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RRIF rules at Oaken
November 13, 2021
6:15 pm
Typhoon
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I have RSP GIC's in both Home Trust and Home Bank. In about a year I will have to convert them to a RRIF. I wanted to leave them with Oaken, but am finding their RRIF rules a little confusing, and am hoping someone can explain them to me.
I have 13 RSP GICs of varying amounts, all maturing at different times. I spoke to an Oaken rep who told me that I would be able to roll them over to a RIF at the same interest rate and maturity dates as at the time of the rollover. She further explained that they would deduct the minimum required once a year (if that is the schedule I request) from each GIC. I assumed that I could just renew my GIC's as they matured, and continue with the payout scheme outlined above. However, since then I've learned that I can only buy$10,000 GIC's in an Oaken RIF. So, as some of my GIC's are for less than that amount, I'm wondering what happens when they mature if they've been rolled into a RIF? Also, as even the GIC's that are more than $10,000 will inevitably end up being less than that as the minimum withdrawals take their toll, what happens when THEY come up for renewal? I really am very confused about how this works. Hope someone can explain it to me.

November 13, 2021
10:04 pm
Loonie
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It's a good question, and I don't think anyone has asked it here before.

I can only make an educated guess, having dealt with Oaken for several years and discussed RIF withdrawals with them.

My guess would be that once a matured RIF GIC drops below 10,000, that they might advise you to cash it in as that would be easiest for them. However, I don't think they can force you to do that. Theoretically, they could tell you to amalgamate it with another one, but the problem there is that they have no provision for waiting until the next one comes due as they refuse to offer an RIF savings account. Your third option, which they won't advise, is to move it elsewhere, but you might run into minimums there too.

It may be that in fact they are stuck with you and your small GICs! I think you should ask them the question directly, via chat or email, so that you have a record of what they said for future reference. If I remember correctly, their default is to auto-renew GICs if you have not elected otherwise. When a GIC comes due, they send out a form outlining the options, but if you don't fill it out they will do whatever you indicated when you first took it out.

If you envision wanting to renew the GICs, even if below 10k, then I would advise specifying that when you take out the GIC in the first place. Failing that, do it later while the GIC is in progress. I think they will honour that. What else are they going to do, really? They can't cash it without your consent, nor can they move it to another financial institution, and they refuse to offer a savings RIF account.

Oaken has a peculiar method too of making the mandatory withdrawals. First, they skim off all the accumulated interest in ALL your RIF GICs. If that doesn't provide enough to meet the minimum withdrawal, then they deduct from your capital. This system gets really annoying, as you will see. Let's say you have 2 RIF GICs, one pays 2% and the other pays 3%. You, being an intelligent person, would like to be able to direct them to take all of the withdrawal from the one that pays 2%, but they will not follow your instructions; they will take it from both.

Here is what I was told by Oaken, in writing, when I asked about mandatory withdrawals in 2016. I don't think the rules have changed.

"1) Interest- it will take whatever interest that has accrued on all investment held in the plan and if that does not satisfy the minimum then
2) Principal- it will take funds from the principal from the investment with
o lowest interest rate
o If the interest rate is the same between 2 or more investments then it will take the funds from the one that has the earlier issue date
o If the interest rate is the same between 2 or more investments and they have the same issue date, then funds will be taken from the lowest active account number."

If you want to minimize withdrawals, and you are married or similar, you can select the age of the younger spouse on which to set the mandatory withdrawal rate. You still have to convert at 71, but you can choose the rating that applies to the younger spouse. I have found that not all financial institutions point this out, so you need to ask for it sometimes.

November 14, 2021
7:27 am
COIN
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"I have 13 RSP GICs of varying amounts"

Don't know about Oaken but they might ask you to sign RRIF conversion documents and have each one notarized. Depending on the notary, he/she might charge a fee for each GIC.

November 14, 2021
8:33 am
Loonie
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In Ontario at least, Oaken does not require any notarized docuements, nor does any other FI I have dealt with in Ontario, nor does Hubert in MB.

November 14, 2021
9:15 am
Norman1
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Typhoon said

…. I assumed that I could just renew my GIC's as they matured, and continue with the payout scheme outlined above. However, since then I've learned that I can only buy$10,000 GIC's in an Oaken RIF. So, as some of my GIC's are for less than that amount, I'm wondering what happens when they mature if they've been rolled into a RIF? Also, as even the GIC's that are more than $10,000 will inevitably end up being less than that as the minimum withdrawals take their toll, what happens when THEY come up for renewal?…

Contact Oaken and ask if their $10,000 minimum for a GIC in their RRIF also applies to

  1. maturing GIC's, already in an Oaken RRIF, being reinvested and
  2. GIC's, already in an Oaken RRSP, that are being transferred to an Oaken RRIF.

It is possible the $10,000 minimum does not apply in those cases.

It would be odd if the minimum did apply. As you mentioned, eventually, each GIC in the RRIF could end up under $10,000 because of RRIF withdrawals over time.

November 14, 2021
9:45 am
Dean
Valhalla Mountains, British Columbia
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Norman1 said

Contact Oaken . . .
  

Ditto ⬆ ... my very first thought.

    Dean

sf-cool " Live Long And Prosper " sf-cool

November 14, 2021
9:47 am
COIN
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Loonie said
In Ontario at least, Oaken does not require any notarized docuements, nor does any other FI I have dealt with in Ontario, nor does Hubert in MB.  

Thanks for the correction. Maybe I'm confusing RRIF with LIF. (If so, my apologies if I inadvertently misled anyone.) All these tax rules are a bit confusing.

P.S. I tried unsuccessfully to delete my original post.

November 14, 2021
1:31 pm
Alexandra
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I just looked at my December 2020 Statement from Oaken. I had two RIF gic's with them. Just as it says in one of the posts above, this is what they did:

They took all interest earned for the year in both GIC's and applied it to my mandatory amount to be paid. Because the total interest was less than the mandatory minimum payment, they then took the remainder from the gic that was maturing the earliest. This happened to be the one with the lowest interest rate.

I would think that they mean the lowest RIF amount that you can originally purchase or transfer to them has a minimum of $10K and not that you have to "do away" with one that after mandatory deductions falls below that figure.

November 15, 2021
10:15 am
Typhoon
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I’m trying to figure out whether or not Oaken’s method of deducting the minimum results in less money in my RIF over the long term. Because it seems to me that taking all the interest from EACH GIC every year negates the benefits of compound interest, reducing it to the equivalent of having simple interest paid out every year. Am I wrong about that?

I already have a small RIF at TD, with the mandatory withdrawal scheduled for every December. The way TD does it, they take the funds from the GIC that pays the highest interest, leaving the rest to progress as normal. And, if I cash in enough during the year to cover the minimum withdrawal amount, I can phone TD and tell them not to take the automatic withdrawal in December. That is not possible at Oaken, they still withdraw the minimum amount from the remaining GIC’s (I called and asked them that question).

Because TD pays minimal interest they are still not as good of an option as Oaken, BUT if some of the online banks handle the withdrawals in a way similar to TD, would that result in more money in my RIF over time, (because of the compounding interest in my remaining GICs) or am I mistaken in thinking that?

November 15, 2021
12:02 pm
Loonie
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Typhoon said
I’m trying to figure out whether or not Oaken’s method of deducting the minimum results in less money in my RIF over the long term. Because it seems to me that taking all the interest from EACH GIC every year negates the benefits of compound interest, reducing it to the equivalent of having simple interest paid out every year. Am I wrong about that?

I already have a small RIF at TD, with the mandatory withdrawal scheduled for every December. The way TD does it, they take the funds from the GIC that pays the highest interest, leaving the rest to progress as normal. And, if I cash in enough during the year to cover the minimum withdrawal amount, I can phone TD and tell them not to take the automatic withdrawal in December. That is not possible at Oaken, they still withdraw the minimum amount from the remaining GIC’s (I called and asked them that question).

Because TD pays minimal interest they are still not as good of an option as Oaken, BUT if some of the online banks handle the withdrawals in a way similar to TD, would that result in more money in my RIF over time, (because of the compounding interest in my remaining GICs) or am I mistaken in thinking that?  

The ideal solution would be if they took the mandatory withdrawal from the GIC that pays the lowest rate, and I don't think it really matters if it's from interest or principal in that case. There is a small risk that this would unbalance a GIC ladder, but, personally, I would not be concerned about that. it sounds like TD is looking at it from the point of view of "taking profits", which is more suited to a brokerage account than to GICs because you can hope that the investments which didn't produce such good returns will do so in future; this is not true for GICs..

I think one has to recognize that a RIF is a diminishing asset and that compounding benefits are going to be limited by this. It's difficult to be precise in answering your quesiton. One would have to do the math in your particular case.

For comparison, this is what I was told at Hubert and Accelerate:
HUBERT:
The RRIF annual payment is removed from the RRIF product receiving the lowest interest. If you have a balance in a RRIF savings account it will be deducted the entire payment, if only partial amount in the RRIF savings it will remove partial and the remaining payment amount from the lowest paying RRIF term deposit.
ACCELERATE:
If you hold multiple RRIF GIC's with Accelerate the mandatory required payment is taken from the lowest interest bearing RRIF GIC. If you hold RRIF GIC'S and a RRIF variable the payment is still taken from the lowest interest bearing GIC unless specified to be taken from the RRIF variable.

I believe that in a brokerage account, you may specify which asset(s) you want the mandaotry withdrawl to come from. It would be in your interests to get that into cash beforehand so that you can pick a good time.

All in all, i don't find that FIs seem to be very fond of RIFs. Some don't even offer them although they offer RSPs. Another way they express their unhappiness with RIFs is by having idiosyncratic rules about withdrawals.

I have been systematically getting rid of my RSP/RIFs for several years and don't have too much left (although spouse has more and we are now working on a strategy for them). When my final Oaken RIF matured this year, I transferred it to Hubert. Hubert doesn't have the best rates right now but it is easiest for me to deal with and I am down to five figures anyway, which will all be gone in a few years. Oaken's refusal to offer registered savings accounts was the last straw, but I also disliked their withdrawal rules for the reasons you have pointed out. I odn't think one should have to be doing the kinds of awkward calculatios you are worried about.

November 16, 2021
12:50 pm
Norman1
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I would guess that Oaken's method would result in more money in the RIF than TD's method.

Oaken's method of taking interest from all the GIC's first and then, if needed, some principal from the lowest yielding GIC's would maintain keep or raise the overall yield of the RIF going forward.

In contrast, TD's method of taking interest and principal from the highest yielding GIC's would lower the overall yield of the RIF going forward.

November 16, 2021
5:09 pm
Typhoon
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Well I spoke to Oaken and got some answers.

Even though the website states that RRIF GICs must be for a minimum of $10,000, that amount only applies to NEW accounts. If you already have an RSP account with them your RSP GICs can be rolled over into a RRIF even if they are less than $10,000.

Also,Oaken RRIF GICs can be renewed within the GIC even if they are less than $10,000

If, in addition to the mandatory minimum, you decide to cash a RRIF GIC when it matures, you can arrange to have the proceeds paid into either your regular Oaken Savings account, or a linked external account, or mailed directly to you by cheque.

Arrangements to cash a maturing GIC must be done in writing (signed letter) but you can attach the letter to an email and send it that way.

I think that answers most of the questions discussed above.

November 16, 2021
5:50 pm
Loonie
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Those answers ring true for me, i.e. they make sense and are therefore likely correct..

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