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How much rrsp should i cash in?
October 27, 2014
4:22 pm
agr
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If i retire at 55 I will receive a company pension of $30,000 before tax. I live in N.S.
If i can comfortably live on $ 30,000 after tax .How much rrsp Should I withdraw to achieve this?

October 27, 2014
4:33 pm
kanaka
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agr said

If i retire at 55 I will receive a company pension of $30,000 before tax. I live in N.S.
If i can comfortably live on $ 30,000 after tax .How much rrsp Should I withdraw to achieve this?

Not clear. You will receive a company pension of 30,000 per year OR YOU want to draw enough RRSP to clear 30000 per year? Do you have any other taxable benefits from your company? What are your plans for applying for CPP, now or later? FYI RRSP income cannot be split with a spouse...but RRIF can at age 65.

October 27, 2014
4:40 pm
agr
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The pension will be $30,000 before tax. I have RRSP's as well. So to get $30,000 after tax how much RRSP should I withdraw to achieve this?

October 27, 2014
4:40 pm
kanaka
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Oops.... Don't bother about CPP as earliest is 60. And does your company bridge your CPP?

October 27, 2014
4:49 pm
agr
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Yes I know about the CPP and when I can collect it.Just looking to know how much i can withdraw up until I am 60 to supplement the $ 30,000 before tax pension to make $30,000 after tax.

October 27, 2014
4:53 pm
kanaka
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Assuming you have no other income or interest payments etc figure out your income tax percentage. So for example:

Your 30000
At 20% (15% federal and 5% provincial)
You would clear 24000

You need another 6000 clear from your RRSP
So you need to withdraw 7500 from your RRSP (7500 minus another 20% equals 1500 tax withhold) to clear 6000

I would also figure out what is the maximum withdrawal do from your RRSP can be to stay in the lowest tax bracket, take the 20% tax withhold and put that surplus amount after your needed 6000 into a TFSA but not to exceed the $5500 per year or hopefully $10000 per year next year.

Peter

October 27, 2014
4:59 pm
agr
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Thanks that is what I was looking for.

October 27, 2014
5:24 pm
kanaka
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Please remember you need to verify your provincial and federal percentages for NS. Also may not need that much as you also have some tax free credits that can differ from province to province. If you can have access to a Turbo tax or another free income tax programs...do a test based on income tax return for 2013.

***The numbers I gave you are on the high side.*** For income tax.

You may have tax free credits for basic for:
Basic 10000 to 11000
Age 4400
Pension 1000

Like I say....do a mock income tax, or maybe see an accountant.

October 27, 2014
8:21 pm
Loonie
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I agree with kanaka's last post. There is no quick-and-easy answer to this. You have to go through your income tax return and run some numbers to find out the answer for your particular circumstance. There are just too many factors which can influence the result. You also haven't told us if you are married, and what is the situation of your spouse, if any. This too makes a difference. It will take you some time, but this is the only alternative other than consulting a professional.
(Pension tax credit should be 2000, unless things are somehow different in NS. This credit amounts to a total deduction in Ontario at least because of the combined Fed/Prov rules.)

I believe 20% is only the marginal tax rate. it is not the "average tax rate" for you. It is the latter that will tell you what you would be paying overall. In other words, you would not be paying 20% on all of it, just on the taxable part.

Just a warning: don't forget about the role inflation could play in your future. Check carefully as to whether your company pension is indexed to inflation; if so, whether it is indexed 100% (most aren't); and what are the provisions that are in place in case the pension plan does not meet its goals. These are all very important and could impact your future. The fine print can be quite revealing.

October 28, 2014
2:19 pm
AltaRed
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There are a number of tax calculators online to do exactly what you want to calculate. Example: Taxtips.ca

October 28, 2014
10:12 pm
kanaka
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AltaRed said

There are a number of tax calculators online to do exactly what you want to calculate. Example: Taxtips.ca

This is fantastic!!!
http://www.taxtips.ca/calculat.....ulator.htm

I think I will ditch the excel version that I madesf-cry

October 29, 2014
1:45 am
Loonie
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Thanks, AltaRed! This is really useful.

December 31, 2020
8:47 am
Bud
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Zero interest rates presents a good opportunity to cash-in ur rrsp rrifs while ur income is low

December 31, 2020
10:08 am
topgun
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agr said
If i retire at 55 I will receive a company pension of $30,000 before tax. I live in N.S.
If i can comfortably live on $ 30,000 after tax .How much rrsp Should I withdraw to achieve this?  

I started this method when I was 54. When you need extra income above your pension income cash enough RRSP to pay the extra expenses. I withdrew less than the minimum. At age 55. 1/(90 - 55) * (RRSP/RRIF Value). Everyone is UNIQUE.

Have a Great Day

December 31, 2020
10:24 am
pooreva
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If you have stocks and mutual funds in your RRSP and you have non registered savings (GIC/HISA), what would you start spending First? Cashing stocks from RRSP? Mutual funds from RRSP? Use cash money?

December 31, 2020
10:51 am
topgun
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pooreva said
If you have stocks and mutual funds in your RRSP and you have non registered savings (GIC/HISA), what would you start spending First? Cashing stocks from RRSP? Mutual funds from RRSP? Use cash money?  

I would say it is a personal choice. There are so many variables to cover in a brief dialogue. When I cashed RRSP originally I cashed just one security. The last time I cashed I cashed proportionally to the amount of security. Assume Security A makes up 5%. Security B makes up 10%. Security C makes up 15%. After selling your portfolio has the same weighting in each security.

Have a Great Day

December 31, 2020
1:50 pm
2of3aintbad
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Loonie said
...Pension tax credit should be 2000, unless things are somehow different in NS. This credit amounts to a total deduction in Ontario at least because of the combined Fed/Prov rules.

In fact the provincial maximum tax credits are less than $2000 - in 2019, 1463 in Ontario and 1173 in Nova Scotia. So that is less than a total deduction at the lowest marginal rate. Also, except for special circumstances minimum age is 65, I think.

December 31, 2020
2:00 pm
Dean
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Bud said

Zero interest rates presents a good opportunity to cash-in ur rrsp rrifs while ur income is low  

Bud revives an Ancient thread, from way back in 2014 ❗

What goes around, comes around ... LOL sf-laugh

    Dean

sf-cool " Live Long And Prosper " sf-cool

December 31, 2020
2:02 pm
2of3aintbad
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pooreva said
If you have stocks and mutual funds in your RRSP and you have non registered savings (GIC/HISA), what would you start spending First? Cashing stocks from RRSP? Mutual funds from RRSP? Use cash money?  

It depends on your future marginal tax rate (and that of your spouse (survivor), if you have one), compared to your current rate, whether to use RRSP or non-registered funds. When your GIC matures, with interest rates so low, you may want to use those funds. Mutual funds have an ongoing fee, but no cost to redeem. Only if you are a 'bad stock-picker', you should redeem stocks in case they continue to underperform.

January 13, 2021
9:55 pm
maxb
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Do remember, that you are now in a low tax bracket !!!
No sense withdrawing the minimum only to leave a mega RRSP when you die for you'll loose close to 50% at that point. Note as well, that in later years (after 71) you'll be forced to withdraw set % of the RRSP which could cause your income to rise significantly, including clawback of benefits...

So in my opinion, you didn't give enough information, nor if you have a spouse, etc, etc.......

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