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consolidate RRSP's ?
March 7, 2015
8:39 pm
yuj
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Referring to 12~14 above

In my case for my (low) tax bracket, single, report income around 19-22,000.,
a quarter of that is mutual fund capital gains/ dividend/ some interest distributions -all reinvested, so the funds appreciate,
another third or more is capital gains derived from sales of MF's with most of these proceeds put into savings accounts,
and a third is HISA interest that partially pay the bills.
(no workplace pensions, and likely next to nothing for cpp to look forward too)
I'm thinking this may be low enough to consider withdrawal of unlocked LIRA into non registered GIC's
whereby it is more flexible to move around and chase better rates or park temporary at times,
rather than if it remains registered GIC somewhere and no daily hisa's on offer..

No entitlements, use some portion of MF sales proceeds and odd jobs, to pay off the rest of the bills,
so I'm interested to consider the complicated calculations on whether winding down some registered assets to un registered assets should be considered. Opinions, reading references appreciated ...sf-cool

March 7, 2015
10:53 pm
Loonie
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Norman1 said

Loonie said
...

This is true, but I don't think this is relevant to OP. He or she can simply get it unlocked because it is a small amount of money (less than 9G in this case).

I was thinking of before yuj's 55th birthday.

The LIRA's owner has to be at least age 55 before the Ontario rules allow unlocking because the LIRA has less than $21,000. However, it doesn't look like any of the hardship unlocking provisions has any age requirements.

I see. Yes, that could work, but I don't hear that OP needs to do this. I hear that what he/she wants to do is have better access and flexibility in regards to the money in the LIRA, and to move it to RSP/RIF. I haven't heard that he/she can't wait til 55 to convert it.

Once converted, he/she can take their time deciding about withdrawals. If a hardship application is made, it will have to be repeated annually and then wait for a response from gov't, which is awkward, not to mention demeaning, but if you wait and put it into RSP/RIF, then you have control over the whole amount.

I think it would make more sense in this situation to just wait to 55 and do the conversion. I think this really is aptly named "hardship", and that you wouldn't want to do it otherwise.

March 7, 2015
11:50 pm
Loonie
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Thanks for the extra clues, yuj.

I think the best thing to do with the LIRA is to convert it to RSP when you reach 55. Then, whenever it suits your overall plan, you can convert to RIF. As soon as you convert to RIF, you will be subject to minimum annual withdrawals which will be fully taxable until you reach 65 and qualify for the 2000 pension credit. https://www.tdcanadatrust.com/products-services/investing/retirement-income-options/withdrawal-cht.jsp

I am not sure when you will turn 55, but I think you said the LIRA is invested for another 1.5 years. At that point you can decide what is best to do with it until you turn 55. Some financial institutions DO offer same rates for LIRA as for other kinds of investments, and you will have lots of time to decide on that. Take a look at the credit unions.

You have not mentioned TFSAs, so I just wanted to say that you would be wise to fill up your TFSA allotment, if you have not already done so, with some of your non-registered money.

Overall, you very much need a financial plan, one that will carry you through for a long time, subject to revision. My advice would be that you not make any changes until you have one. A plan will dictate where you will draw money from annually and how much and where you money will be invested etc and will take into account the tax consequences etc. I can't think of a clearer case of someone who needs to have this. There are a lot of things to consider, and you don't want to do something that you can't undo later, especially considering that your income is low. You need to be sure all your decisions work to your best possible advantage.

Here are some books that I have found helpful in retirement income planning.
It may be helpful to bear in mind that many if not most scenarios that are presented by "experts" assume the reader is in a significantly higher tax bracket, so you need to adjust what they are saying and see if it applies to your situation. These books are all Canadian, so they are using Canadian regulations, but some of the rules may have changed since publication.
You will find there are some differences of opinion. Some think you should always postpone withdrawals from registered plans and use up your cash first. I am more persuaded that the main goal is to maintain enough income security while minimizing taxes, and that taking money from a registered plan may be useful at any stage if it helps meet these criteria.
These should all be available at or through your public library.

Master your retirement: how to fulfill your dreams with peace of mind. 2nd ed. by Nelson, Doug, 1967-. Winnipeg: Knowledge Bureau, 2011.

New rules of retirement: what your financial advisor isn't telling you. by MacKenzie, Warren, 1946-, and Hawkins, Ken. Toronto: Collins, 2008. (This one may be a bit dated since the debacle of 2008-9 but I think still useful.)

Your retirement income blueprint: a six-step plan to design and build a secure retirement. by Diamond, Daryl, 1953-. Mississauga: Wiley, 2011. (One of the very few that really addresses the question of how to establish a reliable and tax-efficient retirement income. Perhaps read it first.)

Pensionize your nest egg: how to use product allocation to create a guaranteed income for life. by Milevsky, Moshe Arye, 1967-; and Macqueen, Alexandra Carol, 1967-. Toronto: Wiley, 2010. (I have not actually read this one yet but it is highly recommended and I have it on my shelf now, ready to read.)

The Real Retirement: Why You Could Be Better Off Than You Think, and How to Make That Happen. by Fred Vettese and Bill Morneau. John Wiley & Sons, 2012.

March 9, 2015
11:22 am
Doug
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Uhh...haven't read the whole thread, too long to do; however, I saw someone post that Locked-In RRSPs (LIRAs) cannot be converted to a RRIF. While it's true, as someone else pointed out, these can be unlocked & converted early (at age 55) if a "small balance" to a regular RRSP (or other registered account, including an Income Fund), my understanding is that a Locked-In RRSP (really, just another name for a LIRA, which describes the various locked-in plans on a "whole" basis, if you know what I mean), can either be unlocked and converted into a regular RRSP at age 55 if a "small balance" or, converted to a regular RRSP (unlocked) regardless of balance limitations at age 65 or converted to a RRIF at age 71. :)

Show me, with proven links from the CRA or major, IIROC-licensed financial institution websites, that say a Locked-In RRSP and LIRA cannot be converted to a regular RRSP or a RRIF. I can't see the government requiring everyone to purchase a Life Income Fund, which as I understand it is either an annuity or segregated fund account purchased through a life insurance company, from a Locked-In RRSP/LIRA considering an annuity/segregated fund product is, arguably and in my own opinion, the worst financial decision one can make. :)

Cheers,
Doug

P.S. I'm 31 - any idea if I can unlock a Locked-In RRSP now and "comingle" it with my regular RRSP? It's only $17,000, from a previous employer, and would be nice to merge with roughly $28,000 in my regular RRSP. Does any provincial and/or federal pension benefits legislation allow unlocking before age 55 in the case of "small balances"? What is that "small balance threshold"? Please provide references (including links). As I was a federally-regulated employer, the locked-in provisions were under the federal/Canada Pension Benefits Standards Act even though I am a B.C. resident.

March 9, 2015
12:15 pm
Loonie
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Doug, for Ontario,the 'small balance' limit is somewhere around 23,000, as I recall, but you can't do anything before 55 unless you are experiencing serious financial hardship. This isn't your question exactly, and I'm not going to spend time looking something up on the internet which you can just as easily look up yourself since you are quite savvy about financial matters, but it gives you an idea of parameters

The LIRAs were meant to be treated like a pension plan, which is what they were before they became LiRA. The whole point of it being "locked in" is to ensure that you have it as pension income later in life, hence the annuity option, so it would not make sense for regulators to allow earlier transfers to RRSPs which could then be used for other purposes, except in unusual circumstances. You can't get your CPP at 31 either, for the same reason.

LIRA can be converted to RRSP at 55, and to RIF at any time thereafter. Nobody has to wait to 71 to convert to RIF. OP is not interested in an LIF, so does not have to worry about the decision about segregated funds. With such a small amount of money it would not make much sense anyway. They are useful for some people in some circumstances and also have disadvantages, but that is not really relevant to the current topic.

March 9, 2015
1:10 pm
Doug
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Loonie said

Doug, for Ontario,the 'small balance' limit is somewhere around 23,000, as I recall, but you can't do anything before 55 unless you are experiencing serious financial hardship. This isn't your question exactly, and I'm not going to spend time looking something up on the internet which you can just as easily look up yourself since you are quite savvy about financial matters, but it gives you an idea of parameters

The LIRAs were meant to be treated like a pension plan, which is what they were before they became LiRA. The whole point of it being "locked in" is to ensure that you have it as pension income later in life, hence the annuity option, so it would not make sense for regulators to allow earlier transfers to RRSPs which could then be used for other purposes, except in unusual circumstances. You can't get your CPP at 31 either, for the same reason.

LIRA can be converted to RRSP at 55, and to RIF at any time thereafter. Nobody has to wait to 71 to convert to RIF. OP is not interested in an LIF, so does not have to worry about the decision about segregated funds. With such a small amount of money it would not make much sense anyway. They are useful for some people in some circumstances and also have disadvantages, but that is not really relevant to the current topic.

Thanks for the clarification on the "small balance" limit in Ontario. I wouldn't expect anyone to look-up the rules and provisions for each province's pension benefits legislation but since mine was under the federal statute, thought there might be a federal pensioner or plan contributor out there that knew.

I was mainly wanting to correct Norman1's earlier reply that said to the OP that a LIRA cannot be converted to a RRIF. It sounds like you, and the CRA, has validated. In or after age 71, a LIRA can be transferred to either a RRIF or LIF, not just a LIF.

So, I wasn't really wondering if a LIRA could be converted to a regular RRSP earlier than age 65. I assume it can be converted to a regular RRIF at age 65 since one would be eligible to begin taking a full pension at that time and it wouldn't make sense for regulators to require someone to hold a LIF and a RRIF if managing a single RRIF or a single LIF makes the most sense to that individual. That's what I was getting at.

Cheers,
Doug

March 10, 2015
6:13 pm
Norman1
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yuj said
...
In my case for my (low) tax bracket, single, report income around 19-22,000.,

...

Under Ontario hardship provision for low income, if you'll have at most $22,000 of income in the following 12 months, you'll have the ability able to unlock and withdraw at least

$26,800.00 - ¾ x $22,000 = $10,300

of your now-$9,900 LIRA in 1½ years when the market-linked GIC matures.

The question then becomes which option is better?

  1. In 1½ years, unlock and do a taxable withdrawal under Ontario low-income provision or
  2. Wait until 55. Unlock and transfer tax-free to regular RRSP under Ontario small-account provision.

I think the best choice will highly depend on one's circumstances. Loonie has suggested some books to help create a financial plan with which one can answer that question.

March 10, 2015
6:44 pm
Norman1
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Doug said

...
I was mainly wanting to correct Norman1's earlier reply that said to the OP that a LIRA cannot be converted to a RRIF. It sounds like you, and the CRA, has validated. In or after age 71, a LIRA can be transferred to either a RRIF or LIF, not just a LIF.
...

What was established is that there are certain unlocking provisions, in certain pension legislation, that will allow money in a LIRA to be unlocked and either withdrawn or transferred to a regular RRSP or regular RRIF.

Otherwise, the LIRA cannot be unlocked, at any age, and has to be eventually transferred to RRIF that is also locked-in under the same pension legislation that the LIRA is administered under. RRIF accounts (that are subject to locking-in provisions) are known as

  1. Life Income Fund (LIF)
  2. Locked-In Retirement Income Fund (LRIF)
  3. Prescribed Registered Retirement Income Fund (Prescribed RRIF)
  4. Federal Restricted Life Income Fund (Restricted LIF)

CIBC Wood Gundy has this page Registered Plans (Locked-in) that provides some details. According to TD Canada Trust: TD Retirement Income Options - What does TD Offer?, only the Newfoundland LIF must become a life annuity and only by age 80.

That CRA link is about pension plan lump sum payments. Whether or not one can receive a lump sum payment from one's pension plan depends on the governing pension legislation. If one has to transfer the commuted value to a LIRA or locked-in RRSP, then I don't think one will be able to receive any lump-sum payment at all.

August 4, 2022
6:11 am
semi-retired
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My wife has both a regular RRSP account as well as a Spousal RRSP plan set up with BMO Investorline.What would the pros & cons be if she consolidated both into one account?RIF transfer is 3 years in the future.She also has RRSP GIC's at several other FI's & we would like to consolidate everything in one place.

August 4, 2022
12:13 pm
Loonie
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That's a complicated question.
Does your wife intend to keep these funds in GICs or does she want other kinds of investments?
How important would it be to get best possible rates for GICs?
Approx total value may also be a factor.

I don't even know if it's possible to mix Spousal and non-spousal RSPs/RIFs but perhaps you have looked into that.

As a general rule, I would say simplification is best as we age into the sunset, but not always applicable in particular circumstances.

If it is your goal to keep some of this money invested in non-GICs and you don't require maximum GIC rates, you might do well to l keep it all at Investorline, up to CIPF limits if you are happy with their service.

If she should choose to withdraw more than minimum from RIF, she may face withdrawal fees at some FIs. You'd need to check on those individually.

For the record, we have closed down several of ours, but we are aggressively reducing our RIFs for tax efficiency.

August 4, 2022
1:13 pm
Bill
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I believe one can combine one's own plus a spousal rrsp into one, ask your financial institution to do it. But I also believe the new combined plan is now viewed as a spousal rrsp, with any attendant special rules such as attribution of income to spouse if spouse has made recent contributions, and so on. There's likely lots of info online re all the implications, check it out first.

August 4, 2022
1:38 pm
Norman1
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I found previously that Income Tax Act subsection 146(16) allows an RRSP to be transferred to another RRSP with the same annuitant.

August 4, 2022
2:02 pm
phrank
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Norman1 said
I found previously that Income Tax Act subsection 146(16) allows an RRSP to be transferred to another RRSP with the same annuitant.  

That's great info, because I recently asked Hubert to do this and transfer a spousal RRSP which hadn't had contributions for enough time to be considered solely the annuitants RRSP, into their regular RRSP and they wouldn't do it.

August 4, 2022
2:11 pm
Norman1
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Doing so would require transforming the regular RRSP to a spousal RRSP after it receives the contents of a spousal RRSP. Hubert's banking system may not be able to handle that.

Hubert may be able to handle a transfer of the regular RRSP to the spousal RRSP with the same annuitant.

The two-year requirement only affects taxation of any withdrawals. By definition in Income Tax Act 146(1), a spousal RRSP remains a spousal RRSP indefinitely.

August 4, 2022
2:18 pm
Bill
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And likely it's the annuitant who has to give the instruction to transfer their rrsp into the spousal one.

August 4, 2022
2:35 pm
phrank
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Norman1 said
Doing so would require transforming the regular RRSP to a spousal RRSP after it receives the contents of a spousal RRSP. Hubert's banking system may not be able to handle that.

Hubert may be able to handle a transfer of the regular RRSP to the spousal RRSP with the same annuitant.

The two-year requirement only affects taxation of any withdrawals. By definition in Income Tax Act 146(1), a spousal RRSP remains a spousal RRSP indefinitely.  

Right, I think their system can't handle it. I've had issues in the past with credit unions and LIRAs with restrictive programs which resulted in having to move the LIRA to another institution so I could manage it the way I wanted to.

In this case I wanted to move the spousal RRSP to their regular RRSP so that new contributions to the spousal RRSP in the future would not reset the clock for the funds which currently are no longer subject to the taxation you describe. They said it couldn't be done, but I may have to re-visit this with them or open a spousal RRSP elsewhere to avoid that potential taxation issue.

August 4, 2022
3:23 pm
Loonie
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See https://www.taxtips.ca/rrsp/combine-spousal-rrsp-with-non-spousal-rrsp.htm#:~:text=The%20Income%20Tax%20Act%20allows,make%20contributions%20to%20this%20account.

This site is normally reliable.

The financial institution you are dealing with is likely to be informed on this subject as it is probably something their customers frequently want to do and which they would want to facilitate as it will likely bring in more money to the FI.

Alas, I have no personal experience with spousals.

August 4, 2022
4:22 pm
Norman1
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phrank said

In this case I wanted to move the spousal RRSP to their regular RRSP so that new contributions to the spousal RRSP in the future would not reset the clock for the funds which currently are no longer subject to the taxation you describe. They said it couldn't be done, but I may have to re-visit this with them or open a spousal RRSP elsewhere to avoid that potential taxation issue.

The spousal RRSP contribution attribution cannot be avoided like that.

Attribution is based on the total withdrawals from the spousal RRSP's and the total contributions from spouse to the spousal RRSP's. That's the way Income Tax Act reads and Form T2205 (Amounts from a Spousal or Common-law Partner RRSP, RRIF or SPP to Include in Income) calculates.

Contributing $5,000 this year to any of the spouse's spousal RRSP's can trigger attribution of a $5,000 withdrawal from any of the spouse's spousal RRSP's and not only attribution of withdrawals from the spousal RRSP that received the recent contribution.

August 4, 2022
8:00 pm
phrank
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Thank you both for the help in better understanding this. Hubert is usually good, but in this instance they wouldn't explain why this couldn't be done and I was feeling more confused than before I asked if they could do that for me. I also generally don't trust people who can't explain their answers on matters like this because like I said earlier, I was dealing with an institution a few years back who said we couldn't choose how to invest our own LIRA even though the documentation for the LIRA said we could. In this case I hadn't taken the time to research this aspect of a spousal RRSP and was just spouting off out of frustration, so thank you for your help and the references so I now fully understand how it works. It made logical sense to me that after the period of time passed to avoid taxes going back to the contributor, because I didn't realize that only referred to withdrawals and that the funds will always be considered a spousal rrsp.

August 4, 2022
8:39 pm
Norman1
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The Navigator: Spousal RRSP and RRIF from RBC Wealth is a good writeup about the planning opportunities and pitfalls.

It is a complex area of income tax law. Lots of articles about the spousal RRSP contribution attribution don't explain the multiple spousal RRSP situation well.

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