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RRIF withdrawals Pre Covid-19 no tax withhold amount vs new minus 25% minimum
June 10, 2020
8:09 am
Norman1
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Loonie said

Nice personal story, GICInvestor. Glad it worked out for you. It shows too how important it is to know what you really want out of life. That way, you can recognize what it is if it should hit you over the head unexpectedly! lOL

I agree. If one voluntarily resigns to retire, then there is no termination or severance pay. In contrast, if one is laid off and ends up retired, then one will receive money for termination, perhaps additional money for severance, and maybe bridging funds until one's pensions start paying out! Might be a challenge for me to pretend to be upset in the latter case.

June 10, 2020
8:33 am
GICinvestor
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Norman1 said

Loonie said

Nice personal story, GICInvestor. Glad it worked out for you. It shows too how important it is to know what you really want out of life. That way, you can recognize what it is if it should hit you over the head unexpectedly! lOL

I agree. If one voluntarily resigns to retire, then there is no termination or severance pay. In contrast, if one is laid off and ends up retired, then one will receive money for termination, perhaps additional money for severance, and maybe bridging funds until one's pensions start paying out! Might be a challenge for me to pretend to be upset in the latter case.  

Lol. “Pretend” you will be surprised at what an “unexpected shock” will do to you temporarily!

Just to add. About 6 months before hand at a managers meeting one of our VPs from Toronto was visiting. The meeting, time wise, had not officially started and I scooted out to the washroom. And there was some pre discussion that would usually end...but upon my return I was asked when would I “wish” I could retire......everyone else had responded in my absence. I said 57-58 as that is how my numbers had worked out on previous versions of our plans (but not the version I was currently on). I thought nothing of it nor did any one say any thing to me. But in the past it was an unwelcome joke that I and another manager, age wise, should be due to retire. So the 2 of us plus a couple much younger managers got the ax. So what had happened over the months we were all unknowingly surveyed! And none of the 250 managers that I later spoke to were upset.

Never the less I should have been more skeptical when asked. As I would have been better prepared.

June 10, 2020
10:18 am
cruzinalong
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cruzinalong said
True. When I started the CDIC limit was $60,000. I made my deposits to one FI. I got to around $50,000. I started transferring funds to other trust companies. I never came close to the $60,000 limit again. I had at least 2 trust companies fail. Dominion Trust for sure. I think Cabot Trust. I think Counsel Trust. Not sure when the limit changed to $100,000 since I stopped buying GICS. Can anyone confirm/deny Cabot or Counsel failures? Does anyone recall when limit increased to $100,000?  

After further checking I found that Cabot Trust merged with a couple other FI in January 1993. I found some information about CDIC. I know I received my money from the new entity. Not close to CDIC limit of $60,000 at the time. Dominion Trust failed. Cabot Trust merged.

June 10, 2020
11:55 am
pooreva
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Thank you GICinvestor for great life story!
But I am sure, as manager with 40 years of service you got nice company pension. But you started working at 16??? Any schooling after high-school? Just curious, I do not 'classify' people by level of education but by how human they are.

Now, my next question have nothing to do with current topic and Peter could move it appropriately into new one if needed.

For those not working, retired, or working but with no benefit plan, how do you manage dental/medical expenses?
Do you have private insurance from some insurance company? Or do you put aside some money for next year for 'just in case' and pray you will not need more?
If you pay for third party insurance, I am interested for recommendations for dental/medical only. Not really interested in drugs.

June 10, 2020
12:20 pm
GICinvestor
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pooreva said
Now, my next question have nothing to do with current topic and Peter could move it appropriately into new one if needed.

For those not working, retired, or working but with no benefit plan, how do you manage dental/medical expenses?

Do you have private insurance from some insurance company?
Or do you put aside some money for next year for 'just in case' and pray you will not need more?

If you pay for third party insurance, I am interested for recommendations for dental/medical only.

Not really interested in drugs.  

For those not working, retired, or working but with no benefit plan, how do you manage dental/medical expenses?

I self insure.

Do you have private insurance from some insurance company?

NO!

Or do you put aside some money for next year for 'just in case' and pray you will not need more?

Yes....but not for just in case.....for what our expectations have been over the past years. If I have to pray.....I would go into some savings. That is what savings are for.

If you pay for third party insurance, I am interested for recommendations for dental/medical only.

I don't and won't recommend. When I lost my plan it was with Sun Life. But it was NOT a Sun Life policy. The company I worked for set the plan and what they would pay. Sun Life administered spending and paying the money. We were then supposedly given two preferred carriers... SunLife and Manulife. So like everything else I do I wrote down and built a spread sheet of what we have spent (even though it was paid by SunLife) on medical, prescriptions, eyes, glasses, etc. If I used everything in both plans offered I would be money in pocket but that would not happen...back to reality and looked at what I would pay for what I currently use.....both companies made huge profits from me. And keep in mind there are annual limits to how much the pay per service and then is out of you pocket any ways. AND what plan do you take one that you pay 20% or 30% or 50%. No matter what I figured I would have to pay a premium and a % and no matter what, the insurance company profited. The only preference that both carriers gave us was they let us into the plan no matter what our age was as most plans have a limit and at a certain age (I forget what it was) they won't let you into their plan cause you are too old!!! That is IF we signed up within x amount of time from loosing our company Sun Life plan. So watch the plans, watch the steps of what is included and excluded and look at what stuff you would likely never use that I would call stuffers to make it look like you are getting a good deal. Like watch the green shield ad on TV it is full of fluff and kind of threatening to NOT take a plan. If you are one that likes to make payments and feel warm and cozy...get a plan. After it made my calls to SunLife...they are 'A' holes and Manulife was fantastic to talk to but too costly. So I built my plan to put xxx.xx away every month which was around the amount of the Sun Life policy. Currently we have only dipped into our medical insurance ledger when needed and is sitting in a nice surplus of over $4,000.

Not really interested in drugs.

If they prolong life. And give me a quality of life. I will not refuse them. Try depression......you can't kick it without medication. And I don't believe in the Health Food store advice or JUNK.

Any questions...or need an Excel Spreadsheet to slot your budgetary expenses.??

June 10, 2020
5:21 pm
Bill
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I'm not on any meds, but aren't your drugs pretty much covered once you hit a certain age?

I think some people like medical plans because they're covered when they travel or snowbird out of country. If you don't have a plan I've heard it can be expensive to buy as you get older and/or have more health issues. But if you don't go outside Canada then you don't care about that anyway.

I have a plan but I rarely use it, paying more than I get (same with my dental plan), probably should have done what GICinvestor does, good idea, guess I'm the warm and cozy type in this case! But it would allow me to get a semi-private room instead of a ward room if I'm ever in a hospital for a while, though I'm not even sure if semi-private or private rooms are available, do they actually offer you a choice when you're admitted or is that just more insurance company bogus stuffer?

June 10, 2020
5:33 pm
GICinvestor
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I'm not on any meds, but aren't your drugs pretty much covered once you hit a certain age?

You are very lucky. BC just dropped have to pay for provincial medical coverage but the way the did it was poorly done. They put taxes on businesses based on their head count so ie. the city has to pay a huge tax.....guess who's property tax and school tax goes up??

And as for drugs in BC we have Pharma Care Fair which kicks in based on income NOT age. And you have to find a supplier that charges the same or lower than the government guidelines. So I will never see it!!! Unless I drive down my income to an amount I am not sure of and if I can I am guessing that could take 15 years.

But do keep in mind the government plans and private plans do not pick up everything ie heart and cancer. The Heart and Cancer agencies pick up some expenses for you too.

I think some people like medical plans because they're covered when they travel or snowbird out of country. If you don't have a plan I've heard it can be expensive to buy as you get older and/or have more health issues.

You should always have out of country coverage and it can be different rate for USA or Europe. You should think twice about travelling to any country with a Canadian Government travel advisory that is not good. Technically you should have coverage if you travel out a province as you may have to pay a difference.

But if you don't go outside Canada then you don't care about that anyway.
I have a plan but I rarely use it, paying more than I get (same with my dental plan), probably should have done what GICinvestor does, good idea, guess I'm the warm and cozy type in this case!

Once again you are lucky with your health.

But it would allow me to get a semi-private room instead of a ward room if I'm ever in a hospital for a while, though I'm not even sure if semi-private or private rooms are available, do they actually offer you a choice when you're admitted or is that just another insurance company bogus coverage?

Right "if" it is available. Bogus maybe but a fluffy option offered by the insurance company to make your policy look good. Like a gold ribbon on a box of chocolates.

June 10, 2020
5:35 pm
pooreva
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Bill said
But it would allow me to get a semi-private room instead of a ward room if I'm ever in a hospital for a while, though I'm not even sure if semi-private or private rooms are available, do they actually offer you a choice when you're admitted or is that just more insurance company bogus stuffer?  

It is a real thing. My friend broke a hip last winter and at emergency they immediately asked 'do you want private or semi-private' as she had to have operation very next morning and stay at the hospital 5-6 days before transfer to other facility which was covered 100% by ohip.
She was in semi-private these 5-6 days and had only one room-mate for 1-2 days.
BUT, wards are, depending on 3 or 4 people in the same room. So if you get into ward with 3 people how is that different that $emi-private with 2??

And as for drugs, correct, OHIP covers 4400 different drugs after you are 65. I did random check for diabetes or hypertension and drugs are there.
Best drug is do not watch news, ignore politics, mind your own business, take a walk every early morning and late night, eat healthy.

June 10, 2020
6:50 pm
Bill
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Lots of these folks have various issues, calling for help all night, other random loud and sometimes disturbing behaviours, I've seen it when visiting acquaintances, etc., so far better odds of peaceful time with one roommate instead of three. Or else you can get private and just pay the difference from the level your plan covers.

June 11, 2020
1:42 am
Loonie
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We have insurance, which we pay for. It is carried over from employment but employer doesn't pay. The price increases significantly every year. This year, they introduced a new wrinkle where meds have to first be approved. OHIP does not cover all meds, and now this insurer plans to decide whether they will deign to cover a particular prescription.

I am annoyed about this new policy. The reason we decided to go for it was to make life easy, not more difficult, and because we could afford it.
They have also introduced a lifetime cap on drugs. I think it's 100K. If you end up with a condition which needs an expensive drug, which can happen to anyone, this will matter.

There are pros and cons to plans. A major con is that the terms change whenever they decide to change them, and you have no say except to quit; and then you'd have to shop around all over again.

Semi-private and private rooms are not guaranteed, no matter what insurance you may have. Room allocations are mostly based on available beds and medical needs of patients.

The last time I visited someone in hospital (Feb 2020), they were so short of space that 3 people had been crammed into a 2-bed room, and the genders were mixed in that room. One person slept all the time; one was very noisy, had lots of visitors, used the phone and TV almost constantly and simultaneously; and the third was driven to distraction by the chaos and lack of personal space.
During the time this person was in hospital, they put in about 10 beds into one room which had been used for physio, all lined up in a row like in the old photos of war casualties etc. And it isn't gong to get any better as our health care system is poorly prepared for the deluge of boomers that is coming. So, forget about your private and semi-private rooms.

If you want to put in the research effort, it is sometimes worthwhile to join an organization which offers group insurance. There are some organizations that exist largely for this purpose,but, unfortunately, I can't remember the names of any of them at the ti moment. They are sometimes cheaper.

Medical insurance, both travel and regular, counts as a medical expense for CRA purposes, so you may get some of it back if you choose to buy it.

June 11, 2020
9:46 am
GICinvestor
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We have insurance, which we pay for. It is carried over from employment but employer doesn't pay. The price increases significantly every year.

They have also introduced a lifetime cap on drugs. I think it's 100K.

Correct...points I found while doing my research that I forgot to mention. Also some policies demand the use of generic drugs but will allow band name if there is no generic. And there will be annual caps on dental and?

There are pros and cons to plans. A major con is that the terms change whenever they decide to change them, and you have no say except to quit; and then you'd have to shop around all over again.

Study each plan and each step up and compare to a few other plans and you will see the insurance company knows what the average Jack and Jill needs. Watch for all the fluff that makes a long list of lovely stuff and compare it too what you have actually used in the past. Then ask your self ...... do I need the fluff and how much is that costing me?

WATCH the age thing about joining or changing plans!!!!

So, forget about your private and semi-private rooms.

While this is a norm and is different from province to province it is not really related to the cost of insurance. But once again is fluff that they add to the policy to make it look good. They know it is unlikely to get a private room.

If you want to put in the research effort, it is sometimes worthwhile to join an organization which offers group insurance. There are some organizations that exist largely for this purpose,but, unfortunately, I can't remember the names of any of them at the ti moment. They are sometimes cheaper.

Good point.

Medical insurance, both travel and regular, counts as a medical expense for CRA purposes, so you may get some of it back if you choose to buy it.

Do your homework on that one!! I have people infer to me that because of my age and medical costs I will get it all back on my taxes. BS!!! Take a look at your tax forms firstly you may have what I call a deductible amount that is NOT claimable. So just say you had $5000 in expenses and the deductible is $3000 and you now have $2000 to claim and from that you will get a 15.x% tax credit. A whopping $300. Nice but for those that say you will get it all back, I say.........

So where ever you are in Canada, age, on your own plan, on a company plan or no plan. I would suggest you do this.

Using annual totals.

1. What is monthly cost of the plan is (problem is if the plan is paid for).
2. What coverage did you use in dollars paid by the insurance
3. What portion of any did you pay

What is the total of 1.

What is the total of 1. 2. and 3.

What is the total of 2. and 3.

Deduct the total of 2. and 3. from 1.
If the total is a positive number that is profit by the insurance company
If the total is a negative number you are doing well with your plan

To self insure look at some real plan brochures and massage the services to what you MAY see yours self using. Your number may come close to the cost of the lowest cost plan. But it should be padded for the future. Set that amount of money aside every month into a ledgered spreadsheet or a jam jar.

 

June 11, 2020
2:20 pm
Loonie
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I think that, realistically, what these plans cover is unpredictable extraordinary drug costs, to a maximum. And that's the part that doesn't fit into your equation because it is in the future. In the future, you may need any number of things that you haven't needed in the past.

In the olden days, semi-private coverage was a big deal. You got it if you had the coverage, and you didn't get it if you didn't; and nobody could afford it otherwise except the very wealthy. Clergy, depending on the denomination, often still get private coverage, probably to protect them from the entreaties of sick roommates and their families.
The insurance companies have kept this provision because it costs them next to nothing and it appeals to those of us who are older and remember the olden days and may think it's still worth it. But times have changed, and nobody knows that better than the insurance company.

August 21, 2020
6:21 am
Loonie
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I'd like ot pick up again on the topic of the reduced mandatory RIF withdrawals for 2020.

When this change was first announced, I was under the impression that you would have to ask your FI to reduce it for you, that it wouldn't be automatic. So I did nothing as I expected to withdraw more than the minimum.

More recently, it occurred to me that I could do some rebalancing of assets by only taking the new minimum but also taking extra out of spouse's RIF, then splitting.

When I started looking around the internet, I got confused. There seemed to be a suggestion that perhaps the gov't had decided, later, that the new lower minimum would apply to everyone until end of year unless they asked for the older rate (opposite of my earlier impression).
The page I found on CRA was not clear to me.

Can someone set me straight on this?

thx.

ADDED: BTW, I would not be at all surprised if the schedule of percentages is changed (lowered) for 2021 and following. With no foreseeable return to even the interest rates of 2019, many seniors will be depleting their RIFs prematurely if the old mandatory rates are maintained and they may not realize they are going to run out of income if it isn't spread out more. The government may want and need more income in 2021ff, but they also won't want a slew of people in their 80s and 90s who then have to be subsidized.

August 21, 2020
7:25 am
GICinvestor
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From what I understand.
1. If you already had your full payment before the announcement there was no recourse to put the extra amount back in your RRIF.
2. The 25% less is only for 2020. But who knows what Trudeau will do to get re-elected.

If you still do not have your RRIF payment for 2020 hopefully some one can tell you what the process is for the reduced amount only to be paid.

August 21, 2020
7:29 am
Bill
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I found nothing about an option to ask for the older rate. Can you provide a reference for that info?

This is what I found on gov't site, seems pretty clear:
https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/registered-retirement-savings-plans-registered-retirement-income-funds-rrsps-rrifs/economic-statement-measure-annuitants-rrsp-rrif.html

August 21, 2020
7:46 am
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I found this on the Manulife website.

Should I reduce my 2020 RRIF payment(s)?
You need to determine whether taking the reduced minimum suits your lifestyle. If you’re not sure what to do and looking for specific advice about your situation, contact one of our licensed advisors. If you decide to reduce your RRIF payment amounts, please let us know. We will not reduce or change your payment amounts without your direction.

Knowing banks etc I doubt they would send you 25% less and make more work for them selves. Likely you have to request the lower amount or some may have a "real good" advisor that would contact you.

August 21, 2020
8:17 am
Norman1
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The impression I got reading the CRA page Bill mentioned is that

  1. there continues to be no tax withholding on the RRIF withdrawals as long as they continue to be no more than the previous unreduced minimum and
  2. RRIF carriers have no requirement to automatically use the new minimums.

I think it will depend on the RRIF carrier. RBC, for example, says they will not automatically reduce the RRIF withdrawals to the new temporary minimums:

4. Am I required to lower my minimum withdrawal?

No. Reducing your minimum withdrawal by up to 25% is optional and must be requested by either calling … or by booking an appointment through Online Banking. RBC will not automatically convert this amount to be the adjusted minimum amount for 2020.

If you have previously instructed RBC to withdraw the minimum amount on your RRIF payment instruction form, we will not automatically convert this amount to the adjusted minimum amount for 2020.

RBC's approach makes sense. Not everyone follows such developments and would welcome an unexpected 25% cut to their monthly RRIF withdrawals.

August 21, 2020
8:22 am
GICinvestor
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Then another question is. If you take the lower amount with no tax withhold in 2020 can you take that extra 25% in 2021 with no tax withhold. I believe I did see somewhere that the answer to that was....yes.

In my opinion only...that was a very feeble attempt by the liberal government to give seniors "something" even though it was "ours" to start with. Not to mention the pitiful $300 or $500 on time payment...while a lot of seniors lost in the stock market which became "their" loss of income now and in the future. While others mostly deserving and a few not deserving received hard cash in their pockets.

August 21, 2020
9:47 am
Bill
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The govt's announcement is about reducing the required minimum RRIF withdrawal for 2020. How individual FI's will handle that with their clients is a separate issue, gov't has no directions about that part, as far as I know.

Nor have I seen any direction re 2021 - GICinvestor, where did you see that info about taking the extra 25% in 2021 without tax withheld?

August 21, 2020
10:00 am
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Bill said

Nor have I seen any direction re 2021 - GICinvestor, where did you see that info about taking the extra 25% in 2021 without tax withheld?  

I guess I did NOT. See article.

If you took the 25% less in 2020 you can take more, in 2020, up to your full mandatory amount, with no tax withheld. I assume the latter only applies to 2020 as per the article. Somewhere I thought the 25% less taken in 2020 could roll to 2021 with no tax withheld. It would be good for those that short changed themselves. I would imagine very few would not pay tax after their withdrawals but most of us will. And would be interesting to know how many took the lower amount AFTER it was announced. Since I like to take enough to buy TFSA for both of us I wouldn’t have taken the offer...but I am not in that mandatory group yet.....but will be very soon.

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