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Oaken - No associated savings accounts for registered accounts
July 14, 2017
9:44 am
Cranston
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I know a lot has been said about this and I spoke to Mr. Katchen years ago and he said they were planning on putting into place but I quess things change and plans get changed.

But I am sure lots of us here have the need for a savings account for TFSA, RRSP or RRIF.

I would like to see for RRIF RRSP to self manage RRIF payments that exceed the mandatory amount.

I would like to see for TFSA as when we get older some will begin to use the interest portion to beef up annual spending ability. And in turn this would allow non registered money to go into TFSA the next year.

Associated savings accounts would allow me to KEEP funds at Oaken.

ANY OTHER GOOD IDEAS?

July 14, 2017
11:48 am
Bill
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It's got to be tough to figure out what savings and other liquid accounts to offer in a time when, and increasingly every day, people can click all their money out of your institution the micro-second some other guy's offering 1/4% more interest and then click it back when they've got no better option that particular minute.

July 14, 2017
12:23 pm
Cranston
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Yes but with their usually best rate and good customer service I find that I still have to transfer out. I could stop doing that if I could park funds in a savings account.

July 14, 2017
3:24 pm
Loonie
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They haven't always had the best rates.
They may fear the withdrawals, but, at the moment, there is nothing at all in registered savings accounts, and that is a big problem which is causing some of us to think twice before depositing with them. I have only put registered funds in there when the rates were so high that I couldn't afford not to do so. However, as I am now moving into RIFs, I will be thinking harder.

New CEO may lead to big changes. Let's hope they are positive ones for depositors.

July 16, 2017
9:47 am
Rick
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Cranston said
I would like to see for TFSA as when we get older some will begin to use the interest portion to beef up annual spending ability. And in turn this would allow non registered money to go into TFSA the next year.
ANY OTHER GOOD IDEAS?  

I'm wondering the situation in which you would take tax-sheltered money out and replace it later with non-registered funds? I mean, that's sort of my plan, but won't be touching the TFSA's until all non-registered funds are used up, and as it sits now, I don't think we'll get to that point for years, if not decades. Still working for another year, so liquid cash will be growing until then, TFSAs and RSPs are maxed out, so nowhere left to stash it tax-free. Downsizing will add a few 100G more so not seeing taking ANY out for a long time. I suggested to the wife that, after I die, the TFSA's should be the last money spent. By then, there should be a couple of nice GIC ladders paying out twice a year. If she/we need it, it's there. Otherwise, kids' inheritance.

July 16, 2017
10:09 am
Cranston
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I have non registered funds, TFSA and RRSP. I am have been retired for twelve years. I received a golden handshake. As of November 2016 I no longer have mutual funds, stocks or ETFs....only GICs. To this date I have not touched any severance pay or paid out pension funds (for some reason not all my pension contributions were included in my defined benefit pension). I continue to convert RRSP $ to TFSA. So both TFSA and RRSP remain untouchable. I have turned on some of my non registered money to pay out interest annually to provide for annual expenses. So before I touch any principal I will firstly turn on all non registered GICs to pay interest annually then the TFSA. In the interim I will continue to convert RRSP to TFSA and turn on TFSA interest to pay annually if I am at that point. So I would still have non registered GICs that I could put into TFSA.

I hope that makes sense. Keep in mind downsizing is expensive. The two of us live in a newer home suitable for 2 to 6 people. Haven't had a mortgage for years and didn't go hog wild when there was no more mortgage to pay. Always bought a new house but never a new car. And yes I know I am causing part of the housing crisis/shortage but at this point am not willing to accept the alternatives.

So there is a cost for upkeep and possibly taxes are a bit more than if we down sized. We are not prepared to go into strata title as we see so many negative things about going that way and are not prepared to add that stress to our lives. Keep in mind the realty costs to sell and in BC there is a 1% tax to buy and more tax if new. Why blow a away $75,000 or so to down size.

Ps. So with taking TFSA interest annually would give me more contribution room for the next year. Keeping in mind I control our RRSP withdrawals to not exceed the current $5500 limit (x2) and also not put either of us into the next tax bracket. That leaves me with unused TFSA room. Also make use out of income splitting and moving RRSP money out by flushing through a RRIF account.

July 16, 2017
10:29 am
Rick
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Cranston said
I have non registered funds, TFSA and RRSP. I am have been retired for twelve years. I received a golden handshake. As of November 2016 I no longer have mutual funds, stocks or ETFs....only GICs. To this date I have not touched any severance pay or paid out pension funds (for some reason not all my pension contributions were included in my defined benefit pension). I continue to convert RRSP $ to TFSA. So both TFSA and RRSP remain untouchable. I have turned on some of my non registered money to pay out interest annually to provide for annual expenses. So before I touch any principal I will firstly turn on all non registered GICs to pay interest annually then the TFSA. In the interim I will continue to convert RRSP to TFSA and turn on TFSA interest to pay annually if I am at that point. So I would still have non registered GICs that I could put into TFSA.

Sounds like you have pretty much the same plan I am on, just 13 years ahead of me. All my investments are now in GICs or cash. The issue I haven't calculated yet is making sure our income level doesn't kick in any claw-backs by converting RSPs to TFSAs, but won't be doing that for a few years.

July 16, 2017
10:48 am
Cranston
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Rick said

Cranston said
I have non registered funds, TFSA and RRSP. I am have been retired for twelve years. I received a golden handshake. As of November 2016 I no longer have mutual funds, stocks or ETFs....only GICs. To this date I have not touched any severance pay or paid out pension funds (for some reason not all my pension contributions were included in my defined benefit pension). I continue to convert RRSP $ to TFSA. So both TFSA and RRSP remain untouchable. I have turned on some of my non registered money to pay out interest annually to provide for annual expenses. So before I touch any principal I will firstly turn on all non registered GICs to pay interest annually then the TFSA. In the interim I will continue to convert RRSP to TFSA and turn on TFSA interest to pay annually if I am at that point. So I would still have non registered GICs that I could put into TFSA.

Sounds like you have pretty much the same plan I am on, just 13 years ahead of me. All my investments are now in GICs or cash. The issue I haven't calculated yet is making sure our income level doesn't kick in any claw-backs by converting RSPs to TFSAs, but won't be doing that for a few years.  

Yes is good to have a portion of funds in cash in a HISA (1.7% or more) just in case you have a bit of an emergency. Part of my idea to transfer RRSP to TFSA is to keep low income vs the higher income you will have if you leave your RRSP to turn to RRIF. This works for me as I don't see any huge cash amounts coming to me other than an unexpected inheritance. Might not work for everyone. I retired at 56 and although I had some cash come to me (old Metropolitan life policy, (endowment) and work Life Insurance buyout....some was taxable) I knew what years not to pull RRSP funds. I wish I started pulling RRSP funds and converting to TFSA as soon as I retired. I also pull funds out of RRIF at 10% tax hold back by doing multiple withdrawals. And yes, quite a few years left to pull RRIF funds to convert.

July 16, 2017
11:53 am
Rick
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Cranston said
Ps. So with taking TFSA interest annually would give me more contribution room for the next year. Keeping in mind I control our RRSP withdrawals to not exceed the current $5500 limit (x2) and also not put either of us into the next tax bracket. That leaves me with unused TFSA room. Also make use out of income splitting and moving RRSP money out by flushing through a RRIF account.  

Still not sure why you would take out of the TFSA and replenish with RSP funds. Why not leave the funds compounding in your TFSA and use RSP withdrawals to beef up annual spending? You are paying tax on RSP withdrawals no matter what you do with the money. Would eliminate the need to keep track of TFSA contribution room changing every year due to withdrawals and annual government increases, not to mention loss of tax free interest on the TFSA funds before you re-deposit your RSP funds. As your maximum contribution limit (should you withdraw any or all of it) is increased by your interest, you are actually losing contribution room by the amount of interest NOT earned by withdrawing any funds. Is it a timing thing?

July 16, 2017
12:13 pm
Cranston
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Ah. Good idea. I kind of plan as I go and am not in that place yet. I guess I could use RRIF interest for beefing up the annual expense fund AND withdraw for each years TFSA contribution. I quess I don't have all my "slots" in the right order as of yet 🙂 One of my key drivers is to NOT pull money from RRSP/RRIF if it puts me in the next tax bracket. As you are suggesting registered $ is registered $ and I consider both RRSP and TFSA as retirement and last to touch funds. But then why don't I use the principal of my non registered funds? I quess I like the idea of using interest first and always be fully topped up in TFSA. You have instilled me to put more thought into the algorithm that I should follow. Right now I am only pulling interest from non registered, pulling RRIF to convert to TFSA and still short a bit on TFSA that I will top up with severance pay or pension payout funds once GICs mature. I am only short a bit.

Ps. Is it a timing thing? No it is a not well thought out thing 🙂 🙂 Thanks for provoking me a bit 🙂

July 16, 2017
12:59 pm
Rick
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Other than having an emergency fund on hand, non-registered interest earning cash will always be the first to go. Govt and private pensions are the base for monthly expenses, any non-registered funds I have after max TFSA and/or RSP contributions, RSP/RIF withdrawals to beef up annual spending, and any income room left before clawbacks kick in top up TFSA until no RSPs are left. THEN start drawing on TFSA interest. Hopefully, by the time I need to take out TFSA funds, the RSPs will be gone and my income will be low enough to avoid clawbacks. That's my plan. Hope they don't change the rules by the time I implement it.

PS... not all "registered" money is equal. They tax RSP withdrawals and TFSA income is tax free. I would not consider using TFSA ahead of RSP unless takinbg out RSP funds put me in the next tax bracxket.

July 16, 2017
2:14 pm
Cranston
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Not all "registered" money is equal. They tax RSP withdrawals and TFSA income is tax free. I would NOT consider using TFSA ahead of RSP unless taking out RSP funds put me in the next tax bracket.

Well put.....short and sweet .... a perfect guideline.

July 16, 2017
2:30 pm
JenE
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I've enjoyed reading your posts, Cranston and Rick, on this subject, but have to admit I can't quite understand all of it. Can you (or anyone else), recommend any reading material that might help me?

July 16, 2017
2:31 pm
Loonie
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I would add too that RSP funds are not sacred. They are a tax deferral tool. There is no essential reason to hold them until the end. There is a good reason not to, in fact, namely that they will be fully taxed upon death of last spouse at marginal rate, a huge bite in some cases.
I am topping up our tax brackets with them every year now, and hoping outlive them, although that seems unlikely but will do my best!
So, you don't have to restrict your RSP/RIF withdrawals to 5500.

July 16, 2017
2:34 pm
Loonie
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JenE, I would recommend Daryl Diamond's book, Your retirement income blueprint: a six-step plan to design and build a secure retirement.

It's the most useful tool I have found so far on retirement income planning, and I would recommend it to anyone.

July 16, 2017
3:55 pm
Rick
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Loonie said
I would add too that RSP funds are not sacred. They are a tax deferral tool. There is no essential reason to hold them until the end. There is a good reason not to, in fact, namely that they will be fully taxed upon death of last spouse at marginal rate, a huge bite in some cases.
I am topping up our tax brackets with them every year now, and hoping outlive them, although that seems unlikely but will do my best!
So, you don't have to restrict your RSP/RIF withdrawals to 5500.  

I agree. I think Cranston and I are both on the same track in reducing RSP's and topping up TFSA's . Trick is to stay under the income limit that will kick in the clawbacks. I did an online questionnaire (don't ask where...I don't recall) that evaluated my retirement plan and was surprised to find I was doing ok IF I used all non-registered cash to nothing before drawing on my RSPs at all, but TFSA's were still last to go.
Are TFSA's taxed as well after both spouses die? I assume they are, but is the tax-bite less than if in RSP'S?

July 16, 2017
4:28 pm
Cranston
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So, you don't have to restrict your RSP/RIF withdrawals to 5500.

I sort of agree. I withdraw $6100 x 2 (<==wife) and minus 10% hold back equals $5490. I do two x 2 withdrawals each being less than $5000 to avoid the 20% hold back. I set aside 20% for all NON registered interest received for income tax. At the most I have to top up to pay our income taxes by another $500. I have an Excel ledger to separate the various categories of annual and monthly expenses in a HISA and works well.

Keep in mind if you exceed the $6100 or $5490 net that will become taxable interest, if you invest it, along with any other taxable interest.

I now just have to study what Rick is saying. To NOT use TFSA principal or interest. Then like Loonie is saying perhaps take more than $6100 to cover extra funds needed for annual expenses. Somehow that could be taken from laddered GICs and use no more of the interest earned for annual expenses and use principal and or interest for TFSA purchase. (My RRSP GICs as far as laddering are all out of wack as they will all mature 2018 and then will move away from my adviser and self directed fees.

But once again not to put me in a higher tax bracket. I have worked out an Excel program to forecast next years tax rates and our income along with income splitting and then play with RRIF withdrawal amounts and so far it works!!! I remain in the lowest tax bracket:)

July 16, 2017
4:42 pm
Cranston
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I've enjoyed reading your posts, Cranston and Rick, on this subject, but have to admit I can't quite understand all of it. Can you (or anyone else), recommend any reading material that might help me?  

I am driving down our RRSP RRIF funds and converting them to TFSA.

To accomplish perhaps:

Not leaving a huge lump of RRSP RRIF funds that will be heavily taxed if not being able to pass to successor.

And also leaving RRSP RRIF to successor can hurt successor tax wise. Now single and no income splitting etc.

Have TFSA fully funded. Which spouse successor can take over and still be in TFSA. Basically you pass on your allowable TFSA contribution amount to spouse forever.

Stay away from claw backs, be eligible for income based benefits like GST rebate, GIS, BC Pharmacare. Etc etc

Long term tax avoidance and taking advantage of income based programs is what it boils down to I guess.

The theories and ideas presented here may or may not be helpful to every one. And you may very well get ideas you can use or spin off ideas.

That is why I Ike this site so much. Lots of ideas. Lots of good suggestions. But do your due diligence first 🙂

Any questions?

July 16, 2017
4:52 pm
Loonie
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Rick, there is never any tax on TFSA. With the proper beneficiary designation, they transfer intact to spouse. When spouse dies, they become non-registered but there is no tax on interest to date of death. I am not sure, but I don't think there is even probate tax on them. The latter may depend on whether there is a TFSA designated beneficiary..

Cranston, sounds like you are on the right track. I was just trying to flag the fact that people sometimes look on RIFs as strictly a retirement thing, something that needs to be preserved longer than is sometimes wise. It's been marketed that way, but in reality it's only a tax deferral system.

You definitely want to stay within your tax bracket and avoid OAS clawback if possible. Sometimes this leads one to consider Cdn dividend stocks... In this circumstance, stocks might, depending on your perspective, be worth the risk as there is the lower tax rate on the dividends and cap gains, the avoidance of what is effectively a surcharge in OAS clawback, and the avoidance of entering a higher marginal rate - these all add up and might offset the stock market risk, especially considering that the dividends are fairly reliable and will likely exceed the interest on GICs for a while. I haven't done this yet; just thinking about it.

In your 10% at-a-time withdrawal system, be aware of the likelihood of mandatory quarterly payments to CRA. If you owe them more than $3000 on your tax return, then, after a couple of years (I think it's 2, but would have to check), they will require you to pay them their estimated tax quarterly, and you reconcile at the end of the year. If you don't pay up, they fine you. I find this a nuisance and am hoping to avoid it as long as possible, so I actually prefer the 30% holdback as it may "cover" some of the tax owing on my other investment income where there is no holdback. If you take your big lump and pay the 30%, you are less likely to run into this problem of quarterly payments. And if you take your lump towards the end of the year, when you are more certain of how much you need to take out to meet needs for the next year and also to top up tax bracket, your money (should it be owed back to you) is not tied up for as long as if you'd had to pay it starting in March.

Laddering will be part of the solution. You will need to start with an assortment of 1, 2, 3, 4, and 5 yr GICs and renew them all for five years as they mature. In a rising interest environment, this may actually help you.

The problem I'm struggling with right now is the limitations of GICs. They are not flexible. The only opportunity you have to adjust your income is when they mature. I don't like this. What happens if you have some huge medical costs in one year? or get told you only have a year to live, and you want to live it up for that time? You are very stuck. I am just starting to look at other options to avoid some of these problems if possible.

July 16, 2017
5:06 pm
Cranston
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Rick, there is never any tax on TFSA. With the proper beneficiary designation, they transfer intact to spouse. When spouse dies, they become non-registered but there is no tax on interest to date of death. I am not sure, but I don't think there is even probate tax on them. The latter may depend on whether there is a TFSA designated beneficiary..

There are very few FI's that allow both successor and beneficiaries. Thus the need to change all investments to have beneficiaries and cancel out the successor. With no beneficiary I would think TFSA would become cash to an estate and no longer protected thus probate tax would likely be collected.

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