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Best age to start a RRIF
January 29, 2020
5:57 pm
Briguy
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HI everyone:
I was just wondering why more people don't take some of their RRSP money and convert into a RRIF and withdraw at a rate of 2000.00 a year to get the pension income credit, at a young age.

eg. 2 scenarios
Scenario 1: Mr. X is 40 years old, and plans to retire at age 65 with his defined benefit pension plan from his company.
He transfers 50,000 from a RRSP into a RRIF at age 40, and instructs bank to withdraw 2000 a year for the next 25 years

Scenario 2: Mr. Y is 40 years old, and plans to retire at age 65, but has no private or foreign pension.
He transfers 80,000 from a RRSP into a RRIF at age 40 , and instructs bank to withdraw 2000 a year for the next 40 years ( assuming he lives that long ).

I don't know of anyone doing this, including myself. Any reason why we're not?

January 29, 2020
6:16 pm
2of3aintbad
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Except for special circumstances, you need to be 65 or older to get the $2000 pension credit. Otherwise, since it is a credit, not a deduction, the benefit of the strategy depends on the marginal rate at age 40, etc.

January 29, 2020
6:20 pm
Bill
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Google says before age 65 only certain annuity payments income (i.e. not just withdrawals, as in your examples) are eligible for the credit:
1.Life annuity payments from a superannuation or pension plan
2.RRIF payments received as a result of the death of a spouse or common-law partner
3.Annuity payments received from an RRSP or DPSP as a result of the death of a spouse or common-law partner
4.Income from certain foreign pensions
5.Income as a result of an election to split pension income.

January 29, 2020
6:23 pm
Briguy
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2of3aintbad said
Except for special circumstances, you need to be 65 or older to get the $2000 pension credit. Otherwise, since it is a credit, not a deduction, the benefit of the strategy depends on the marginal rate at age 40, etc.  

I forgot there's a minimum age, guess it all starts at 65...

January 29, 2020
6:39 pm
Briguy
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Bill said
Google says before age 65 only certain annuity payments income (i.e. not just withdrawals, as in your examples) are eligible for the credit:
1.Life annuity payments from a superannuation or pension plan
2.RRIF payments received as a result of the death of a spouse or common-law partner
3.Annuity payments received from an RRSP or DPSP as a result of the death of a spouse or common-law partner
4.Income from certain foreign pensions
5.Income as a result of an election to split pension income.  

I do have Saskatchewan Pension Plan which qualifies for pension income tax credit, and I'm 58, I should convert to an annuity ! I wish the interest rates weren't so low now.

I guess in a way anyone without a work pension plan would probably benefit from contributing to SPP if they want to start the pension income tax credit at 55. However, you never know when tax rules will change

January 29, 2020
9:07 pm
GICinvestor
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I am just about to be 71. But the right age is based on your needs or plan. I began a controlled withdrawal system years ago.
o I do not need my RRSP savings as of yet
o My plan is to move RRSP to RRIF to TFSA for both wife and I
o I still remain in the lowest tax bracket
o I only pay 10% tax withhold by doing multiple withdrawals
o It will lower my annual income vs if I had waited to withdraw at 71
o Both of us are fully funded TFSA wise.

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