RRIF minimums in a locked GIC | RRSPs and RRIFs | Discussion forum

NCC1701Z said
If one turns age 72 before a multi year locked RRSP GIC matures is the institution required to convert it to a RRIF at age 71 and unlock the minimum withdrawal amount each year from age 72?  

Yes, but they could penalize you for early redemption. Policies vary; you should check with FI before getting yourself into this situation.

I would expect that it's your responsibility to make sure there's enough cash to make annual mandatory minimum withdrawals or else fi will have to do whatever it needs to do to liquidate enough to meet CRA requirements.

mordko said

Yes, but they could penalize you for early redemption. Policies vary; you should check with FI before getting yourself into this situation.  

There is no penalty to do a mandatory withdrawal. And you can have a GIC with a balance at less than $1000.

Bill said
I would expect that it's your responsibility to make sure there's enough cash to make annual mandatory minimum withdrawals or else fi will have to do whatever it needs to do to liquidate enough to meet CRA requirements.  

No, it’s not your responsibility. The FI will pull mandatory funds based on their rules. And Oaken and Hubert are from lowest interest rate….so if you have cash in a RRIF HISA account and a GIC at a lower % rate…then it comes from the GIC.

You might be able to have funds specifically from a GIC or HISA….but expect a screw up to occur. To some FI employees the RRIF is a scary boogie man that nobody wants to be involved with. But FI systems “should” handle it. Does the FI take the direction and give to back office or do them selves after your call is over? I bit of both. When you want extra, some FIs will allow more, with rules, to be taken from an RRIF. That’s where it’s handy to have cash in an HISA account. If you keep withdrawals at $5000 or less they take a 10% tax (20% in Quebec) holdback. And I do 1-3 less than $5000 withdrawals…all at 10%. Make sure you tell Hubert to take 10% on extra withdrawals as they are out of whack as they withhold less than 1%….so I ask for $3000 and say to make sure $300 is withheld vs seeing the mistake and calling back.

Only if oaken would get realistic and have RRIF HISA accounts.

@dommm It is smart that you asked and got an answer that was satisfactory to you. Beaucoup to you!

As I understand it, how FIs handle such situations vary by FI. Hopefully, the OP's FI will do a similar thing (I have heard of that before) but worst case is the FI doing what I said earlier. Crystallize (early redeem) the entire GIC within the RRIF so that there is cash that can be withdrawn to meet the minimum annual withdrawal. The OP needs to ask his/her FI.

I will confirm that the financial institution must remove at least the minimum requirement (which increases every year) from an existing GIC without penalty. I just did this last month at VanCity and asked a lot of questions.

But pay attention to the withdrawal date you select - and you can change it before each annual withdrawal. There shouldn't be any tax withholding on the minimum, but the later in the year you make the withdrawal, the longer your cash is tax-sheltered. As I understand it, the latest day in the year you can select is December 15, so check and pick that if what they told me is correct.

The requirement is that financial institution must withdraw the minimum and it will. If the contract stipulates penalties for early redemption then these may or may not be charged, depending on the institution. Manulife shows charges relating to early redemption in the RRIF context. https://www.manulifebank.ca/personal-banking/investments/registered-retirement-income-fund.html

AltaRed said

You may have missed the point. There is not a withdrawal (from RRIF) penalty but there could be a penalty applied by the GIC issuer for early redemption or the breaking of a portion of the GIC to meet mandatory withdrawals.

The original post is not all that clear as to whether this is a multi-year GIC of a substantial amount that could go well beyond 'year 72' mandatory

 

@AltaRed. Any thing is possible interpretation wise.

The 71 72 has nothing to do with it.
Based on the FI rules, breaking into a GIC MUST be done for the mandatory amount ( if there is no $ in an HISA ) and is NOT the RRIF owners responsibility. If you ask for more it would be prudent to have that money in an HISA account. But if not…like I said…. “some” FIs allow more to taken from that GIC based in their rules at no extra cost other than the mandatory tax withhold. On the other hand an FI can refuse to let you take any more from your GIC or collapse it before maturity.

RetirEd said
I will confirm that the financial institution must remove at least the minimum requirement (which increases every year) from an existing GIC without penalty. I just did this last month at VanCity and asked a lot of questions.

But pay attention to the withdrawal date you select - and you can change it before each annual withdrawal. There shouldn't be any tax withholding on the minimum, but the later in the year you make the withdrawal, the longer your cash is tax-sheltered. As I understand it, the latest day in the year you can select is December 15, so check and pick that if what they told me is correct.  

Yikes! Good tip. I have a quarterly to cash in on Dec 10. Was planning a withdrawal on the 10th and 17 of December. And another early January before my mandatory amount.

I’ll be on the phone tomorrow morning.

The portion of the redeemed GIC that does not have to be withdrawn to meet mandatory minimums would then be free for the RRIF account holder to re-invest in a new GIC or some other product such as a HISA. I suspect it could be a likely scenario with a brokerage that is strictly an agent for the GIC issuer.

The point is an account holder ultimately has the responsibility and accountability to arrange his/her investments to meet regulatory requirements, e.g. RRIF mandatory minimums. The OP needs to ask his/her FI as has been posted already.