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Converting RRSP to RRIF
January 29, 2019
6:46 pm
Norman1
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Jim Sherat said

Thanks for your comments, links, and clarifications Loonie, Norman, Londonguy.
Clearly, I have some homework, and a bit of "light" reading to do. 😉

The good news is that I'm now aware that what I assumed would be a seamless process to convert my RSP > RIF, may if fact, be more complex, and possibly A LOT more complex? Better to be starting the journey in Jan. than in Dec.

As for exiting TDDI for another FI, I'm definitely thinking about it. All but one of my non-redeemable GICs, will mature by late Nov., so an option will be to park all of it into the TDB8150 (Manulife) high Interest fund, currently at 1.6%, whilst I research what else is out there.

I'll probably have just enough time before year-end to execute a transfer to another FI with better HISA and GIC rates than I can get at TDDI, then convert it to a RIF.

I would plan to leave enough cash behind to cover the min [4.x%] withdrawal of my remaining GIC, and of course do the RSP > RIF conversion, with TDDI.
When that one has matured, later in 2020, I'd then be in a position to transfer the final portion of my (then) TDDI RIF. Sound ok ?

As long as the resulting RRIF can provide the required minimum withdrawals, in cash or in kind, it will be fine.

As well, one can directly transfer assets from an RRSP to a new RRIF for the same annuitant, without opening an RRSP at the new financial institution first. That is the second option in Part C of the T2033 direct transfer form.

January 29, 2019
7:29 pm
Jim Sherat
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Thanks, Norman .... good info to have. The saga begins.

January 29, 2019
9:03 pm
Loonie
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You are indeed correct to think about starting this process early in the year. You can read some of my earlier posts on the subject.

Based on my varied experiences, I would not initiate a transfer in December and expect it would necessarily be completed by year end. On one occasion, I tried to simply cash out an LIRA in December, and even that proved impossible. I had to wait til the following year. An RSP took a few weeks to close. And two RIFs which I tried to close proved not to actually be closed. One FI came close to refusing to switch my RSP to RIF in May of the year I turned 71. So, I have become quite skeptical about the ease with which these transitions happen. Some have been perfectly fine, but you just don't know what will happen until you do it.

My main piece of advice would be to get the RSP-RIF conversion done early in the year. There is no advantage really in postponing this. It will ease your mind. And you never know, if you should have a health crisis or whatever, it's best to have this behind you as there is a deadline.

Some FIs will apparently convert for you automatically at year end. I had an RSP at Hubert which was empty (I had never used it). At year end, it morphed into an RIF automatically. However, you shouldn't rely on this, for at least 3 reasons. First, you just don't want to trust that it will happen. Second, you need to fill out new beneficiary when you convert. And third, you want to choose the date when the mandatory withdrawals will occur. Further, if you are the older spouse, you will likely want to choose your spouse's age to determine the rate of mandatory withdrawal. All of these things require your personal intervention. Many FIs don't ask you about the spouse thing, and some (to my surprise) seem not to know about it. You can't change it afterwards, so make sure you get it right in the first place.

Good luck!

January 30, 2019
7:29 pm
Norman1
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Loonie said

… Further, if you are the older spouse, you will likely want to choose your spouse's age to determine the rate of mandatory withdrawal. All of these things require your personal intervention. Many FIs don't ask you about the spouse thing, and some (to my surprise) seem not to know about it. You can't change it afterwards, so make sure you get it right in the first place.

The election to use the spouse's age can be made anytime before the first payment from the given RRIF, according to the definition of "minimum amount" in Income Tax Act 146.3 (1).

Once the first payment is made from the RRIF, all is lost, but only for that RRIF. One can do a direct transfer of the funds out of that RRIF to another RRIF and make the election on the new RRIF before the first payment from the new RRIF. sf-laugh

I found this is in RRIF Minimum Withdrawals from the Jordan Team library at RBC Dominion Securities:

Your RRIF minimum amount is calculated at January 1 of each year based on the fair market value of your RRIF at December 31 of the previous year. To determine the required minimum withdrawal, a percentage factor corresponding to your age at the beginning of the year is applied to the value of your RRIF assets at December 31 of the previous year. When the RRIF is established, you also have the option to base the minimum withdrawals on your spouse or common-law partner’s age. Once you make this election, you cannot change it even if your spouse or common law partner dies. However, you can establish a new RRIF, transfer funds from the old plan and make a new election for this new RRIF.

Could also be handy after changing to a younger spouse! sf-surprised

January 31, 2019
8:25 am
Loonie
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Ha-ha!
I actually figured a while ago while thinking about this that you could probably keep an RSP or RIF going almost indefinitely if each widowed planholder remarried. and the new spouse added a little leavening to the mix. It's sort of like grafting trees or taking slips off a plant and rooting them... or something... the gift that keeps on giving. CRA may never get the residue!sf-laugh

Actually, I think the big banks are better in handling RIFs - generally. They seem more used to the routine. I've gotten some strange responses at some of the smaller institutions. But I'm sure you'll agree that it's best to get it right in the first place.
And the thing is, if you aren't in control of the process of conversion, you don't control what the date is for the automatic withdrawal. It could be January 2, in which case you have no opportunity to update the file according to your wishes. I found it quite scary when Tangerine refused to let me convert when I wanted to do so. I was never quite sure they had followed my instructions. I just cashed it all in - or at least I tried to. Despite assurances that the interest was calculated to date when I told them to close it down, there is still a small balance that I still have to deal with. Grrr.
Finally, however (touch wood), the RIF I had at TD, with six cents in it, seems to have disappeared - at least i've not gotten a statement this time around.sf-smile

February 2, 2019
1:03 pm
Norman1
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Yes, it's better to get the basis for minimum withdrawals on RRIF correct the first time, without having to transfer to another RRIF to change it.

Not sure if I need the RRSP issuer's permission to "convert" it to a RRIF. The Income Tax Act actually doesn't recognize conversions. It is an RRSP-to-RRIF direct transfer.

I could just open a new RRIF and initiate a T2033 direct transfer of the property from the RRSP to the new RRIF. Describe the RRSP in Part A. Pick the second Part C option "Transfer the RRSP, RRIF, SPP or PRPP property described in Part B to my RRIF."

February 2, 2019
3:55 pm
Loonie
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I suppose you could try that.
But if you were doing it within the same FI, and the FI were Tangerine, I think they would be scratching their heads and might even ignore you. They understand transfer forms to be to another FI. It was they who initially refused to convert mine on my request. They said they'd do it at the end of the year, but I wanted it done during the year so that it would be eligible for pension splitting and pension tax credit. They were so uninformed that they didn't even understand these issues - not that the reason should have mattered. I finally got my way; and then I cashed it out in December - all except for the $7.14 interest which popped up at the end despite assurances that interest to date was included in the withdrawal. Not a big deal, but a nuisance. - another line
item on my income for another year.

I'm so glad to be done with these conversions!
Everything that remains in RIFs will be moved to Accelerate or Achieva starting in June, and I intend to leave it there until it's gone. This should make it easier for my POA, as they won't have to do anything with it - I hope.

February 5, 2019
8:25 am
Norman1
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Loonie said
I suppose you could try that.
But if you were doing it within the same FI, and the FI were Tangerine, I think they would be scratching their heads and might even ignore you. They understand transfer forms to be to another FI. …

An RRSP-to-RRIF transfer is a legitimate transfer. Tangerine may have a specific form for an internal RRSP-to-RRIF transfer.

We found out earlier the hard way that TD does. sf-laugh

February 5, 2019
7:17 pm
Loonie
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Tangerine didn't provide any kind of form when I was dealing with them, and that's part of why it was scary.

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