Quote:
Originally Posted by bizaro86
Sure. But there's not a big advantage to doing it before the year you turn 65, imo, since you can't income split or get the pension credit until then. And converting early limits your flexibility because then you have to take minimum distributions.
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Depends what you mean by not a big tax advantage? If you're taking out RRSPs anyways and have no other pensions, converting a portion of the RRSP to RRIF allows for a non-refundable pension income amount tax credit, which is $2,000 and at 15% is worth $300.
RRIF aren't mandatory until around 71, so someone starting at 65 is still potentially getting 6 years of an extra tax credit for something they're doing anyways.
Quote:
Originally Posted by Geraldsh
When you hit 70(or 71?) you are forced to roll out a minimum of 7% of your rrsp to your riff. If that amount is enough to affect your taxes you may as well do something about it beforehand.
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Sorta... I don't know the rule inside out but basically...
At age 71, you're not allowed an RRSP anymore. If you have an RRSP, it's converted to a RRIF. The RRIF was typically supposed to be fully withdrawn in 20 years (age 91) so fundamentally you needed to withdraw 5% base per year (loosely based on amount at age 70 divided by 20).
But I guess the rules also allows for situations where there's meteoric growth in a RRSP/RRIF, so technically it can go past age 91, but by that point, the minimum annual payout is 20% of the base when the RRIF started.
https://www.woodgundy.cibc.com/en/re...ithdrawal.html
There's something you can do if you have a younger spouse and you haven't used up all your RRSP room by age 71. At that point you cannot purchase RRSP for yourself because you are not allowed an RRSP account. However, you can still purchase spousal RRSP if your spouse is still allowed an RRSP account.
That's also why if one spouse's retirement income is going to be wildly bigger than the other spouse's retirement income, it's potentially a good strategy to consider more spousal contributions so that you have appropriately "income split" in your later years to maintain more household income in the lower tax brackets. Many people don't realize that although there basically is not much of a difference now, the point of spousal contributions and RRSP is typically for a tax difference decades later.
Quote:
Originally Posted by chemgear
Is there an amount in the your RRSP's that is considered "too big" tax wise? Generally always thought that hitting the maximum every year was a bare minimum savings wise but maybe you can go too far?
(Want to make sure that I allocate my $4 million+ here.  ) |
It depends, but over $3 million FMV probably doesn't make a lot of sense to have in an RRSP. Divided by 20 years, it's around $150K a year. If something happens prior to it being fully withdrawn, the RRSP may be immediately pulled into income immediately which means being taxed in the highest tax brackets.
It's not a bad problem to have, but basically it'd be a gigantic pregnant liability. You're better off doing a complex tax planning strategy to get more wealth to your beneficiaries vs losing more than necessary of your wealth to tax.