Cashing out RRSP | Page 5 | RRSPs and RRIFs | Discussion forum

Alexandre said

mordko said
example. I agree that the $2M cash guy might lose out by maximizing his benefit. One could instead put $6M into a house and have a mere $1M or even $500K in pocket money

Before you do that, I strongly suggest you run property tax calculator, for city such as Toronto, to see how much more you'll be paying annually in property taxes for $6M house vs. $2M house.
What I found says it is about $30,000 more, annually.

I think if I am facing such tough choice, I'll stay with $2M house, park $4M at 3% to have $120,000 in interest income, save on property taxes what I'll pay on income tax for interest income, and forget about GIS.  

Firstly, I am not planning to claim GIS.

Secondly, we are discussing people who don’t really need income support but structure their finances to use the loophole.

People do live in multi-million properties and pay municipal taxes. While they are at it, there is nothing stopping them from claiming income support. Apparently.

savemoresaveoften said

That's exactly my beef against Canada "income support" program.

This program is, in its essence, Guaranteed Basic Income (GBI) program for seniors.

A person who was born in Canada and lived in Canada all their life, by only fact of reaching 65 is guaranteed by the government to have income of no less than $1,800 monthly. No matter what.

As someone who has been middle class by income practically all my career, upper middle class by income last decade before the retirement, who diligently paid taxes on employment income, I see no problem with GBI. Which was and is funded from my taxes, too, so I do have a say on that subject. Just like you, not denying you your opinion.

That program saves Canada from extreme poverty among seniors and all negatives coming from that. These negatives impact not just low income folks, but society as a whole.

If you disagree with GBI in principle, we are not going to have common ground.

It is unfortunate. But, it is practical.

Administration and gatekeeping costs escalate when one tries to get more strict. Bureaucrats will need to be hired if one wishes to qualify using net worth or family "means" instead of just the applicant's own net income reported on his/her tax return.

One critic of these institutionalized supports pointed out that some of the welfare programs in the US cost close to $1 in administration for each $1 paid to recipients.

Canada used to have "means" qualification for some supports. "Means" has become a dirty word because the process was intrusive. Not only were the applicants resources considered but also the resources of their relatives. Applicants had to justify to a government worker, for example, why one of their children, who happened to be a well paid dentist, wasn't helping out and the welfare program should.

Alexandre said
As someone who has been middle class by income practically all my career, upper middle class by income last decade before the retirement, who diligently paid taxes on employment income, I see no problem with GBI. Which was and is funded from my taxes, too, so I do have a say on that subject. Just like you, not denying you your opinion.

That program saves Canada from extreme poverty among seniors and all negatives coming from that. These negatives impact not just low income folks, but society as a whole.

I disagree with the GBI in principle. If enacted, it would need to consider the entire economic life history of the recipient. Otherwise, it penalizes those who live frugally within their means while rewarding those who spend their money frivolously. A person who scrimps and saves every penny towards home ownership and forsaking annual vacations (or any) abroad ends up paying for those who spent every cent of every paycheque for their 'experiences' and $10/cups of coffee. Those who did not consider their retirement on the first day they entered the workforce deserve to be eating gruel and wear second-hand clothes, even if they are senior citizens.

If a work lifetime is 40 years and the average salary is $50K throughout that period, then $2 million has been earned. How that is spent or mis-spent should be the deciding factor on income support in the latter stages of life.

I don't like global basic income because it seems likely to simply drive up the price of everything, especially housing.

But there are lots of ways to lose one's life savings that don't involve mismanagement - divorce. child support, medical bills (especially in the USA), fraud, robbery, legal defense from lawsuits or prosecution, crippling injury and surely many more.