RRSP Question

[Drury18]

I'm hoping someone might be able to help on this as I've seen a couple different write ups about this.

At my former employer there was a Group RRSP plan in which we had part of our paycheque deducted which was matched by the company and put into a 100% GIC and Savings Deposit with no withdrawl restriction. I no longer am with this employer and the bank that they have this RRSP with is not one that I will do business with due to numerous problems in the past so I wanted to find out if there was a way to transfer the amounts in that RRSP to my current bank without huge penalities or if I can withdraw the money somehow without losing alot of it. While the amount in there is not massive to start with since it was only 14 months deposits, I still would like to do this without losing alot of what's in the account or paying excessive tax on my return.

Can you generally transfer RRSP's from one bank to another without paying tax on the RRSP as a withdrawl? Or can I have it transfered to a TFSA as I have no desire to invest in the markets at this point. On amounts less then $5000 is it worth it to just withdraw the amounts and transfer it to where you would like?

Thanks guys!

[yads]

You can have the securities transferred in kind to whichever institution you want. There is typically a transfer charge of around $150. You do not have to withdraw.

[taco.vidal]

Originally Posted by yads

You can have the securities transferred in kind to whichever institution you want. There is typically a transfer charge of around $150. You do not have to withdraw.

The new institution needs to be able to hold the securities you are transferring (ie. you couldnt transfer stocks from an rrsp at a broker to an rrsp at the bank.) Also, you probably cant transfer a royal bank gic to cibc. Youd have to wait for the gic to mature and then transfer the cash or pay a penalty to cash out early then transfer.

[Temporary_User]

Originally Posted by Drury18

the bank that they have this RRSP with is not one that I will do business with due to numerous problems in the past

God I hate ATB too!

[Drury18]

Actually it's RBC that I will not deal with. I've never touched ATB.

From what I can tell from this listing, it is an RBC Savings Deposit. There isn't any maturity date on it and the company seemingly just put it all into a savings deposit to which I am called monthly by RBC suggesting I invest in in other funds as this will not meet any of my objectives (which I don't know how they know what those are as I've never had any conversation or meeting with them about my long term planning. This is an account opened by my workplace that we had to contribute into).

[Slava]

As others have said you can transfer the funds. Depending on your plan though you might not have to pay a penalty at all, and you won't be charged taxwise unless you actually withdraw the funds or move them to something like a TFSA.

The other option is to transfer the funds "in kind" and depending on where you transfer them to you don't have to sell themtk do this (in this case the maturity date doesn't matter).

If you need help feel free to PM me. It's straightforward and simple though.

[Clarkey]

Some institutions will pay the fee to move your investments over to them but only if it's a sufficient amount you are porting.

[Slava]

^Quite often to transfer out of a group plan there are no fees, or the fees are much smaller ($25 in some cases). It wouldn't be enough to dissuade me from moving my money if I wanted to...but you should check to make sure ahead of time.

[AMG_G]

First you go to the bank you want the funds transferred to. Just bring your account number and they will do the rest. They will request your old bank to liquidate your funds and what actually gets moved over is money not the type of investment. With the money you can invest it back into the new banks as rrsps with no penalty or if you move it to a TFSA you will be taxed at your current tax rate for the full amount. I paid no fees to either bank when I did this 6 months ago. It was from TD to CIBC. The amount was 45k which just didn't grow at all from TD. Their service was next to none. They are suppose to contact me once a year to review my investments but I never got a call the 6 years I was with them. I got feed up and moved it all to CIBC. The ETFs I selected have grown 12% over 6 months....best decision ever.

[Drury18]

Thanks everyone. I have an appointment with the bank to discuss what fee's might be involved since the amount is not anything significant and their website is not clear.

I figured the TFSA would end in being taxed since its moving from one type of account to another, but I was hoping it wasn't the case as I'm not a huge fan of RRSP's and the investment rules around it.

[AMG_G]

Originally Posted by Drury18

Thanks everyone. I have an appointment with the bank to discuss what fee's might be involved since the amount is not anything significant and their website is not clear.

I figured the TFSA would end in being taxed since its moving from one type of account to another, but I was hoping it wasn't the case as I'm not a huge fan of RRSP's and the investment rules around it.

TFSA is after tax dollars and RRSPs are before tax dollars. With RRSPs you pay the taxes when you withdraw. Supposedly when you are ready to retire your income bracket will much lower hence lower taxes on the money when you take it out. The issue is that taxes will only go up generally so this might not be be the best investment vehicle. So if you have a large amount in your rrsp and you are forced to take out a minimum percentage (~7%) after it turns into a RRIF you will be faced with a large tax bill anyways.

Some say its wiser to pay the tax on the monies now at the current lower rate and invest it into the TFSA with investments that pay you to hold them. Any money earned will be tax free. RRSP are an old school thought...now it should be max TFSA then RRSP.

Found the percentages http://www.tdcanadatrust.com/rifsand...drawal_cht.jsp
Annual Minimum Payment Schedule

The federal government requires that holders of retirement income funds withdraw a minimum amount of retirement income from their RIFs each year, according to the following schedule:

55 2.86
56 2.94
57 3.03
58 3.13
59 3.23
60 3.33
61 3.45
62 3.57
63 3.70
64 3.85
65 4.00
66 4.17
67 4.35
68 4.55
69 4.76
70 5.00
71 7.38
72 7.48
73 7.59
74 7.71
75 7.85
76 7.99
77 8.15
78 8.33
79 8.53
80 8.75
81 8.99
82 9.27
83 9.58
84 9.93
85 10.33
86 10.79
87 11.33
88 11.96
89 12.71
90 13.62
91 14.73
92 16.12
93 17.92
94+ 20.00

[Slava]

Originally Posted by Drury18

Thanks everyone. I have an appointment with the bank to discuss what fee's might be involved since the amount is not anything significant and their website is not clear.

I figured the TFSA would end in being taxed since its moving from one type of account to another, but I was hoping it wasn't the case as I'm not a huge fan of RRSP's and the investment rules around it.

If you sell the RRSPs and withdraw that cash to put in a TFSA you will be taxed. There is a way around that, but its more convoluted than what you are explaining here.

[Slava]

Originally Posted by AMG_G

First you go to the bank you want the funds transferred to. Just bring your account number and they will do the rest. They will request your old bank to liquidate your funds and what actually gets moved over is money not the type of investment. With the money you can invest it back into the new banks as rrsps with no penalty or if you move it to a TFSA you will be taxed at your current tax rate for the full amount. I paid no fees to either bank when I did this 6 months ago. It was from TD to CIBC. The amount was 45k which just didn't grow at all from TD. Their service was next to none. They are suppose to contact me once a year to review my investments but I never got a call the 6 years I was with them. I got feed up and moved it all to CIBC. The ETFs I selected have grown 12% over 6 months....best decision ever.

This isn't totally accurate. You can move it all in cash (which is obvioulsy what you did), but there are also lots of times when you move them in kind (in the same positions as you currently hold), or partially in kind.

[Drury18]

Originally Posted by Slava

If you sell the RRSPs and withdraw that cash to put in a TFSA you will be taxed. There is a way around that, but its more convoluted than what you are explaining here.

Depending on the amount it will be taxed and what it will do to my tax return, I may end up just going to the direct option so I be rid of it altogether. Last year was not a high earning year for me and being the RRSP is not much money at all, the hit against my taxable income for 2010 might not be so bad compared to if I leave it and have a high earning year this year.