer. They base it on income because it's easy; they already have that information.

Measures to allow income splitting and sharing are relatively recent and came into existence because it was finally recognized that finances and financial planning are a family effort. You may want to fiddle with the ratios, but the basic principle is sound. Two people living on the same combined sources, but only one decent income; why shouldn't they be able to split it?
CRA gets lots back in the proceeds of the combined RIFs on death, and they could fiddle even more with that if they wanted to.
Even more recently, they all but destroyed the CPP Survivor Benefit, leaving many widows in serious financial trouble (unless born before 1934 or so). Be careful when you complain about what couples get.

April 30, 2019
8:32 pm
Loonie
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Doug said

What's under discussion? Peoples is considering it?

But yeah, I (a) didn't realize they didn't have RRIFs and (b) was meaning they topped the leaderboard in terms of non-registered GICs.

Cheers,
Doug  

meaning, RIFs are the topic of this thread.

April 30, 2019
8:48 pm
christinad
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I actually read an article that suggested singles are subsidizing the survivor benefit, if thats true i'm not happy with that either. We'll have to agree to disagree about income tax splitting. Almost our entire system is based on individuals taxed so not sure why a tax advantage is given here. I'm feeling like a little bit of a scrooge here. I'm mad because at work a married person gets a higher commuted value just because they are married. Its ridiculous.

April 30, 2019
9:29 pm
Loonie
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Doug said

Also, when you said in another thread (or earlier in this one), that you're not in the stock market, do you mean you own no stocks or ETFs period? Have you ever owned stocks, index mutual funds, or index ETFs? If not, I'm just curious how you managed to build a retirement portfolio that would generate sufficient supplementary retirement income on GICs alone since you're lucky if you can maintain your purchasing power net of inflation over the long term in GICs.

Cheers,
Doug  

Has it ever occurred to you that you ask a lot of intrusive questions, and that, for some reason I can't fathom, you are especially interested in asking them of me?

I am not going to answer them, but I will say that, based on my own experience and what I have seen of the experience of others, these things help:

1. Invest in long bonds when rates are high, and you will likely outperform stocks during that period. (Let's hope they are high again in due course.) Failing that, yes, it's worth it to shop around for GICs and may be worth it to have accounts in various places. Never exceed insured levels.
2. If you don't buy into the stock market, you won't have to worry about when to get out of it and you won't lose any money. Beware encouraging charts and tables that include the word or concept "IF..." as they are not reliable.
3. If you must invest in the stock market, do it outside of RSPs.
4. Be the first-born and discourage your parents from having more kids.
5. Discourage your parents from getting divorced.
6. Marry, and don't get divorced.
7. Have two incomes in your household.
8. Invest in yourself; develop better qualifications for better incomes.
9. Buy property you can afford as soon as you can afford it, but don't over-extend yourself. Consider having a room-mate or tenant.
10. Don't smoke. All things in moderation and of good quality.
11. Give generously to charity. It will help you realize how much money you really do or don't have, both of which are very useful to know.
12. Don't have children if you're ambivalent.
13. If you live somewhere where a car isn't really necessary, then don't buy one. You're already paying more than enough to live where you do. If you need a car, rent one, and get a credit card with a strong insurance policy. If you must own a car, talk to your insurer before buying it.
14. Don't waste your life doing things you're not really interested in. You may have less money, but you won't notice it as much.
15. Be a "conscious" shopper. Get value for your money. Learn the art of delayed gratification, comparison shopping, where and how to shop for value, etc..
16. Be aware that the stock market is always a significant risk. The past does not predict the future by any means. If you feel you must use it, start early and hang on. Don't take it up as a retirement hobby unless you have money to waste or are sure you have at least 25 years ahead of you.
17. Be aware that it all adds up. You won't have a lot of money for quite a while unless you inherit some or your daughter becomes the next instant billionaire and you were her first investor. Be patient.
18. Share.
19. Read entire books. Learn something that could change your life.

Others may disagree, and probably will.

April 30, 2019
9:37 pm
Loonie
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christinad said
I actually read an article that suggested singles are subsidizing the survivor benefit, if thats true i'm not happy with that either. We'll have to agree to disagree about income tax splitting. Almost our entire system is based on individuals taxed so not sure why a tax advantage is given here. I'm feeling like a little bit of a scrooge here. I'm mad because at work a married person gets a higher commuted value just because they are married. Its ridiculous.  

Do you actually know anything about how the survivor benefit is calculated?

CPP does not have a special pool of contributions by single people from which it draws to pay widows.

People write for various reasons and almost anything that is written can be critiqued. Check for the bias of the writer. What are they trying to prove, and why?

Don't waste your energy on what other people are getting as it will only deplete you and make you unpleasant to be with. Focus on what you can do for yourself.

April 30, 2019
9:43 pm
christinad
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Alexandra Macqueen (who cowrote the Pensionize your nest egg book) suggested in an article singles are subsidizing the survivor benefit. I have to say i respect her opinion. In any event, back to the topic at hand, any other reasons to invest or not invest in rrsp?

April 30, 2019
10:23 pm
Loonie
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christinad said
Alexandra Macqueen (who cowrote the Pensionize your nest egg book) suggested in an article singles are subsidizing the survivor benefit. I have to say i respect her opinion. In any event, back to the topic at hand, any other reasons to invest or not invest in rrsp?  

I don't think you know anything about the calculations currently involved in the Survivor Benefit. They changed dramatically when the CPP was updated a few years ago, at the time when contribution rates were increased.

Macqueen's statement, whatever it was, would be a statement of opinion based on her own analytical assumptions and interpretation. No such information exists within the CPP because that is not how benefits are calculated.

There are many ways of interpreting the data. If you're trying to sell articles or sell yourself as an expert, you will often look for the interpretation that is most likely to get people riled up because it sells papers and magazines and so on, and it portray you as someone "in the know". The main reason such people write these articles is to promote their careers, one way or another. It doesn't mean they are necessarily wrong, but it does mean you have to read what they say critically so that you know how much of it to appropriate.

i don't have anything to say about RSPs that I haven't already said more than once in various threads. I think you have read all of them, and probably some people are tired of hearing them (but they are being polite!)

From what you have said of your own situation, I doubt I would bother with RSPs if I were in your shoes, although I do allow that for a minority of people they are probably a good idea (mostly for people who would never save any money otherwise, sometimes for homebuyers or mothers, and for those few who can be certain of paying less in the long run). Certainly I would top up TFSA as a priority.

A smallish RSP may be of some use as a back-up in case of job loss etc, but I would cash it in to top up my bracket in retirement once I knew what bracket I was going to be in - again on the principle that it will never be cheaper to do so unless tax rate is reduced and age credit clawback is terminated, both of which seem unlikely to me, given current constraints, but are always possible. Trudeau, for instance, reduced the bottom rate slightly at the beginning of his term.

RSPs can give you the illusion you have more money than you do, because it's not all yours. If, for example, you have 300,000 in RSPs, but owe 100,000 of it ultimately to CRA due to tax bracket and age credit clawback, then you only have 200,000.

I recognize though that this is a difficult decision for someone in your position. The answer is not crystal clear because the future is not knowable.

Remember too that all hell doesn't break lose if you should slip into the next tax bracket. What happens is that if you are, for example, $1000 into the next bracket, you only pay the extra tax on that $1000. Each bracket pertains only to the money that is in it, if that makes sense. It does not mean the whole thing is then taxed at the higher rate. I mention this because I have found that some people are not aware.

May 1, 2019
7:36 am
christinad
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Thanks for the rrsp tips. Alexandra Macqueen doesn't strike me as a sensational writer and i'm not discounting what she says. I also see she wrote anothet cpp article

https://www.theglobeandmail.com/globe-investor/retirement/retire-planning/cpp-enhancements-understand-whats-not-changing/article34149364/

which suggests she's developed a specialty in it.

Doug, from what i read when you have a pension you can take more risk as you have your pension to count on or less risk as you don't have to rely on the gains so much.

May 1, 2019
7:49 am
Doug
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Loonie said

OAS clawback for 2019 begins at 77,580 .
This means that people with incomes well above that are still drawing from OAS. Politicians of both stripes have not had the guts to change it.

Right, that's what I was getting at - guessing I was using an old threshold of $75,000 where the OAS clawback began. It just keeps going higher, but it doesn't need to because it's already higher than it needs to be! sf-cool

When the Conservatives raised the CPP and OAS eligibility age to 67, I didn't necessarily think that was the right move and wished they would've lowered the OAS clawback threshold to $50,000 and eliminated it entirely at $90,000, per person, instead of then $75,000 and something like $125,000. You're right that it would take political guts to do this, but I suspect a certain amount of self-interest comes into play (many politicians likely get at least some OAS).

I doubt very many people who don't need it can get GIS, or at least not very much of it. The cut-off is low - not sure of exact amount, but it's in the mid-20's for a single person. Even if you had cashed in all your RSPs, you would likely not be eligible unless you had no work pension and little savings.

[...]

These things should be needs-based, not income-based, but too many would blk at that and it would be too difficult to administer. They base it on income because it's easy; they already have that information.

Income-based means testing is fine, but yes, it's not perfect and can be abused. Still, it provides a method for government to assess needs and I think it generally works well, but I just wish people would stop trying to figure out ways to get it! It's welfare for the most vulnerable, needy seniors. If they were working age, would they try and go and apply for provincial income assistance (some seniors have to qualify for this, too, if they don't qualify for OAS, for example) as often as possible? I think, or would hope, not.

Some people enjoy complaining about government spending on the one hand and taking all they can get from same government on the other even if they know they don't need it.

Agreed! You won't hear me complain about government spending, but you will hear me go on about what I view as an excessively and needlessly large public service. sf-cool

Measures to allow income splitting and sharing are relatively recent and came into existence because it was finally recognized that finances and financial planning are a family effort. You may want to fiddle with the ratios, but the basic principle is sound. Two people living on the same combined sources, but only one decent income; why shouldn't they be able to split it?
CRA gets lots back in the proceeds of the combined RIFs on death, and they could fiddle even more with that if they wanted to.
Even more recently, they all but destroyed the CPP Survivor Benefit, leaving many widows in serious financial trouble (unless born before 1934 or so). Be careful when you complain about what couples get.  

Exactly. Well said, Loonie. sf-cool

I wasn't aware of the CPP survivor benefit, unless did it have to do with only being able to receive one former husband's CPP pension? If so, then yes, my grandma would've been affected by that in that when he second husband passed away in 2011, she never got to receive his CPP survivor pension. Thankfully, she did OK thanks to her first husband's former Alberta Treasury Branches pension. Her first husband only got maybe a year of his full pension, but she's been receiving the survivor ATB pension since around 1976 or so.

Cheers,
Doug

May 1, 2019
11:17 am
Loonie
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They totally changed the formula for calculating the Survivor Benefit, Doug. Has nothing to do with how one qualifies per se.

May 1, 2019
11:28 am
Doug
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Loonie said
They totally changed the formula for calculating the Survivor Benefit, Doug. Has nothing to do with how one qualifies per se.  

Ah, okay. So, basically, a widow has never been able to receive two survivor pensions and always receives only the earlier of the two survivor pensions, right?

Cheers,
Doug

May 1, 2019
11:43 am
Loonie
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I can't answer that question. The answer is available; I just can't remember what it is.

May 1, 2019
12:04 pm
Doug
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Loonie said
I can't answer that question. The answer is available; I just can't remember what it is.  

Ah, okay, thanks, Loonie. 🙂

Cheers,
Doug

June 21, 2019
8:41 am
BillieBob
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I opened my first RRIF HISA account at Hubert this morning and was planning to transfer some $$ from my Hubert RSP HISA into it immediately. That option is not available to me (i.e. the new RRIF HISA is greyed out when choosing the account to transfer to). Does anyone know if there is a specific period of time before I can do so? (My plan is to take advantage of the $2000 pension credit.)

June 21, 2019
9:32 am
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BillieBob said
I opened my first RRIF HISA account at Hubert this morning and was planning to transfer some $$ from my Hubert RSP HISA into it immediately. That option is not available to me (i.e. the new RRIF HISA is greyed out when choosing the account to transfer to). Does anyone know if there is a specific period of time before I can do so? (My plan is to take advantage of the $2000 pension credit.)  

You have to call or chat with them to move RRSP funds to RRIF. I prefer chat as I can print it when done and the amount is indisputable.
Keep in mind you will have to do a mandatory withdrawal from it next year.

June 21, 2019
10:28 am
BillieBob
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GICinvestor said

You have to call or chat with them to move RRSP funds to RRIF. I prefer chat as I can print it when done and the amount is indisputable.
Keep in mind you will have to do a mandatory withdrawal from it next year.  

Thanks for the info. Do you know if I can withdraw from it the year it is set up? From what I have read online, it looks like a can. I am hoping to make a $2000 withdrawal from it this year and then withdraw $2000 every year until I'm 71 to take advantage of the pension credit.

June 21, 2019
10:53 am
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Once the money is in your RRIF savings you can start to withdraw. Keep in mind that withdrawals $5000 and under will have a 10% tax hold back. A mandatory withdrawal has no hold back. I don’t need my RRSPs but have been withdrawing them via my RRIF Account for quite a few years. I then use the withdrawn funds for TFSA. It will help reduce taxed amounts once I have to move all RRSP to RRIF and then taking the mandatory amounts. Also when I take out enough to buy $6000 x 2 for TFSA I do multiple withdrawals under $5000 to acquire an amount close to $12000. We are both on a pension already that give us the pension income deduction. With income splitting we both always stay in the lowest income tax bracket. Once funds are in RRIF at Hubert they are totally under your control.

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