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RRIF REQUIREMENTS WITH STOCK IMPLICATIONS
September 26, 2018
7:20 am
Murphcrud
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Hello,
I am about to convert my RRSP into a RRIF. I am 71 years of age.

My RRSP consists of all Canadian Dividend Stocks, on a self directed basis. Of course the stock prices and dividends fluctuate while in these plans.

From what I understand, if I choose to have an annual withdrawal from my RRIF, I must insure that I have sold sufficient stocks, being held in my RRIF, to satisfy the annual percentage withdrawal rquirement as set out by the Government. At the end of year when I am 72, I must withdraw 5.28% of my total RRIF. At year end when I am 73, it increases to 5.4% and on and on. Who would calculate these percentage amounts (as a dollar value) of a current fluctuating value RRIF ??? Dividends are paid 4 times per year, stock prices change daily ----, so what time of year is the RRIF value established to determine dollar value required withdrawals??

September 26, 2018
9:54 am
semi-retired
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Jan 01 of each year to determine the takeout %.Go & sign up at Boomer & Echo website for great tips & info on all sorts of financial situations.Its free.

September 26, 2018
11:27 am
Murphcrud
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semi-retired said
Jan 01 of each year to determine the takeout %.Go & sign up at Boomer & Echo website for great tips & info on all sorts of financial situations.Its free.  

Who determines what my RRIF balance is at Jan 1, me, my RRIF provider, Revenue Canada? If my RRIF grows more than I am obligated to take out, ie: Growth 10%, Obligation 5.2%, how does this affect future years obligation, other than the standard minimum % guidline? If my investments inside my RRIF grow at a rate of 10% annually, in 6 years, my RRIF would grow by 33%, even with withdrawing the obligated % annually. This will leave my wife quite wealthy when I pass and she then can transfer my RRIF to her RRIF tax free. Is this how this all works???

September 26, 2018
12:12 pm
semi-retired
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If you are running a self directed rrsp plan I think you would use your year end statements total(Dec/31)It seems to me that is your total for the new year.(Jan/01)Once your RRIF is set up you will get a year end balance.The better your plan does just means your minimal yearly withdrawal would be higher.If your plan loses money during the year your minimal withdrawal will be lower.The minimal % of withdrawal is on the gov/chart.Your total in your account will increase as long as your rate of return is greater than the withdrawal rate.I don't know about tax implications when it is rolled over to a spouse.This is how I understand how the system works from articles I've read.If it is different any 1 of the many financial gurus on this site will correct me.I'll be using this info in 8 years.

September 26, 2018
1:09 pm
Norman1
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One also does not have to sell any investments. One is allow to do in-kind withdrawals.

If the required withdrawal is 5.4% and the self-directed RRIF has only 100 shares, one could transfer 6 shares out to a regular brokerage account to do a 6% withdrawal.sf-smile

September 26, 2018
1:10 pm
Murphcrud
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semi-retired said
If you are running a self directed rrsp plan I think you would use your year end statements total(Dec/31)It seems to me that is your total for the new year.(Jan/01)Once your RRIF is set up you will get a year end balance.The better your plan does just means your minimal yearly withdrawal would be higher.If your plan loses money during the year your minimal withdrawal will be lower.The minimal % of withdrawal is on the gov/chart.Your total in your account will increase as long as your rate of return is greater than the withdrawal rate.I don't know about tax implications when it is rolled over to a spouse.This is how I understand how the system works from articles I've read.If it is different any 1 of the many financial gurus on this site will correct me.I'll be using this info in 8 years.  

Exactly as I thought. Thank you.
I believe I read that when I am no longer in this world, my souse is able to roll over balance of my RRIF into hers.

September 26, 2018
1:20 pm
Murphcrud
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Norman1 said
One also does not have to sell any investments. One is allow to do in-kind withdrawals.

If the required withdrawal is 5.4% and the self-directed RRIF has only 100 shares, one could transfer 6 shares out to a regular brokerage account to do a 6% withdrawal.sf-smile  

Thanks for that info Norman. After you mentioned the 'in-kind withdrawal', I did recall that phrase being used for this type of a transaction, just didn't know what it meant until I just now looked it up.sf-embarassed Thanks again.

September 26, 2018
1:24 pm
Loonie
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The responses given are basically correct. I am already in the age group in question.

To summarize, the mandatory withdrawal is a percentage of the total balance in your RIF account as of the previous Dec 31. If you have more than one RIF account, you will get the same % withdrawal from each (unless it is 2 GICs at the same institution - details depend on the institution). You can choose the date(s) on which you want the funds withdrawn during the year, but you need to ensure that you have enough liquid assets to allow this to be done, so ths may require planning ahead.

If you die first, your spouse can roll over the RIF into her name.

It doesn't matter what you are invested in, dividends, etc. You just have to have enough liquid to pay the withdrawal. If you don't, the brokerage would likely cash something for you, as they must meet CRA's requirement. This is not to your advantage. It is your financial institution who calculates how much is withdrawn, and they are required to follow CRA rules as custodians of the RIF.

The percentage to be deducted is calculated based on your age as of Jan 1 of the year in question, so, yes, it would be 5.28 in the year you turn 72. However, it sounds like your spouse is younger than you, as you expect her to outlive you. If your spouse is younger, you have the option of setting up your RIF in such a way that mandatory withdrawals are calculated based on her birthdate instead of yours. If you choose to set it up this way, it must be done at the time you set up the RIF and cannot be changed later. This gives you flexibility, as you can still take out more than the minimum whenever you choose to do so. If you choose to do this, you must pro-actively ask for it. I have found that many employees of financial institutions are not well versed in this, so be careful. They typically do not think (or know) to ask you whose birthdate you want to use. I believe, but am not certain, that when your RIF is inherited by your wife, that she will be able to make minimum withdrawals based on her age regardless.

If you have a substantial amount in your RIF, and especially if your spouse also does, you should be doing some financial planning around the final disposition of this asset. It will be taxable at marginal rate when the last spouse dies. This may affect your decision about voluntary withdrawals.

I hope that helps.

September 26, 2018
1:37 pm
Murphcrud
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Hello Loonie,

How about the in-kind withdrawal -- wouldn't I determine what stocks, rather than the brokerage, to dispose of to fulfill the rules set out by CRA?

September 26, 2018
2:11 pm
Loonie
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Sorry, I don't know anything about the in-kind rule.
In general, you have the option to decide what funds to use for your withdrawal, and I think the brokerage will ask you to make this choice, but I don't know anything about in-kind withdrawals. My point was basically that if you fail to make provisions for the necessary withdrawal, they will do whatever they have to do to make the withdrawal.

I suggest you ask your brokerage about this.
I would consider this source reliable:
https://www.taxtips.ca/rrsp/inkindwithdrawals.htm

You may also find this discussion helpful:
https://www.financialwisdomforum.org/forum/viewtopic.php?t=120279

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