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The RRIF quandry
December 3, 2023
7:04 am
RetirEd
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I'll turn 71 in 2024 and need to empty my RRSP into.. ??? Should I just withdraw it all and let my means-tested benefits suffer for a year, or dribble it out via an RRIF? (I don't think I'm likely to be unusually long-lived and benefit from annuities, but I could be wrong - and rates are up right now!) I haven't found a good source guidance or staff who really understand the details - like how minimum and/or maximum withdrawals can be tax-advantaged.

Usually, the rule of thumb is to delay all tax liability and benefits-tested income as long as possible. But now things are getting complicated.

Asking at Peoples Trust (who hold the RRSP) revealed neither PT nor PB offer RRIFs - I'd thought only PB didn't until the recent news about the third-party RRIF offering. That feels too new and untested for my liking. The PT phone rep (not a specialist, as he admitted) said I could just take one of their nifty 5.8% 1-year GICs and be assured that they would allow me to open the GIC and with no penalties or lost interest any time in 2024.

That might be the best course - but is there anyone (or any thread) that might help me understand RRIF protocols and the best places to seek them? And who's best to deal with? The sum is under $5K.

That 5.8% rate might change before my GIC rolls over. Does anyone know how long PT will hold a rate? I'm nearly a month from maturity. I don't want to query the CSR directly lest it make me look greedy and affect my treatment. PT's always been good to me, save for peak taxation season phone service.

RetirEd

December 3, 2023
8:15 am
Norman1
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There could be an advantage to transfer the RRSP to a RRIF and withdraw from the RRIF.

RRIF withdrawals qualify towards the $2,000 pension income amount (line 31400). In contrast, RRSP withdrawals (Box 22 of T4RSP slip) don't.

The Navigator: The pension income tax credit from RBC Wealth has more details.

December 3, 2023
8:26 am
AltaRed
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I agree with Norman1 albeit we do not know what RetirEd's taxable income is, whether he is already making use of the 'pension income amount' from a DB pension, and impacts from the Age Amount, OAS clawback (if any), etc.

If he does not have other 'eligible pension income', then it very clearly would make some sense for him to transfer the RRSP to an institution that has RRIFs as soon as is practical, transfer (convert) the RRSP to a RRIF in 2024, and take out $2k per year to get the pension income tax credit.

I would suggest RetirEd model 2 tax returns using 2022 Studio Tax software (free to use) or the taxtips calculator, with and without $2k RRIF (pension) payment to see what impact it makes to the bottom line.

December 3, 2023
8:27 am
Briguy
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Norman1 had a good point. Another point of view- Since it's only 5000.00 I would cash it out to simplify your life, and put it into a TFSA in 2023,or in 2024 if you're already maxed out your TFSA in 2023. This is assuming the 5000.00 wouldn't add enough to your income to result in OAS clawback , ie push your income above $86,912 for 2023 or $90,997 for 2024.

December 3, 2023
8:44 am
AltaRed
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It is a little more complicated than that. There is the Age Amount Tax Credit (and associated claw back) per https://www.taxtips.ca/filing/age-amount-tax-credit.htm that will be affected.

While I agree the $5k is too small to fret much over it and spend too much time dealing with it, I would still first convert it to a RRIF to take advantage of the pension income tax amount for 1 year, or split it over 2 years, to optimize value. The devil is in the details, i.e. model it to some degree.

December 3, 2023
8:48 am
Alexandre
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I have senior relative who is about 10-15 years older than you. He has about $4,000 left in RRIF. He parked RRSP at RRIF Savings account at the age of 71 with one of major banks that offer very low interest. Simply because he does all his banking through that bank.
Every year on his birthday date bank transfers minimum RRIF withdrawal amount to his regular Savings. Every year bank produces tax form.

He doesn't care much, as long as it is worry free (it is). He doesn't even plan to withdraw lump sum at any point. Comparing with his other sources of income that let him live modest but decent life, that amount is not large enough to worry about.

December 3, 2023
9:10 am
Rail Baron
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Achieva has no fees for RRSP or RRIF transfers, and pretty good rates at present. This led me to open an account recently, to set the stage for the RRSP to RRIF consolidation down the road. Their service has been excellent thus far.

I had previously planned to do the same with Hubert, but their value proposition has declined since the merger, so I'm keeping options open.

December 3, 2023
9:26 am
Dean
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RetirEd said

. . .

The sum is under $5K.

. . .  

An amount like that is Not worth fretting over.

Do what's easiest ... and be done with it.

My Two Centavos,

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

December 3, 2023
9:33 am
Briguy
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Rail Baron said
Achieva has no fees for RRSP or RRIF transfers, and pretty good rates at present. This led me to open an account recently, to set the stage for the RRSP to RRIF consolidation down the road. Their service has been excellent thus far.

I had previously planned to do the same with Hubert, but their value proposition has declined since the merger, so I'm keeping options open.  

I agree, I've only had good experiences dealing with Achieva. And their web site is very functional.

December 3, 2023
10:09 am
AltaRed
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IIRC, RetirEd is on the West Coast and wants brick and mortar FIs to deal with. If that is correct, his best bet may be Motive Financial (CWB) where I believe he can have a RRIF Savings account. https://www.highinterestsavings.ca/forum/motive-financial/transferring-rifs-to-motive/

I have not read that thread, but as I understand it, that while CWB branch staff do not have access to Motive Financial accounts, I suspect they can handle the paperwork to get the RRSP savings account there and then morph it into a RRIF savings account, and then draw that down in one lump or two, or let it ride and have Motive simply take out the RRIF annual amount each year.

Added: OTOH, like has already been mentioned, the sum is too small to spend too much time on it. The simplest version is simply to collapse the RRSP in 2024, pay a bit more taxes than necessary and move on.

December 3, 2023
10:57 am
serendipity
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You don’t empty your RRSP. I always wondered what happened at PT when you are about to turn 71.

You only need to transfer them to a RRIF, and you can do that any time, age wise. But become to be forced into the mandatory amount. I was taking money out of RRSP well before 71 but probably less than the mandatory amount.

Estate planning wise it is better that you don’t have too much RRIF or RRSP as if you die before you expect … the full amount is taxable in that year of death. And of course if you have a spouse, make sure there is a successor set up.

“When it comes to the minimum mandatory withdrawal you must start withdrawing money from your Registered Retirement Income Fund (RRIF) in the year after you open it. If you were to convert your Registered Retirement Savings Plan (RRSP) in the year you turn 71, the latest you are allowed to take your first payment is December 31st in the year you turn 72 however, the payment would need to equal the full minimum amount for that applicable year. Generally, you can elect to take the minimum withdrawal amount on a monthly, quarterly, semi-annual, or annual basis provided that your total yearly amount equals the minimum amount for the applicable year.”

PT does offer a RRIF but it is through another FI and there are some associated fees with it. Since there is no fee to transfer out of PT it’s time to shop for another FI. I assume your GICS, if you have any vs just HISA, will mature before your birthday? Or will they collapse them for you?

Personally I would move to RRIF. But beware of who you talk to as RRIF seems to be a big dark hole with some who you may speak to. A RRIF GIC is same as all other BUT you have to take that mandatory amount every year or more if you choose. The mandatory amount has no tax with hold and the extra up to 5000 has a 10% withhold and more than 5000 has a 20% withhold. Quebec has different rules. Know what the withdrawal rules are in your new chosen FI. I mean rules pertaining to what GICS are used for the withdrawal ….. not every FI does it the same way.

I have taken more than $5000 extra from an FI at 10% withhold by doing two withdrawals say at $3000 each. Or if you are uncomfortable with that, use 2 FIs to hold your RRIFs. No matter how you manage it … it’s all taxable. I hold back in a ledger 10%, of the mandatory withdrawals.

I use my RRIF withdrawals to buy our TFSA annual allotment.

Any extra I take, never takes me into the next tax bracket. You can manage, how much more you can take, by plugging in extra withdrawals into your tax software, if you do your own taxes.

My wife has all of her RRIF in Oaken.
I have 2/3 of mine in Oaken and the other 1/3 in Hubert. Both with different rules. And Oaken has no HISA.

So knowing the withdrawal rules I have put a lump amount in and a series of $1000 and $2000 GICS that I can pick on every year for the extra amounts froma Oaken. And I manage Hubert to have extra cash in the HISA account every year. And if not needed, it goes back into a GIC.

One thing that I mis managed was … both my wife and I had RRIF in same FI. That would have meant that if one of us passed the merged amount would have exceeded the $100,000 CDIC coverage. Oaken was good enough to move my funds, before maturity, to the other bank. Ie my registered TFSA and RRIF is in Home Bank and hers is in Home Trust and is much easier to manage, CDIC wise. And TFSA in PT must be trimmed down until we are both around $45,000. And Hubert is no problem as their insurance is unlimited. It’s a comfort level for me to not be over CDIC coverage.

As far as Hubert goes, though, I plan to move all TFSA and RRIF out to CWB. All 2, 3, 4, and 5 year non registered GICS will move to other FIs.

As mentioned about the last dollars in a RRIF … say $15,00 left. I would drain it out at $5000 per year and be done with it in 3 years.

December 5, 2023
8:08 am
RetirEd
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Wow! Thanks for all the info, folks. Lots of reading and thinking to do. I didn't ever think about the Pension Income Amount, or other minimum withdrawal rules, until now. Moving early to a RRIF and then withdrawing from it is a good tip - thanks for that, too. I've read the Navigator article, thanks.

I don't care about taxes due after my death, as there are no heirs to worry about.

I have already drained all my RRSPs over the years so there's little left to worry about there. My main fear is losing means-tested benefits.

I have no private pensions at the moment, am not near any clawback amounts and have kept my TFSA holdings maxed out. That's why my taxable income is so limited.

With rates likely to fall next year, should I take the PT 1-year and wait to next December, or transfer to an RRIF in hopes of locking into a better rate? PT tells me they will willingly allow me to break any GIC when going to an RRIF, and they have no transfer-out fee anyway.

I need to talk to several outfits about this. Any more ideas for who to go to for this? Would avoiding the big banks be a mistake?

I would like:

-At least one branch I can visit to talk near Vancouver.
-The ability to get at least one printed statement a year without fees.
-Minimal or no other fees.
-At least some usable phone contact.
-No apps or online contact needed.

I do deal with Oaken, but only for fixed-term GICs. They only allow one printed statement a year, but that might be enough for such a simple activity.

Since getting advice doesn't mean signing on any dotted line, I am willing to talk to outfits even if they don't meet my other choice needs.

How the heck did I end up getting so old? It always looked so far away!

RetirEd

December 5, 2023
8:36 am
AltaRed
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RetirEd said
With rates likely to fall next year, should I take the PT 1-year and wait to next December, or transfer to an RRIF in hopes of locking into a better rate? PT tells me they will willingly allow me to break any GIC when going to an RRIF, and they have no transfer-out fee anyway.  

I would not do the 1 year and wait until December next year to make the transfer to a RRIF. It will take awhile to transfer the RRSP to another FI and another little while to open a RRIF at that new FI including the completion of beneficiary forms (no successor annuitant in your case due to no spouse). Provide yourself for some time to avoid delays caused due to glitches. I would do it no later than about September or October (spouse and I, and my ex, made our transfers from RRSPs to RRIFs about September in the years we turned 71).

P.S. I doubt there will be better rates a year from now. Central bankers are likely done raising short term rates and may already be into a few declines by this time next year.

December 5, 2023
11:12 am
serendipity
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RetirEd said
Wow! Thanks for all the info, folks. Lots of reading and thinking to do. I didn't ever think about the Pension Income Amount, or other minimum withdrawal rules, until now. Moving early to a RRIF and then withdrawing from it is a good tip - thanks for that, too. I've read the Navigator article, thanks.

1. I don't care about taxes due after my death, as there are no heirs to worry about.

2. I have already drained all my RRSPs over the years so there's little left to worry about there. My main fear is losing means-tested benefits.

I have no private pensions at the moment, am not near any clawback amounts and have kept my TFSA holdings maxed out. That's why my taxable income is so limited.

2. With rates likely to fall next year, should I take the PT 1-year and wait to next December, or transfer to an RRIF in hopes of locking into a better rate? PT tells me they will willingly allow me to break any GIC when going to an RRIF, and they have no transfer-out fee anyway.

3. I need to talk to several outfits about this. Any more ideas for who to go to for this? Would avoiding the big banks be a mistake?

I would like:

4. -At least one branch I can visit to talk near Vancouver.
-The ability to get at least one printed statement a year without fees.
-Minimal or no other fees.
-At least some usable phone contact.
-No apps or online contact needed.

5. I do deal with Oaken, but only for fixed-term GICs. They only allow one printed statement a year, but that might be enough for such a simple activity.

Since getting advice doesn't mean signing on any dotted line, I am willing to talk to outfits even if they don't meet my other choice needs.

How the heck did I end up getting so old? It always looked so far away!  

1. It might be less hassle for the executor though, to have none. But as you have mentioned means tested opportunities… you don’t want to affect them. The juggling act is under your control to best suit you.

2. If you have been taking out RRSP all along, unless RRIF forces you to take more, why not move it well before hand? If you have RRSP in not yet matured GICS and change to RRIF the FI just reclassifies them as RRIF. But is good if PT allows you to break. The principal may change to the cashed out value….but at the end of the term you will not be shorted. And you can have RRIFs at more than one FI. And if you break now….do some 5 years ladders of various amounts and get some good rates. Big banks…..if you have ignored them all along….then I would continue to do so….that’s what I do. The last thing I would want to do, is talk to a hyped up, brainwashed bank “advisor”. (<= meaning brainwashed with their products I have no idea of what competition is offering) **
Would the no tax withhold on mandatory amount on RRIF be a benefit vs taking out of RRSP? I forget the RRSP rules….is the withdrawal taxed on at withdrawal or end of year?

3. Know where you are moving to, first, and plan around their in house withdrawal rules, including taking more from the “picked on” GIC. You manipulate what GICS you want money from by knowing the rules. And like I say….you can have some small ones every year to take more out. And if you don’t take more out reinvest it. If you had a big $ one …. an FI might not let you take more from it. This way Oaken can be manipulated by you and more so if you have RRIF funds in another FI that has an HISA account.

4. Look at Canada Western Bank. I’m in Maple Ridge and closest to me is Surrey, Langley and Coquitlam so I would choose Langley. I have had some good information emailed back and forth. And they have nice options for seniors. Like no interest penalty for interest payments paid out monthly. And no fees for accounts…but transfer fees for registered funds moving out. They are the only ones that have fairly high rates all the time. I deal with Vancity and BMO but once things settle I imagine they will eventually go back to ho hum rates.

Note. I have decided to reduce FIs and get a lot out of Manitoba and have local face to face contact which CWB, PT, PB and Oaken all have. And have been researching and watching for a few years. CWB fits the bill, even though rates are a little lower. But will have to deal wth and advisor like person. <= estate planning along with realigning accounts to not exceed CDIC coverage in the event of death.

** The other day I was at Vancity for some cash Christmas gifts. The teller noticed that I had over $25000 in my account. (Ooops I goofed on that one!!). She suggested some options and I said no thanks a few times including the offer to see an advisor. I mentioned that I had looked to see if they had a variable rate GIC…no….then I asked what their prime rate was….7.x%…. So I mentioned the CWB one would be 7.x% and locked in for 30 days and then could be dissolved or pull funds from it. And did say I realized the rate would change based on any changes on the prime rate. She was surprised! Lol 🙂 Will be reducing that balance as soon as December purchases are all done. 🙂

December 5, 2023
12:53 pm
AltaRed
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The OP is talking about ~$5k in RRSP funds. It is, at best, a 3 year de-funding process taking advantage of the $2k pension income credit available to RRIF withdrawals (not RRSP withdrawals). RetirEd could have been doing that since age 65. My opinion: KISS principle.

December 5, 2023
4:57 pm
Itellyouwutt
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AltaRed said
The OP is talking about ~$5k in RRSP funds. It is, at best, a 3 year de-funding process taking advantage of the $2k pension income credit available to RRIF withdrawals (not RRSP withdrawals). RetirEd could have been doing that since age 65. My opinion: KISS principle.  

Yes. Honestly, even if OP has to eat mandatory RRIF withdrawals, I believe the minimum amount the year you turn 71 is 5%. So if we're talking $4500 then the withdrawal amount is $225.

Hard to imagine that amount will have any meaningful impact on income tax or clawbacks. I suppose there is a slight possibility that an additional $225 (estimated) in income will knock someone out of the running for certain income tested programs. But even if that's going to happen, there are legitimate ways to reduce one's overall income. Heck, it may even make bottom-line sense to stick $ in a conventional savings account vs. a HISA or GIC.

But again, I would be very surprised if that's the case here.

With this being said, I like this discussion overall because it's interesting and informative to learn what people are doing, and approaches and strategies are available. But I've honestly had to "suspend my sense of disbelief" in this thread because OP is talking about an RRSP worth less than $5k. Most people who are in RRSP 'tax hell' have 6 and 7-figures in their late 60s.

December 5, 2023
6:35 pm
serendipity
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CWB doesn’t even want to know about Motive. I have some inside information on that one.

I should have read better.

<$5000, what about ALL in a floating GIC or the highest GIC rate wise, at CWB taking the mandatory till 91 and reevaluate every time the balance of funds are reinvested. End of story.

December 5, 2023
8:29 pm
Itellyouwutt
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serendipity said
CWB doesn’t even want to know about Motive. I have some inside information on that one.  

Yup, me too. Motive is like CWBs unwanted and unloved step-sibling.

December 6, 2023
9:30 am
RetirEd
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AltaRed: I've made RRSP/TFSA transfers in early December since Tangerine took over three weeks when I left them. PT back-dated it for me, but now I have to deal with irritated reps asking why I chose a busy year-end for maturity!

I'll ask about transfer times as I research! I didn't know one could have a RRIF before 70. Is that a boo-boo? The little RRSP was a 5-year GIC earning well during low-rate years, so I'm cool with that.

serindipity: I apologize for not being able to decipher some of your advice. I will definitely visit Canadian Western Bank; they've a branch near me in Vancouver and there's parking. Motive, as a derivative online fintech, is out for me. I might use Oaken but their service and location suck. I've only CIGs with them, needing little interaction.

Fees are more important than rates for that low an amount. It's too small for multiple institutions. For your question, there's witholding tax on RRSP withdrawals (out of registered status), claimed back the following year. The December withdrawal date would be great for this. I've ample non-registered cash to stuff my TFSA for 2024, so I don't need to wait for tax refunds anyway.

I've been thinking of the minimum-withdrawal route so far, unless I see some good arguments against it. Posthumous taxation doesn't worry me.

Itellyouwutt: I just said "under $5K" because I've always been careful about revealing info on this public forum. I do the math every year to see my risk of taxes or losing benefits. I wouldn't lose all of any benefit but two of the amounts would be reduced. Critically, some tax reductions (like medical expenses) only apply to taxes owed, and can't reduce my Total Income for benefit purposes. I'll have to see where the Pension Income deduction fits in.

In the '80s, after becoming more aware of the disadvantages of RRSPs for low tax brackets, I stopped RRSP deposits to wait for better tax reductions. Then TFSAs appeared and I've used those exclusively. In some years, I was able to remove big chunks of RRSP late in the year and claim the witholding in January without incurring taxes. That is how I maximized my entitlements when old enough. We should warn young folk about the hazards of RRSP contributions in early, low-income years!

Thanks to all of you, and glad to let my experiences help the discussion!

Any other institutions I should consider?

RetirEd

December 6, 2023
10:27 am
AltaRed
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RetirEd, the pension income amount of $2k is a non-refundable 15% tax credit, so if you do not pay income tax, it is of no benefit to you.

https://www.taxtips.ca/filing/pension-income-tax-credit.htm

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