RRSP Meltdown Strategy - Save Thousands In Taxes (Includes a Complete Withdrawal Strategy example)
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- เผยแพร่เมื่อ 3 ต.ค. 2024
- RRSP Meltdown Strategy - Save Thousands In Taxes
𝗦𝗰𝗵𝗲𝗱𝘂𝗹𝗲 𝗮 𝗰𝗮𝗹𝗹 𝘄𝗶𝘁𝗵 𝗗𝗮𝘃𝗶𝗱 📅 calendly.com/a...
An RRSP meltdown strategy, is a technique designed to strategically withdraw funds from your RRSP to minimize taxes and maximize your retirement income. It's an important aspect of planning and timing when it comes to withdrawals, ensuring that you can enjoy your retirement savings without facing exorbitant tax bills.
Getting a retirement plan is key to putting all the prices together. The first step is to assess your current financial situation, including your RRSP balance, other retirement savings, income sources, and projected expenses. This assessment forms the foundation of a tailored meltdown strategy.
Understanding how Canadian tax brackets work and why timing your RRSP withdrawals strategically can lead to significant tax savings. By withdrawing funds during years when your income is lower, you can reduce the overall tax burden on your retirement income.
Utilizing tax-efficient investment vehicles, such as Tax-Free Savings Accounts (TFSAs) and non-registered accounts, in conjunction with your RRSP will further reduce your over-all tax.
The benefits of pension income splitting, a strategy that allows you to allocate up to 50% of eligible pension income to your spouse, potentially lowering the overall tax payable by both partners.
𝗪𝗵𝘆 𝗬𝗼𝘂 𝗦𝗵𝗼𝘂𝗹𝗱 𝗪𝗮𝘁𝗰𝗵:
This video is not just for economists or financial experts; it’s for anyone concerned about their financial well-being in the coming years. If you're looking for ways to safeguard your investments, plan for retirement, or understand the economic indicators that could impact your future, this video is your go-to resource.
By the end of this discussion, you’ll have a clearer understanding of the driving forces behind rising interest rates, market volatility, CPP / OAS, Retirement planning and the tools you'll need for protecting your assets and ensuring a secure financial future.
Don't leave your financial future to chance. Equip yourself with the knowledge you need and consider getting professional advice to navigate these uncertain times. Subscribe for more insights and actionable tips.
Disclaimer: This video is for informational purposes only and should not be considered as financial advice.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to schedule your confidential meeting with me. You can schedule your meeting here: calendly.com/a...
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Very pertinent and true !! BUT the hardest part is the psychological aspect of withdrawing many thousands of dollars from the RRSP each month or year ;) Hard to do after 40-45 years of accumulating !!
Great insight with your comment. You're so true about this. Many retirees feel uncomfortable spending money at the start of their retirement. It takes a little time but when your working with an advisor, have a retirement plan and regular communication you will gain the confidence to spend your cash and enjoy your well eared retirement.
I've been contributing to my wife's spousal for several years. She was contributing to her own RRSP until our kids were born and hasn't been employed for over 22 years. It has grown quite substantially. She has no income and we have just started to meltdown her RRSP into her TFSA.
This was a very well made and accurate video. The scenario of deferring CPP&OAS until 70 is brilliant for someone that has a sizeable RRSP to access.
Not a criticism but this approach only works for those that can live off of just their RRSP, meaning they have a large even RRSP to draw down from and cover the taxes. If there is a Non-Registered account, that will also help.
You still lose all your OAS in a clawback unless you parked virtually everything in offshore tax havens.
Another great strategy used by the fellow whose wife is redeeming her RRSP is to withdraw $25k/year and add these funds back into his RRSP at the higher rate. Then withdraw those funds using the 'dent swap' scenario. A financial plan combines goals, tax planning, assists in income splitting while offering confidence in the future with a Purpose! Wonderful and exciting!
Good video, Aaron! Deferring CPP and OAS makes absolute sense for those with good health as the guaranteed return within both plans is very good. I have been using deductible, real estate-secured debt as a tax deduction. The investments in my open account are 'tax-deferred' using corporate class while the interest offsets my dividends from my corporation and other income. At age 74, I am keeping my OAS while building a large 'open portfolio'.
Thanks Ian, Good to hear from an incorporated business owner. Balancing your corporate investments with your personal assets requires careful planning. Thanks for your comment.
The way I see it making 6 or 7 percent by waiting to take CPP and OAS sure beats losing all your money in the stock market. I'll never see a OAS payment but will get them and then pay all of it back at tax time every year.
Excellent information! 😊 👍
My RRIF meltdown began at age 57. My RRIF withdrawals are coordinated with my pension income to fall in the same tax bracket as would be the case without RRIF withdrawals.When my bridge ends at 65 I will triple my RRIF income to age 70. OAS is likely at 65 for me and CPP at 70, at which time my RRIF will be completely melted down. My effective tax rate will be relatively constant throughout this period, give or take…about 20 to 22%. My TSFA - to which I still contribute - is to fund large and exceptional expenses and I use it as my personal line of credit.
The $2,00 tax credit doesn't kick in until the year you turn 65. Bad idea starting at age 57.
Great video. For example, you presented what is monthly take-home income (after taxes) for this individual? Thanks
Not quite as rosy as it might appear. The scenario described does not appear to take into account all the Interest, Dividends, and Capital Gains that would continue to increase tax free in the RRSP. That earned money now outside the RRSP becomes taxable, so those taxes need to be added to the Meltdown strategy to make a fair comparison.
Actually it is. An RRSP meltdown doesn’t eliminate taxes but it can reduce your taxes paid year over year. Impossible to measure everything at once because it depends on your goal. We’re also not illustrating the estate making a charitable contribution to further lower taxes. The question is what is your goal? Use more of your money while you’re living with a tax efficient withdrawal or is it not leaving money behind for CRA? Each outcome has a different tax consequence.
I shoved 23 million into gold bars in an attempt to get my OAS but still fell short. Just buy something that produces no income.
Since there is bank/financial service fee incurred (I think it's up to $50 per each RRSP de-registration/withdrawal), we may consider rolling that partial portion (whatever your annual RRSP meltdown amount) to RRIF first & then withdraw from there to save some fees. BTW, I suppose this RRSP/LIF meltdown method only work best for early retirees with many available years under low tax bracket prior to age 71.
I paid no de-registration fee and no fees on my monthly RRIF withdrawals. In fact I pay no account fees other than my mutual fund investments.
@murraytown4
As far as I know, Canadian mutual fund fees are among the highest in the world.
I paid no fees to withdraw monthly amounts from RRSP during the two years leading up to its conversion to a RRIF, and neither held any mutual funds.
@@murraytown4RRifs have no fees but lots of banks charge a fee when it’s money taken out of an RRSP .
Great video! Will you in future also be doing one with also rental properties?
Yes in fact, next week I’ll be posting a video about that. Stay tuned!
You shouldn’t have to turn your rrsp into. a RIF but be able to leave your money in your rrsp and be allowed to remove money when you want not by a prescribed amount. That seems fair to me.
Thanks for the video Aaron, the example you have shown, what’s the benefit of pulling more from RRSP when the money is not needed? I guess it reduces the overall tax bill over a long term? Thanks
Yes it reduces the overall tax and also doesn’t leave it behind for CRA
Now that's a fantastic strategy !! well executed. Quick question, when the 50% is withdrwan from the LIRA and placed into RRSP , do you need to already have unused Contribution room available in the RRSP or does the LIRA rules alllow you to contribute 50% to the RRSP?
There are some Provinces that do not allow 50% unlocking. This was na Ontario example which allows at age 55 to unlock 50% of your LIRA to your RRSP. You don't need additional unused contribution room.
@@AaronWealthManagement Thanks for clarifying this , very much appreciated
@@AaronWealthManagement Thank you for clarifying this, very much appreciated
Hey Aaron, I just watched your video and I must say that it was really informative and well-made.
I was wondering if I could help you edit your videos and repurpose your long videos into highly engaging shorts? I can also make high CTR thumbnails for your channel
Clearly the example shows a millionaires portfolio as it’s over 1 million and it’s not even incl the spouse so not the average Canadian imo. Good info but not how my retirement will play out that’s for sure
Hi Annette, generally speaking an RRSP meltdown is used when someone is likely to not get through all of their RRSP/RRIF under a minimum withdrawal within their lifetime, resulting in leaving money behind for CRA.
Great video. Just one question. If you have 1,000,000+ in rrsp & rif and draw out into taxable accounts due to tfsa being fully contributed already, will the interest, which is now treated as taxable income, not be an issue? At, say 4% interest, you will now have 40,000+ taxable income from that alone. At 5%, interest income would be 50,000+. In the rrsp this would be tax free interest except for what you actually withdraw. How does this play into the meltdown strategy? Thanks again for the great videos & content.
Great insight. You're correct in that the combination of tax on withdrawals and taxation of a non-registered account is a concern. It's a question of goals. What is the need for accessing cash in the future? The other concern for many is leaving RRSP/RRIF behind for CRA and never having used it. When you do that you're just growing an account for CRA and they won't send flowers to your funeral.
I'm 61 will be 62 in Nov .I live in Ontario and have 250k in a LIRA and 650k in rrsp . I put 25 k a year into RRSP to minimize tax and still paid 1300. Should i or can i move 50% of the LIRA into my RRSP now i only have the 25k room.My TFSA is fully funded from savings interest/ dividends as is the 25k into rrsp
Yes, you should unlock 50% of your LIRA and then work on a withdrawal schedule for your RRSP. I can help you with a plan. aaronwealthmanagement.com/financial-plan/
Unfortunately my Financial advisors are from YT any other FI I've tried to work with has not been transparent or trustworthy!
Sadly I hear that too often. Get written instructions from them as to what you agree to and how they plan specifically to manage your portfolio. Then if they do something not aligned with your instructions you’ll have documentation
Good info, I am retiring at age 59 in one month. I have a sizable LIRA now from a previous employer, I will be converting to a LIF/RIF [50%-50%] very soon. I am currently in a defined contribution plan [DCP] with my current employer, its current value is only about 15% of what my LIRA is. I would like to move the defined contribution plan funds to the same financial institution I have my LIRA with. I won't get the [DCP] options package until after I am no longer employed by the company. What would I move the DCP funds to, the current LIRA, the LIF, the RIF would I need to open a new account? Thanks.
They funds from your employers contributions would be considered a LIRA and your contributions would be an RRSP.
@@AaronWealthManagement Thank you for your fast reply, great channel for Canadians, excellent advice and well explained!
Only issue I see is a loss of massive dividends that could be earned over the 5 year period. I would pull rrsp money from some term deposits and just the dividends from the stocks in rrsps then fine tune and pull the rest out at some point before 71 or possibly even spread the rest out over the next 5 to 8 years. Not many people have portfolios north of 500 k for singles in retirement so your videos like many are painting plans with a very wide brush.
Thanks for your comment. My channel content and business is focused on the 50+ age group with $500K + of investable assets so all of my retirement plans represent people in those areas. I’m “painting” with a very narrow brush.
Thanks David, What are your fees for the meetings, financial plans etc.
Hi thanks for watching the video. There is no charge to have a meeting. Here's a link to my calendar: calendly.com/aaronwealthmanagement/discovery
@@AaronWealthManagement Thanks! I'll review the calendar and schedule it for some time next week
Hi Aaron. Is it true that QPP can now be pushed back until age 72?
Yes the maximum age of deferral is 72