Question: should I take advantage of my RRSP top up at my younger age during 43% income bracket years and then look into this strategy since TFSA room is wide open?
@@marcin7570 Starting earlier is indeed advantageous, allowing for more time to leverage the benefits of the TFSA Maximizer strategy. By optimizing your TFSA contributions early on, you can build substantial tax-free savings over time. Additionally, beginning earlier provides a longer runway to accumulate wealth in your TFSA, which can be particularly beneficial as you approach mandatory RRIF withdrawals at age 71.
@@precedenceprivatewealth2872 appreciate the response :) would you lean towards maximizing RRSP due to tax deferral with annual refund and then maximizing TFSA at higher tax bracket once RRSP maxed out?
Hey @marcin7570, Glad to hear you appreciate the response! When it comes to maximizing your RRSP versus TFSA contributions, it often depends on your individual financial situation and goals. Maximizing your RRSP contributions can indeed offer tax deferral benefits, potentially resulting in an annual tax refund that you can then reinvest. Once your RRSP is maxed out, focusing on your TFSA can be advantageous, especially if you're in a higher tax bracket. TFSA contributions grow tax-free and withdrawals are tax-free as well, which can be beneficial in retirement or for other financial goals. Ultimately, it's worth considering factors like your current tax bracket, expected future tax bracket, investment timeline, and specific financial objectives. Consulting with a financial advisor can help tailor a strategy that aligns best with your circumstances. Cheers!
@@precedenceprivatewealth2872 thank you so much 😊 I’ll will definitely reach out in the future for assistance. Loving the videos 🙌 thank you 🙏 for sharing your knowledge
Thank you so much for this video. It hurts to think that half my RSP savings will go to the government! This has been a real eye opener. 🤩
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... ya, be a good slave ... income tax is extortion/theft ... go all cash income and stop paying slave tax which the government (govern=control/mente=mind....duhh)
In the vast majority of cases half of your RSP does not go to the government. It all depends on how much you take out. When we put the money into our RSP we got a deduction on our taxes. Most people will be paying significantly less than 50% and less the initial deduction when they withdrawl money from their RSP or RIF in retirement.
@Precedence Private Wealth : This is very interesting. Thanks for sharing publicly. One thing I couldn't understand is if the money from the RRSP and the TFSA are invested into a mortgage, then how can money be taken out of the RRSP via a RIF in order to make mortgage payments? I know I must be missing something, but I can't figure it out. Thanks.
I was wondering the same thing. I think this is roughly how it is done: Using similar numbers to the ones in the video, you'll pay to your RRSP the following amount of interest 3%*500k=15k, and you'll pay your TSFA 10%*100k=10k of interest. Now that you've paid 25k of tax deductible interest, you can RIF that 15k and put it in your TFSA.
@@QUARTZdls YYYEES! i agree. How does it work? For me, it seems extremely conplicated. And when i do not understand something i routinely stay away from it. Thanks.
Really innovative way to reduce tax burden. It seems like a great plan for some I challenge your statement about having a 35-40% tax burden to remove 500k-$1m from an RRSP. I found you can drive it to 13.5% pretty easily. Here are the assumptions.. Retired at 65 with $1m in RRSP an maxed out TFSA. 1. defer OAS and CPP until 71 2. take max RRSP deductions starting at 65 to drive 13.5% ave tax rate 3. continue to max out TFSA contributions 4. Then when forced to RIF RRSP will be low enough to stay close to the target 13.5% tax rate 5. At 71 your CPP and OAS are 45% higher and indexed to inflation Using this approach you never hit OAS claw back. Over time the RRSP drives to zero while the TFSA never gets touched. Same outcome. Costs 13.5% tax but nothing complicated and does not depend on the government not shutting down these "loopholes"
Thanks for watching our content and for your feedback. I think the assumption you provided is missing the future growth rate within the RRSP. Even a family was to income split at age 65 for approximately $80K total income the growth wtihin the RRSP it will never allow them to reduce the value within the RRSP over time. Therefore, the only way to reduce it to zero is to make more substantial withdrawals which inevitably forces higher taxation. Also, it is assuming that clients are desiring that low of income from their savings up until age 65. So there is usually alot more to an analysis of whether this is suitable for a client or not. Age and oustanding balance are important factors, but there are other things to consider such as desired lifestyle, additional pension earnings, business assets, etc. that also play a role in this process. Also, although 13.5% is a low tax consequence in comparison, it still is not zero. 😉
@@precedenceprivatewealth2872 All reasonable assumptions and perspective. I actually factor all of it into the plan and admit that I am not typical case. What makes my situation unusual, is I am happy with zero risk investment(AAA bonds and GICs), and I am happy to live comfortably below my means. So my investment return only keeps pace with inflation. The last surviving member runs out of RRSP at 99 but leaves a ton of TFSA, property and fixed assets. So it does pay 13.5% tax which seems like a win after a life of 50%+, but I am happy with zero risk, and zero concerns about whether CRA is coming to get me.
I think I have to watch it 4 more times to understand it, but looks like a very good strategy to avoid excess taxation.
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... ya, be a good slave ... income tax is extortion/theft ... go all cash income and stop paying slave tax which the government (govern=control/mente=mind....duhh)
Thanks Adam , Your videos in my opinion are the best source of answers for soon to be retiring curious Canadians outside the financial advisors office .
This is the type of transaction that would attract GAAR. For those who don’t know what GAAR, it basically allows the CRA to deny the benefits of a transaction where the rules are used to avoid tax in a manner in which the rules were not meant to be used. Paying interest to yourself actually involves no risk in which case the interest paid on the TFSA may not be reasonable. If the CRA seems the interest to be unreasonable, it would be denied. Furthermore, for those that rely on RRSP to fund their retirement, the tax rate is rarely over 40%. Unless the CRA has actually issued an interpretation bulletin on this type of transaction or it has been tested in court, this would considered to be what is considered risky or “aggressive” strategy
Thanks for watching and for your comments Robert. There have been several important updates to this strategy that tackle many of the underlying concerns you have put forth. The more updated version of this video can be viewed at www.precedencewealth.com. This will more accurately illustrate the steps taken within the updated structure to satisfy CRA’s requirements. If you have further questions after viewing this video please reach out to us. We’d be happy to discuss further with you. Thanks again for watching our content.
Also, please remember that if an individual has only a modest RRSP then this type of strategy should not be prioritized. However, just because an individual is not in the highest tax bracket does it mean that they should not try to structure their financial affairs and assets in the most tax efficient way possible.
Yup. This is jiggery pokery and will only "work" if you have all of the steps in place and CRA doesn't look too closely. These your own mortgage strategies are ripe for a slap.
Great video!! I'm not there yet but so great to know there are legal CRA compliant strategies that allow regular Canadians to capitalize on their hard earned money in retirement!! Great explanation!
Just remember. Nobody is going to set all this up for you for free. It's not a given that "regular" canadians have the wealth to make this strategy profitable. I guess it depends on how you define "regular" though. I'm sure it's profitable for the tax accountants for sure.
Thanks so much Tim! We really appreciate you sharing this strategy. It’s important to note that your house does not have to be completely free and clear. You just have to ensure there is at least $250-300K in available equity. Hope that is helpful.
I paid off my 356,000 dollar cottage at 44. Bought it at 29 but I got a good deal & fixed it up with another 20,000. But I took amortization / mortgage for 15 yrs.
I may have to close my eye and bit my teeth on paying tax........, It must be financial obligation somewhere that we have to pay..., I thought manage your asset and retire early to enjoy the hard earning money.Thank you for the information.
I heard you mentioned about TFSA growth is tax deferred but also mentioned that upon withdrawal it is tax free. So just to clarify, there is no tax deferral in TFSA growth because it is tax free.
Hi Neil, Thanks for your question. Here is a brief overview that may help.. # 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively. #2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp. #3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS. #4. Now we begin to withdraw the money out of your RIF which is taxable income. #5. We then make your mortgage payments to the MIC. #6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset. For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thanks for the reply but i didn't really get it. I'm not sure why RIF is mentioned. Do you to convert the RRSP to RIF? Is the mortgage of the house will be from the MIC. What proceeds from MIC?
@@NielTenebro Yes you convert the RRSP to a RRIF. We then make your mortgage payments to the MIC. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset. Niel, if you would like to have the concept explained, please contact us at info@precedencwealth.com and I can set up a call.
The strategy is good...However the risk with this strategy is you have to sell your assets and then buy back in for the initial non-registered accounts.. Secondly when you move the money from the non-registered accounts you need to sell assets again to move the money back to the TFSA account. Then you need to purchase assets again if you're looking to invest and grow. My reservation on this strategy is the amount of selling and buying assets.. Something you need to consider in this strategy
Thank you for your comment Brandon. Your initial assessment of the cash flows required is inaccurate. The only forced transaction required within this strategy is the liquidation of RRSP assets to initially fund the strategy. However, this has since been adjusted as well and is no longer required. Therefore, currently no other assets are required to be sold. The non-registered assets are eligible to continue to grow without being disrupted as long as the client desires. Recall that the TFSA grows only by the interest earned on the private mortgage(s) in which it invests into. There is not a “transfer” or moving of assets from the non-registered to the TFSA whatsoever within this strategy’s sequence of cash flows. Hopefully that help clarify. Should you have any further questions, feel free to send another comment/message or reach out to us directly and we can discuss more about these specific details. info@precedencewealth.com
Great, informative video that is specific to Canadians. Thank you. I do have a mortgage so this is not as applicable to me but I was wondering how to transfer my RRSPs to a TFSA without incurring any penalties or fees if possible.
@precedenceprivatewealth2872 Hey there. Would you kindly respond to @chrism7199 comment above? I notices you didn't and his response seemed to have some reasonable financial implications
This is a brilliant way to avoid tax. 👍 I have one question. The RIF income used to fund the mortgage payment is a taxable income. You mentioned the tax can be offset by the tax deductible from the loan payments made in the NR account. However, my understanding is that mortgage payments are tax deductible in the US but not in Canada. So how could we avoid the tax on the RIF income in this strategy? Thanks 🙏
Liked the presentation - very smooth. I don't think there is anything wrong, however, there are some risks not identified (re-investment risk of the mortgage funds borrowed & potential under performance within one's RRSP) and additional overhead/mgmt costs with this strategy. Someone with a little knowledge can replicate this in a simpler way with less risk. If someone takes out a mortgage from a bank paying 3% interest on their home to invest and earn 6% growth then they are ahead of the game since 6%>3%. The interest deductibility exists to offset the tax liability arising from the withdrawal of $10,000 from your RRSP. You can contribute the $10,000 to your TFSA, too. This result is the same as your strategy. This is simpler and better than your strategy because 1) you are investing the funds in your RRSP to earn 6% (on the same investments as your non-registered account) instead of a mortgage that only pays 3%; 2) you avoid the high management costs of the mortgage administration (min $2-3k initial + $1k/yr) and professional advice (your 1.5% fee). Keeping the strategy simple allows one to focus on each element. If you are still working and have a deduction available from the interest on the mortgage, why not just use the deduction to offset part of your regular income from your job? Why not leave the funds in your RRSP until a time when you retire and have significantly less income (and thus less income tax)? [Rhetorical questions]. Despite the fact this strategy is sub-optimal, I still appreciate the video as it brings greater visibility to the benefits of learning to invest and tax planning. Thxs!
Thanks for watching and providing your feedback. Unfortunately your calculations are not accurate. This is not the same as a basic leverage strategy and therefore shouldn’t be compared to such. Leverage involves additional 3rd party investment risk. It is very effective to use leverage appropriately but this strategy does not do that.
A couple of questions: a) How can you have a RIFF if you are supposed to sell all CASH and re-invest in a Non-REG account? This implies the RRSP and TFSA are left empty, and b) Can you transfer in-kind to avoid DSC charges?
Hi Rosa Delgado, thank you for watching our video. 🙏🏻 Great question! The special purpose mortgage vehicle is actually held inside your RSP and TFSA. The proceeds of the resulting mortgages are then invested into a non-registered investment account. With respect to DSC charges...unfortunately they cannot be held inside the RSP as they need to be sold in order to be used in the strategy. However, we have helped many clients manage their investments and sell them over time as they become free or matured. That’s really unfortunate though...any advisor that buys DSC’d investments for their clients should be ashamed of themselves. In 2018 it is complete unacceptable...but we are aware that it still often happens. 🙄
@@toddmclay5029Hi, I'm reading this 5 years after., I'm confused on how do you pull out a RIF when the only thing sitting in the RSP account is the mortgage? I'm assuming all the cash went into the Taxable investment account - or you just pull out the interest, after the mortgage payment is deposited.
The RRSP/RIF still has its full value say the 500k at the begining. The minimum RIF payment is based on that, say 5% and rising each year. This payment is satisfied by the mortgage payments going back in so there needs to always be a greater repayment plus interest going in then RIF coming out. As the RRSP/RIF is depleted the RIF payments as a gradually rising percentage of that will diminish. RIF payments for the full year are set each Jan 1 based on the RRSP/RIF value Dec 31 of prior year.
This is very interesting concept , reminds me bit of the " Smith " system that recommended using borrowing to make your principal residence mortgage interest tax deductible.
What would the upfront and ongoing hardcosts be for this strategy? CMHC costs - initial, monthly? Cost of preparing all of the associated paperwork/documentation, and management fees? I thought CMHC was there to just insure/gaurantee mortgages for first-time home buyes. This is why it is good to have a good financial advisor and accountant. Thanks for the video.
Hi Andre & Beth, The main difference between the original TFSA video and the most recent one is that we now use the Mortgage Investment Corp instead of a direct mortgage and the strategy evolved to the point where there are no longer any CMHC fees required for the set-up.
@@precedenceprivatewealth2872 I am still struggling to understand the exact way this should works. Would like to see a some sort of a spreadsheet with the details showing the RRSP/TFSA, the mortgage, the taxes, the deductions ... With the interest rates now substantially higher, what rates that could be payable on back to the RRSP / TSFA. thanks
I don't understand the part where the RSP funds are transferred to a taxable investment account. Doesn't that trigger massive taxes because the funds are being withdrawn from the RSP?
They are offset by the tax deductible interest. Therefore eliminating the tax on the RRSP withdrawal. Hopefully that helps clarify. If not, reach out to us. Happy to walk through your questions together.
This seems similar to the “Smith” manoeuvre, but by creating your own investment into your 1st and 2nd mortgages. I’m failing to see how this is considered income by CRA??
HI Sumyunguy, Thanks for your question. Because we are using realistic prescribed rates and you are satisfying the connected person rule, the borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear.
Well, my friend, when the shit hit the fan, you're the only one who gets it. Because you're the one who submit and sign your tax return. I guess the big question is This tragedy foul proof? It will be nice PRECEDENCE can give us a straight forward answer since the inception of their strategy, does it pass CRA review/audit? a YES will be nice, if not, whats the basis of adjustment, if any.... my gust feel is this strategy wont pass the GAAR General anti avoidance rule, Section 245 of the Income tax act.
correct me if i am wrong! what you're saying is you to have 1 piece of property Mortgage free. there fore it don't matter if you have 1, 2 or more pieces of property that are still mortgaged ?
Hi Jim, Thanks for watching! Glad you found the video valuable to you. Great question!!! It depends on a number of factors including the value of the properties available to be used within the strategy. I would suggest reaching out to our team at info@precedencewealth.com and we can provide a personalized illustration based on your own specific situation. Thanks again for your time and attention!
Very interesting video. I appreciate your confidence. Though I have a very hard time accepting there is no risk for this strategy from the CRA. Can't they apply GAAR or something and call this tax avoidance in spirit? Quacks like a duck .....
I’m with you, pongster. This may be legal but it shouldn’t be. I like living in Canada and don’t mind paying my share of taxes- we get a lot from them: health care education, roads, police, etc. The point of RSPs is to defer taxes, to avoid them. This scheme may be legal but it stinks.
I have done all these strategies. The problem is getting the CMHC approval, AND getting the institution to declare the mortgage as approved / allowable JR
Would it be that the “TFSA MTG Payment” includes the interest rate (which is your rate of return on the Self-Directed TFSA MTG) so therefore that return is not a Contribution? (But rather the growth on the TFSA capital?)
Sounds like a good strategy, I see lots of upfront cost - to set up/combine and sell off RRSPs. Any difference if RRSPs are converted to RIFs already? When selling RRSP isnt there Automatic withholding taxes? Cant quite understand that piece of the equation.
Feb 2021- Once RRSP funds are converted to cash and moved to a taxable investment account the taxpayer receives a Tax slip for the withdrawal. In effect what your proposal entails is making your house a registered asset that in reality sits inside your RRSP account. I would like to know total costs of tour strategy and rulings by CRA in the past 2-3 years.
Agreed on the fact that every penny that leaves RRSP account is withdrawal and WILL be added to your gross income for the year. BTW, RRSP withdrawals can be cash or in-kind, i.e., you don't have to sell your stock/bond/mutual fund in order to withdraw.
You don’t withdrawal your assets from your RRSP... you simply invest your registered assets into a special purpose mortgage investment that I turn lends you the money back to create the tax deductible interest. Hope that helps clear things up!
@@precedenceprivatewealth2872 "creativity" is the word u use. I am not dumb but I do not understand your scheme with the house. I do not think it is real.
@ Hi @Grundewalt, Thank you for your message and for sharing your concerns. I completely understand how some of these strategies can seem unclear or even overwhelming at first. To clarify, the approach we discussed is a form of tax planning, not a "scheme." Tax planning is a legitimate and well-established way to structure finances within the legal framework to help achieve specific goals, such as optimizing your resources or reducing liabilities. That said, it’s important to note that not all strategies are suitable for everyone. Each plan is tailored to an individual’s circumstances and comfort level. If this particular strategy doesn’t feel right for you, that’s perfectly okay. I’d encourage you to speak directly with a trusted professional who can explain the details in a way that aligns with your unique needs and goals. We’re here to help and ensure you feel informed every step of the way. Please don’t hesitate to reach out if you'd like to explore this further or discuss alternative approaches.
A bit complicated but interesting. I’m thinking there must be a way to make it less complicated but of course with less upside too . Maybe using a second mortgage from our house and do something with it ?
This is very interesting, but I have to know a couple things. 1. This is purely a cash transfer scenario there is no payout to yourself during the process, correct? 2. Upfront deposit? Must be less than 20% as per cmhc insurable mortgage. This cash comes from? My pocket? Tfsa? Or is it just the CMHC fee you pay? 3. Term length? At 56 and having to complete before age 71 is this depending on the size of transfer from TFSA to RRSP? It would seem to me there's some principle interest amount that would make that sweet spot work? 3. A certain portion remains in the RRSP at the end of this. Just pay the taxes and move on? Thank you for the insight. Although I'm only 38 It may be of interest for me to pay off my mortgage before retiring for this reason.
It would be best if you speak directly with Todd to discuss the strategy.
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
Then you borrow from another MIC corp at those prescribed rates and that’s what creates the tax-deductible interest.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 I would also like to know if this passed a CRA audit, as I see its on the CRA website under their TFSA maximizer scheme and the Advantage Tax applies.
@@Marco-t5t Because we are using realistic prescribed rates and you are satisfying the connected person rule, borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear. This is what the CRA is going to see: Interest Deductions: You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove. A pre-qualified investment inside the RRSP A Pre-qualified investment inside a TFSA that is reasonable A RRIF withdrawal Tax-Deductible Interest Why would the CRA think that you are creating an unfair advantage? You are paying tax on your RRIF There will be a little bit of a tax drag that you will get back at the end of the year. There will be tax on the non-registered account. It’s not a switch, it takes 10 - 15 years in some cases It’s the restructuring of your affairs
@@Marco-t5t Because we are using realistic prescribed rates and you are satisfying the connected person rule, borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear. This is what the CRA is going to see: Interest Deductions: You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove. A pre-qualified investment inside the RRSP A Pre-qualified investment inside a TFSA that is reasonable A RRIF withdrawal Tax-Deductible Interest Why would the CRA think that you are creating an unfair advantage? You are paying tax on your RRIF There will be a little bit of a tax drag that you will get back at the end of the year. There will be tax on the non-registered account. It’s not a switch, it takes 10 - 15 years in some cases It’s the restructuring of your affairs
We had borrowed RRSP not because we need tax shield but due to insufficient money even for initial 20%. We had to pay back same amount with interest to government.
You still own the property, that doesn’t change, once you put the mortgage on, that just pulls out all the equity in the property and turns it into cash, that you reinvest
Sounds interesting, but there is one thing I do not understand. When you send all the money to a non-registered account 9:30, don't you have to pay the income tax on the whole sum? Or do you mean that the mortgages stay in the RRSP and RRIF? And if the mortgages stay in the RRSP and RRIF, how do you get the tax credit for the money withdrawn from RRSP to pay the interest? Thanks!
Here is a brief overview that may help.. # 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively. #2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp. #3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS. #4. Now we begin to withdraw the money out of your RIF which is taxable income. #5. We then make your mortgage payments to the MIC. #6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset. For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thank you for a detailed reply. One more question, when the mortgage is paid off, the lender receives the full amount of the principal plus interest. Therefore, the RRSP account will also receive the full amount of principal when the mortgage is paid off. Doesn't it mean that the full conversion of RRSP into TFSA is not possible?
Thank you for pointing that out, and I truly appreciate your patience. Our Precedence Capital site is currently being rebuilt, which is why the fee page isn’t accessible at the moment. I’d be happy to email you a detailed fee overview directly. Please let me know if there’s anything specific you’re looking for. You can also reach out to us anytime at info@precedencewealth.com with your questions - we’re here to help! Looking forward to hearing from you,
@@w.s.2102 Not name calling, but would you understand ''fuck You''. Just wondering your skill level here. Please explain to an understudy Prime Minister Name like Trudeau how this is rigged. Cause I fully understood what he said. Maybe you didn't?.
@@precedenceprivatewealth2872 i got in trouble again it seems 😂.....I just hate seeing someone sell traditional financial products when the traditional financial system is basically a rigged poker game....I encourage people to take personal responsibility for their wealth creation and management instead of just handing that responsibility to someone in a nice suit that makes his or her living off others hard earned money
Correct! Must be held in a non-registered account. money borrow to invest and it clearly 24:16 states interest paid on money borrowed 24:19 to invest is tax deductible assets must 24:23 be held in a non registered taxable 24:25 account they must be available for any 24:28 asset class that meets the income and 24:31 profit test that would include stocks 24:35 bonds mutual funds businesses etc it has 24:39
@@precedenceprivatewealth2872 Borrowing money to invest always has some level of risk. Sure you can write-off interest. You must have enough cash flow to pay off principal.
Thank you! Nov one ever told us this, Not even my current investment advisors. Maybe our portfolio is way too small😂 what is your minimum portfolio size
Hi David, Thank you for your message! I'm glad to hear that the information was helpful for you. I understand how important it is to have clear guidance, especially when it comes to investments. Regarding your question, our minimum portfolio size is $250,000. This threshold allows us to provide the comprehensive attention and services that our clients deserve. If you're open to it, I would be happy to discuss your current situation and explore how we can support you in achieving your financial goals. Feel free to reach out if you have any more questions!
Does anyone here watched Dave Ramsey show? I was wondering why you lending yourself with an interest rate of 3% plus up to 15% to a 2nd mortgage If you can pay cash. I think you are paying more with the interests rather than being taxed when you withdraw your money from rrsp. In addition, your money in the tfsa is already safe for being taxable, why you need to use it to get 6-15% interest rate of mortgage plus taxable if you you put or transfer to a non reg taxable account. If I will count the numbers, I'd rather be taxed than paying up to 18% in total for a mortgage with my own money.
Hi Connie Deja, Thank you for watching our video and for your comments. Here is a quick outline of why the strategy is set up the way it is. As discussed in the video, the benefit to having a personal mortgage inside your RSP and TFSA is that you are able to pay yourself interest. The interest itself is funded by a withdrawal from your RSP. And because the interest itself is tax deductible it totally negates the tax payable from the RSP withdrawals. You do not pay interest to anyone but yourself through this strategy. Therefore the 3% and 15% (not 18%) are actually paid directly to you personally. The end result is a tax free transfer to your TFSA overtime. Also, recall that this is not a leveraged debt situation. Because you own the mortgage on your RSP and TFSA personally, your net balance sheet does not change before or after engaging in this strategy. It is merely the taxation of the assets themselves that gets affected. Hopefully this helps to clarify. Please be sure to let us know if you have any other questions!!!
Oh I get it now. Thank you so much for this information. I think it will help to a lot of people in the future. 😍 I will take a picture of this comment of yours to make sure I will not forget if I'm going to use this strategy later on. Lol
I found the following on your website: "And, for those concerned about how CRA will view this strategy, well, every Mortgage Investment Corporation created within an RRSP, RRIF or pension account must be registered with them, guaranteeing their approval before implementation. So, no worries on that front. The main restriction is that this approach is only available to “accredited investors,” those with $1 million of investable assets, or $200,000 earned personal income, or $300,000 earned family income." So it looks like MOST Canadians cannot adopt this strategy. The median family income in Canada is $105K.
BTW. What counts as the $1 million investable assets? RRSP? LIRA? TSFA? RESP? 401K? IRA? Roth-IRA? Registered Stock? Home Equity? Is this joint or individual?
According to other websites, those who can do this strategy, generally don't benefit enough to make it worth their while. And those who would benefit, do not qualify. Normally the mortgage insurance is about 0.5% on the first 65% of the value of your come. And 2.75% on the value after that. So you only want to mortgage the first 65% to participate in this strategy. And given the individual maximum of $75,500 that you can add to an TSFA, unless you have been maximizing your TSFA and using at an investment vehicle, you probably don't have much more than than in a TSFA. Crunching the numbers a 3:1 ration seems about optimal. So that means you'll probably want to work with a $300K mortgage to start with. A couple might do up to a $600K mortgage. As an American though, I would avoid that. Because it would requiring putting my name on the deed of the home, which means it would be subject to capital gains tax upon sale. And since one would only want to do this on 65% the value of there home, they would need a house worth $1 million dollars. Converting $300K to being tax free to pay capital gains on a home that might be worth $2 million when you sell will probably not be a break even deal. However, there are probably ways this strategy could help me, I just have not figured them out yet.
@@billc.riemers3245 HI Bill, There is a updated video that no longer has CMHC Involved. Here is a brief overview that may help.. # 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively. #2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp. #3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS. #4. Now we begin to withdraw the money out of your RIF which is taxable income. #5. We then make your mortgage payments to the MIC. #6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset. For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thanks. As a follow-up. I am a dual US Canadian citizen. My wife is Canadian. All our income is in my name. My wife owns are home. I am not on the title so that we won't owe the US capital gains tax should we sell our home. Will this strategy still work? Or would I have to add my name to the title an incur an obligation to pay capital gains tax later?
@@billc.riemers3245 HI Bill, If you have time for a quick call with our lead advisor Todd McLay, I can have all your questions answered, and possibly do an actual illustration for you with your exact numbers. info@precedencewealth.com
Older video, but hopefully still valid. Does this actually change the amount in the TFSA account or the possible limits or simply transfer money from RRSP into the registered mortgage?
Yes, still very much valid. I would suggest visiting us at www.precedencewealth.com to review a more recent video as well as our FAQ section. It will help you asses this strategy best!
@@timcestnick2004 Hey Tim, haven't heard your name for quite some time. We are certainly aware of these articles and the allegations stated within them. However, it should be of no surprise that this strategy will garnish attention from CRA. However, the facts are misrepresented within their statement. We will be putting out a video in response to their allegations very soon. Nothing has changed with respect to the validity of this strategy. We also will be sharing an alternative strategy that eliminates any possibility of scrutiny as well in the coming days. ps: Are you still writing books with Jerry White?
@@timcestnick2004 CRA should issue an Advance Ruling on this particular Precedence Wealth investment plan rather than post a bulletin of what they deem 'Commercially Reasonable' But, they are CRA and can make your life pretty miserable. I do 2nd mortgages all the time and 15% + fees is not out of the ordinary. Most MIC's pay investors 10% - what are they charging their clients in order to make a profit?? (13-16%). Real Estate investors are always looking for solid lenders to partner with. Canada usury rules cap interest rates on loans at 60% apr. TD used to administer these and would not touch your file if the rate was above 36%. CRA should look more closely at Payday Loan operators. In the end, this was a good plan if CRA accepted it.
Hi Mashaca, Thanks for watching. Yes, we are still running the program, but have made a few updates. If you're interested in speaking with our lead advisor Todd McLay, please send me an email - info@precedencewealth.com
A little above me but I think I understand the plan. I will ask my investment broker about his thoughts . Do I have to take all my rrsp out for this or can I do 1/3 like a million . What if I have no room left in my TFSA .
Hi John, The minimum amount we would consider doing the strategy for would be $250,000. Depending on your age, we wouldn't even implement the Maximizer Strategy until age 71 and would do a traditional RRSP Meltdown process first. Here is the video on the RRSP Meltdown Strategy. th-cam.com/video/_sx2ZOflB3w/w-d-xo.html
Hi @saublesurfer8197, Great question! There’s no correction needed-money withdrawn from a Tax-Free Savings Account (TFSA) is indeed not subject to tax. One of the key benefits of a TFSA is that both the contributions and the growth within the account (including interest, dividends, and capital gains) can be withdrawn tax-free at any time. That said, it’s worth noting that withdrawals from a TFSA will free up contribution room equal to the amount withdrawn, but this room is only available starting the following calendar year. Over-contributing to a TFSA can lead to penalties, so it’s essential to stay within your allowable limits. If you have any follow-up questions, feel free to ask!
Question regards the TFSA .. how does the contribution limit fit into this strategy .. if I dumped 100,000 out of the TFSA into cash, then I would be able to put it back (the next tax year) but I couldn’t exceed the 100k value (ok 106k but that’s not the 500k I want to transfer)
@@precedenceprivatewealth2872 so that interest earned is actually expanding your contribution room in your TFSA so when you begin to withdrawal you will never lose that room?
@@precedenceprivatewealth2872 I still don’t understand your reply regards the contribution .. seems to me that I’m limited to what I can put into the TFSA by that limit ?
@@blairkinsman3477 The money flowing into the TFSA is not by contribution but rather by interest earned. Visit our website at www.precedencewealth.com for access to a more recent video and to learn more about this strategy.
Is this video out of date since the CRA issued that noticed back in May 2021. "Warning: Watch out for TFSA maximizer schemes" . Is your strategy different than what CRA was talking about? Also, you don't offer the TFSA Maximizer Strategy on your website anymore.
I was just reading in the Financial Post that earlier this month, the CRA updated its comprehensive folio on the topic of interest deductibility. From what I can tell, if you invest in common shares where the company explicitly states it doesn’t pay dividends, the. The interest on the borrowed money won’t be tax deductible. This really impacts the strategy you’re explaining here. I have a large amount of growth common shares that don’t pay dividends. What are your thoughts on this update from the CRA?
Investing in growth stocks is not usually advisable for borrowing to invest strategies for this very reason. A more tax efficient strategy is to use special purpose mutual funds that are built around a corporate class structure. Although, mutual funds are not very efficient vehichles for investing due to their higher fees, because of the tax treatment of corporate class structures, they are far more superior for these types of strategies. Other structures offer return of capital distributions as the majority of their income paid to investors which is also enticing. The important thing here is to have a careful consideration to the requirements set forth by CRA. When conducted propertly these strategies are able to provide very special results.
Hi Rob, thanks for reaching out to us. The majority of our clients are from the GTA, but we don't have an office in Toronto that we are at everyday. Prior to COVID our lead advisor Todd McLay would be out there every 6-8 weeks, but until things get back to normal it will likely be a while before he goes out that way again. If you would like to speak to him by phone and have any questions or concerns answered, please send me an email at info@precedencewealth.com
Hello Todd. Thank you so much for sharing such valuable strategy. Question, if overtime 100% of the RSP assets will be in the TSFA bucket due to the withdrawal of the annual RIF and the difference in interest on the two mortgages, wouldn't the balance in the TSFA exceed my lifetime contribution limit of $95,000 (as of 2024). Is that allow?
Recall that the TFSA grows only by the interest earned on the private mortgage(s) in which it invests into. There is not a “transfer” or moving of assets from the non-registered to the TFSA whatsoever within this strategy’s sequence of cash flows. Hopefully that help clarify. Should you have any further questions, feel free to send another comment/message or reach out to us directly and we can discuss more about these specific details. info@precedencewealth.com
i am reading this four years after it was first posted. interesting idea but i have a few questions: 1. has CRA taken a position on this or studied it? i.e. is it still considered ok? 2. do you have any comprehensive numbers showing how this actually plays out over time? i.e. using the $500K and $100K figures (and assuming current mortgage rates, etc.) what are the various costs per year and how does the value of the RSP, TFSA and non-registered accounts change annually over the life of the mortgage? in other words, a spreadsheet showing all the monies paid out annually, their flows through the accounts, and how the accounts change in value annually for the life of the mortgage. 3. with current house prices so high, does this strategy still apply or does it need to be tweaked? or is it in fact more beneficial now? if the house price is, say, $1.2M but you just have $600K available for the mortgage, wouldn't you need to borrow the rest from another institution? thanks, rob
Thanks for watching RJW. 1. This is what the CRA is going to see. You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove. 2. A pre-qualified investment inside an RRSP 3. A Pre-qualified investment inside a TFSA that is reasonable 4. A RIF withdrawal 5. Tax-Deductible Interest We have a game plan for everyone who enters into this strategy. Why would the CRA think that you are creating an unfair advantage? 1. You are paying tax on your RRIF 2. There will be a little bit of a tax drag that you will get back at the end of the year 3. There will be a tax on the non-registered account 4. And it’s not a switch, it takes 10 - 15 years in some cases. 5. It’s the restructuring of your affairs Now if the Government pivots and changes Syndicated Mortgage Rules on what would qualify inside a TFSA, then we will make adjustments.
I like it, it’s creative, I’m just only questioning about the interest rates. Obviously the strategy hinges on the difference in interest rates between first and second mortgage position. In your example you used 3% and 15%. What is the rationale behind choosing the interest rates? I mean, does it need to be CRA prescribed interest rates at the time of the contract (similar to a spousal loan, for example)? Or is that something that is handled on the mortgage company side of things? Would setting the interest rates for first and second position be described in or dictated by the Income Tax Act, or elsewhere? And, is interest on personal debt (I.e. yourself) for investing purposes deductible? Not sure if ITA has anything about non arms-length debt and deductibility. P.S. I CALLED the biggest actual ‘risk’ being CRA Audit from the JUMP! Ha, go figure.
When implementing an RRSP meltdown strategy, the selection of interest rates is indeed a critical aspect. The rationale behind choosing the interest rates, such as 3% and 15% in the example, is based on maximizing the spread between borrowing costs and investment returns. Regarding the specific interest rates used, they don't necessarily need to align with CRA-prescribed rates, as with spousal loans. Instead, they are typically determined by the mortgage company based on market conditions and individual financial profiles. While the Income Tax Act doesn't explicitly dictate these rates, it does provide guidelines on the deductibility of interest on personal debt for investing purposes. As for deductibility, the ITA does address non-arm's length debt and its deductibility. However, it's essential to consult with a tax advisor to ensure compliance and understand any potential risks, such as CRA audits. Your foresight in identifying CRA audits as a potential risk underscores the importance of thorough planning and compliance within RRSP meltdown strategies. It's crucial to approach this strategy with a comprehensive understanding of both the financial and regulatory aspects involved.
You are borrowing from your own RRSP and TFSA. How can it be non arm length mortgage? Do you go through MI Corporation. What will be the feel like to set up say a $1000000 in first and $500000 in second mortgage? How CRA views it?
Absolutely! Starting to plan and strategize well before you're required to take RIF withdrawals can be highly effective in optimizing your financial situation for retirement. By implementing proactive strategies, you can potentially maximize your savings, minimize tax implications, and ensure a comfortable retirement lifestyle. If you'd like a personalized illustration tailored to your specific numbers and circumstances, please feel free to email me at info@precedencewealth.com. I'd be happy to assist you further.
Is this not the same strategy as a leverage loan except using your house as the collateral in a line of credit scenario? Plus you are still restricted as to how much you can contribute to TFSA annually. So if you had a mortgage of $500,000.00 at a 4% interest you would owe $20,000.00 / year in the mortgage but only have room for $11,000.00 in TFSA as a couple. So would the strategy be to have the mortgage interest cost below that of the maximum TFSA contribution? Also, how can you establish the rate so high on the second mortgage? I assume it would need to be competitive to the market.
Great question! No it is actually not the same. Because your balance sheet does not change overall. Your RRSP is indirectly lent back to you which eliminates the 3rd party investment risk. A leverage loan would result in both the RRSP and Non-registered investment loan being exposed to investment risk... and gains 😉
Great video....but....I only have one year to go before I retire and only 15G in an rrsp. How can I save the most...move it to a tfsa. before I retire or leave it? It's not much but I need as much as possible next January. We want to have it to squeak us thru till we can hopefully get the guaranteed income supplement here in Canada. What do yall think?
Rick Jones thanks for watching Rick. Honestly, if you qualify for guaranteed income supplement then you very likely will have next to no tax owing on small withdrawals from your RRSP each year in retirement. If you take them out in small chunks consistently then it will be very minimal. Hope that helps!
You talked about if a person were to pass away having 500k in rrsp then that would be as income on that day, i heard that you can have your spouse as beneficiary and that if you pass away it becomes your spouses money instead, are you familiar with that?? Thanks for the video.
If you declare your spouse as beneficiary of your RRSP, it's automatically his/her RRSP when you die. If the last surviving spouse still has RRSP upon his/her own death then the entire RRSP would be deemed income in the year of death and the estate would have to pay any tax owed on the final income tax return.
The part that I do not understand is the treatment of the principal portion of the mortgage repayments. If you are paying back principal, then presumably over the term of the mortgage, your RRSP and TFSA will have converted the mortgage into cash. This would be fine for the TFSA but if your monthly RRIF payout from the RRSP is equal to the interest + principal (so that there is NIL balance at the end) wouldn’t you have a taxable portion (ie the principal repayment portion) each year that is not sheltered by the interest deduction?
Hi Stephen, Thank you for your question. The strategy we discuss involves interest-only payments, meaning there are no principal repayments on the mortgage during the term. This ensures that the RRSP and TFSA holdings are not converted into cash, and the focus remains on the tax-efficient use of interest deductions.
@@precedenceprivatewealth2872 That means that the mortgage is never paid off and left as an asset in the RRSP, to be taxed on death of the holder (or spouse). So essentially all you are doing is deferring the tax, not saving it.
If the repayments are interest only, at the end of the mortgage term the mortgage is still sitting in the RRSP and therefore the whole amount is taxable when it comes out. Am I then wrong to assume that the scheme is only a tax deferral arrangement? Rather than a tax savings arrangement?
@ Hi Steven, Thank you for sharing your perspective. While it might appear that the strategy is solely a tax deferral arrangement, this is not entirely accurate. Allow me to clarify: With interest-only payments, the mortgage balance does indeed remain at the end of the term. However, the key benefit of this strategy lies in the tax deductibility of the interest payments. By converting non-deductible personal debt into deductible investment debt, you can claim the interest expenses as deductions against your income, creating real, measurable tax savings over time. Furthermore, the structure allows for strategic withdrawals from the RRSP (or RRIF), which can be optimized to reduce the overall tax impact-for instance, during lower-income years or at strategically advantageous tax rates. This combination of interest deductibility and strategic planning is what generates tax savings beyond simple deferral. It’s a nuanced approach, and as with any financial strategy, it’s important to consider whether it aligns with your personal circumstances and long-term goals. If you'd like to explore how this works in greater detail, feel free to reach out. info@precedencewealth.com
Is this a legal manoeuvre that an average joe can pull off without alarming the tax man or is this reserved for lawyers with a business degree overseeing large scale portfolios for stockholders in a firm?
Hi Coltukkor, thanks for watching. You have to be extremely detailed with the TFSA Maximizer Strategy. The Government is likely going to change Syndicated Mortgages, that space is running wild, but until something changes, we’re going to continue to do what we can do. Because we are using realistic prescribed rates and you are satisfying the connected person rule, the borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear. 1. This is what the CRA is going to see. You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove. 2. A pre-qualified investment inside an RRSP 3. A Pre-qualified investment inside a TFSA that is reasonable 4. A RIF withdrawal 5. Tax-Deductible Interest We have a game plan for everyone who enters into this strategy. Why would the CRA think that you are creating an unfair advantage? 1. You are paying tax on your RRIF 2. There will be a little bit of a tax drag that you will get back at the end of the year 3. There will be a tax on the non-registered account 4. And it’s not a switch, it takes 10 - 15 years in some cases. 5. It’s the restructuring of your affairs Now if the Government pivots and changes Syndicated Mortgage Rules on what would qualify inside a TFSA, then we will make adjustments.
Hi Mary, thanks for checking out our content. Depending on the number of assets we are managing, the fee structure changes, but here is a link to our website that breaks everything down. www.precedencewealth.com/fees. ie) 1.25% $500,000 +
Smith manoeuver didn't work out for me with market crash and dividend funds eating themselves around 2008 crash. The HELOC we set up remains very useful to us today. Very fancy manoevering by an advisor with moving around of large funds and the fancy manipulation is something I would never do on a large scale again.
There really is not defined age, but rather once their is at least $250k or more inside an RRSP and also adequate equity within a Canadian property to accommodate the structure.
What if you do this to buy your primary residence, you can't claim the interest as a tax deduction can you? We're considering selling our home soon and renting for a few years before buying a retirement residence. In that time we'll top up our RRSP and TFSA accounts close to your example. We would then be in a position to buy a $750,000 house with 20% down and $600k mortgage. Is the interest on those mortgages tax deductible then or would we have to borrow against those assets to finance the house and deduct that tax?
I still have questions after watching this video. Isn't that TFSA has limit on the contribution that we can make every year? So I still don't get it when you explain moving the money to TFSA? Or in reality we do not move it to TFSA but just a strategy? Second question, when the money is being pulled from RRSP, and you will manage that money by purchasing computershare stock? or putting it into a REITs? Isn't this actually have another risk, as the stock of computershare company and REITs can go down in value? And at what age Canadians can start transfer their RRSP to RIF? Thanks for this insight.
Here is a brief overview that may help.. # 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively. #2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp. Then you borrow from another MIC corp at those prescribed rates and that’s what creates the tax deductible interest. #3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS. #4. Now we begin to withdraw the money out of your RIF which is taxable income. #5. We then make your mortgage payments to the MIC. #6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset. For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
A very interesting video, but the strategy is very costly for those who practice it from the information that I gathered by reading comments and the responses from advisers. Let’s say CRA can not do anything against it, and after ten years all your RRSP assets are smoothly converted into TFSA without any tax, you will end up paying a total fee of 24.9% of your whole portfolio that I assume is the total amount of your RRSP and TSFA in cash before investing in MIC. I got 24.9% because responding to manage fee cost questions in some comments they are saying it is 2.49% annually for the portfolio , remember you will now pay fees for your TFSA component as well which is tax free and should not have cost extra for you. And considering this strategy’s complexity and purpose it is very risky too, CRA really be fine with this or will fine this? What if your taxable investment is in the stock and the stock market crashes and keeps long depressed, and you need withdraw money to pay your mortgage which may have much more value than your investment? Is it really worth to take risks at the said costs?
Hi Terry, thanks for taking a look at the video. The total cost of the strategy is 1.45% Annually and includes: 1. Creating of a full comprehensive Financial Plan 2. Portfolio Management 3. Estate Planning 4. Accounting & Tax Advisory There are no additional professional fees involved with managing the special purpose mortgage within the TFSA Maximizer Strategy. This makes the RRIF Meltdown Strategy much more cost-efficient in the early stages up to and within retirement up to age 71. The RRSP continues to be invested, whereas in the TFSA Maximizer Strategy it is placed inside these special-purpose mortgages and receives no additional investment return. Overall, the math will always show that it makes far more sense to take a two-step approach. The first step is the RRIF Meltdown and the second step is the TFSA Maximizer....but the latter certainly does not need to be activated until age 71.www.precedencewealth.com/fees
It sounds like a scam. Let use your 25% management fee as an example. I will be paying 25% of my entire portfolio (RRSP+TFSA) vs 33% for my RRSP from withdrawal. It is a wash at best. Now, I am facing all the uncertainty and risk with this private wealth management firm. It is a non start for me.
I'm with you up until about 17 min. I don't understand where the borrowing to purchase income producing invesments actually takes place. I realize it is critical for not paying the tax but can't see when it actually happens.
Thanks for watching Stratt Gatt. It may be best to have a quick chat about the details. Please email us at service@precedencewealth.com. We can set up a time for a conversation to answer your question and clarify for you. We’re always happy to help! 😊
I understand the strategy but if the value of the home securing the mortgage was far in excess of the amount of both mortgages combined, would charging such a high premium on the 2nd mortgage not be deemed as being unreasonable? If so, would that not be putting you at risk of being charged for tax avoidance?
Exactly. Market 2nd mortgage rates are currently 6.95% and first mortgage rate are 3.99% (a 3% difference). Only if you expect a extremely high level of default can you charge 15%, which is unlikely given that it is a secured loan and property values would need to drop so low that the equity gets wiped out. Notice how he has on the board a rate of 6% - 15% for the second mortgage but circles the 15% as though that is the realistic number. 6% is more like it if the risk level support it, otherwise you can call the first $1,000 the first mortgage and rest of the $500,000 a second mortgage, which would be a farce. Also, if this is a closed circle where the lender/borrower is the same person, CRA will likely challenge the "market rates" charged as it is not part of the mortgage market and assign it 0.5% for admin. costs only. In the meantime company walks away with 1% of your investment every year plus other fees.
@@PNWCoastGuy I didn’t rewatch the video but I believe he also suggested the loans would have to be CMHC insured, reducing the risk of default to virtually nil. I’m thinking this strategy would carry a very high risk of being rejected through audit.
Interesting idea but has this strategy has ever survived a tax audit? Jurisprudence 101 in tax law is that a strategy whose sole purpose is to avoid paying tax is rejected.
Yes. This certainly is not avoidance as there is tax on the non-registered investments. No strategy is perfect. However, this sequence of cash flows allows Canadians to consistently create a more favourable outcome out of their RRSP. But it definitely is not a “switch” and something that happens over night. It takes several years to obtain a substantial benefit.
@@precedenceprivatewealth2872 let me congratulate you on an imaginative strategy. However, it seems to me the only goal of the strategy is to avoid paying tax on RRSP withdrawals - after all, it is the title of the video. I would love that but would it survive a CRA audit? I also wonder if CRA would accept you paying a 15% interest rate to your TFSA. Anyway, I thank you for a thought provoking video.
So in your illustration, I will take $30,000/y as RRIF income/y and then pay back $15,000(3% of $500,000 RRSP) to RRIF and $15, 000/y (15% of $100,000 TFSA) back to TFSA? Wouldnt I be overcontributing to TFSA, given that I can only put $6000/y? Or CRA considers I withdrew the full $100,000 from TFSA through personal mtg? Even though I get the whole TFSA room back upon the mtg advance, it will be maxed in 12, 13 years(15k contribution each year) to reach the lifetime limit and I still have about $300k money left in my RRIF. From that point, I can only contribute $6000 into TFSA( or whatever the annual limit) and more money goes back to RRIF... And how much would my initial non reg investment be? $600,000 both RRSP & TFSA combined?
The tfsa deposits are not contributions, they are interest payments, as the tfsa has been setup as a MIC, and demand interest payments to be paid back to it. I'd assume the tfsa limit would still grow as well in this scenario. Prob dicey if CRA comes for the audit.
I have a HELOC on my house and have used a portion of it for a down payment on a rental property. I'm going to sell the rental property within a few years. Can I use my own house to do this strategy when I'm using a portion of the HELOC for the rental? Thank you.
Let me see if I understand this. If you convert all your investments to cash then they are no longer growing in value correct? You are foregoing today's gains in order to get it back later when the rrsp cash transferred to the tfsa is tax-free. So a tfsa retirement dollar is worth one dollar but an rrsp retirement dollar is only worth let's say 75 cents because the government takes 25. You would have to withdraw about $1.34 from rrsp money to have a dollar.
larky368 great question Larky. Thank you for watching our content and for reaching out with your thoughts. I would suggest watching our more recent video on this strategy. It helps illustrate the flow of funds a little better than this older version. Simply visit our page and it pops up automatically. You followed along well however, the growth part you are mistaken on. Recall that the proceeds of the mortgages are invested. This can be inverses the exact same or differently than what your RRSP and TFSA assets were prior to entering into this strategy. Hope that helps clarify. Be sure to let us know if you have any other questions!
Shawn, best to speak to Todd directly, but we cn do an illustration with your exact numbers to show you the exact cost to run the strategy and the results. info@precedencewealth.com
wondering if you are still monitoring the chat on this video... :p you mentioned leveraging rrsp and tfsa to set up a pool to purchase the house (something along that line)... can you leverage a LIRA account instead of RRSP account? given the high interest rate these days.. this strategy may make sense, if i understand it correctly
Hi @zc2051 Certainly! It's great to see your interest in exploring different financial strategies. While leveraging RRSP and TFSA for a home purchase is a common approach, using a LIRA (Locked-In Retirement Account) is indeed a possibility, depending on your specific situation and goals. Leveraging a LIRA for a home purchase could make sense under certain conditions. LIRAs typically hold pension funds, and the rules governing them can vary by jurisdiction. Here are some considerations: Unlocking Restrictions: LIRAs often have restrictions on withdrawal until retirement age, but some jurisdictions allow unlocking under specific circumstances, such as purchasing a home. It's essential to understand the rules governing LIRAs in your region. Interest Rates: If you're considering this strategy due to high-interest rates, it's crucial to assess the overall cost of borrowing and compare it with other financing options. Ensure that leveraging the LIRA aligns with your long-term financial goals. Tax Implications: Withdrawals from LIRAs are generally subject to taxes. Understanding the tax implications of unlocking funds and any potential tax advantages is essential in making an informed decision. Professional Advice: Given the complexity of retirement accounts and the potential impact on your financial future, it's highly advisable to seek professional advice from a financial advisor or tax expert. They can provide personalized guidance based on your specific circumstances. In summary, leveraging a LIRA for a home purchase is a possibility, but it requires a careful evaluation of the rules, costs, and potential tax implications. Always consult with a financial professional to ensure that the strategy aligns with your overall financial plan and objectives.
In your example is this an interest only mortgage or is there principle in the monthly payments? If there is principle do you get that from your non registered investment? If it’s interest only wouldn’t the rsp be still owed 500k upon death (therefore still being taxable) to the estate? Thanks
Yes, exactly. The mortgages are interest only so that 100% of the payments remain tax deductible. Principle payments would be inefficient and non-tax-deductible. No, the RRSP is liquidated over time to make the tax deductible mortgage payments. Hence, transferring over to the TFSA completely over time. Let us know if that makes sense. If you need more clarity, don't hesitate to reach out to us at info@precedencewealth.com. Always happy to help!
From what I read and understand, a second mortgage cannot be used in a non-arms length mortgage. How does the TFSA legally come into play in this case? I like the idea and have a lot of experience with RRSP 2nd mortgage lending. I also have a paid up house and vacation property with maxed out RRSP's and TFSA accounts. If I can better understand the CRA rule with respect to the 2nd mortgage (TFSA) part, I might give this a try.
Michael Power thanks for your question! Yes, the method has adjusted slightly since the initial release of this video. I would suggest watching our more recent video at www.precedencewealth.com We use special purpose mortgage investments to facilitate this strategy currently. It is much more efficient and cost effective then what is outlined in this video. Although the same strategy in general the specific nuances are far improved. Let us know if you have any questions after checking it out. Thanks so much again for the attention and consideration Michael.
Great video. I have one question. What happens if I sell my house and buy another one on this strategy? Can I port the mortgages to my new home or do I need to close out the mortgage(s) on house one and then reestablish the strategy again on my new home? Does this strategy only really work if I’m in my forever home? Thanks.
Hi Ryan, thanks for watching. We would have to restructure the debt and keep the same structure (non-deductible vs deductible components) on the new property. If you bought a more expensive property, you would have to come up with the additional down payment (to keep you at the 80% Loan-To-Value ratio) and the increased mortgage payment on the non-deductible debt. It would be the same out of pocket if you hadn’t done the strategy at all and upgraded. If you would like to speak with our lead advisor Todd McLay please send a note to info@precedencewealth.com
Hello, this is a very interesting strategy, I actually have a question. I am 46 yo and planning to retire at age 50. Currently my RRSP and TFSA are maxed and I am planning to retire on dividends. Clearly I would love to transfer my RRSP to the TFSA tax free. I still owe half of my mortgage and it should be payed completely at age 57. The main question I have after watching your video is, you explained that first step is to sell all my assets in both accounts to transfer the money to a non-registered account. Then you say, we would need to withdraw from the RRSP/LIF to pay back the mortgage, isn't the RSSP/LIF already empty? since I already sold the assets to transfer the money to the non-registered account (and re-bought the assets I had previously in the RRSP/LIF and TFSA). I see your video dates from 2017 and possibly the rules have changed, but if it is still relevant , could you explain the idea of emptying the RRSP and then withdraw from it ?, probably I misunderstood something. Thank you
Hi Max, Thanks for your questions. I would suggest speaking to our lead advisor Todd McLay directly info@precedencwealth.com Here is a brief overview that may help.. # 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively. #2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp. #3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS. #4. Now we begin to withdraw the money out of your RIF which is taxable income. #5. We then make your mortgage payments to the MIC. #6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
@@precedenceprivatewealth2872 this is where I have a problem: everything inside RRSP and TFSA is invested into a mortgage. Where do the money RIF withdroawl come from? Have you actually implemented this?
Since CMHC no longer insures refinances, does this only work when you purchase a home? If you can still do it as a refinance, what are the CMHC fees, based on a 75% LTV?
Hi Geoff, we now use the Mortgage Investment Corp instead of a direct mortgage and the strategy evolved to the point where there are no longer any CMHC fees required for the set-up.
This is one of the best videos showing how you can keep more of your hard earned money near retirement and/or as soon as your home is paid off 🙌
Question: should I take advantage of my RRSP top up at my younger age during 43% income bracket years and then look into this strategy since TFSA room is wide open?
@@marcin7570 Starting earlier is indeed advantageous, allowing for more time to leverage the benefits of the TFSA Maximizer strategy. By optimizing your TFSA contributions early on, you can build substantial tax-free savings over time. Additionally, beginning earlier provides a longer runway to accumulate wealth in your TFSA, which can be particularly beneficial as you approach mandatory RRIF withdrawals at age 71.
@@precedenceprivatewealth2872 appreciate the response :) would you lean towards maximizing RRSP due to tax deferral with annual refund and then maximizing TFSA at higher tax bracket once RRSP maxed out?
Hey @marcin7570,
Glad to hear you appreciate the response! When it comes to maximizing your RRSP versus TFSA contributions, it often depends on your individual financial situation and goals.
Maximizing your RRSP contributions can indeed offer tax deferral benefits, potentially resulting in an annual tax refund that you can then reinvest. Once your RRSP is maxed out, focusing on your TFSA can be advantageous, especially if you're in a higher tax bracket. TFSA contributions grow tax-free and withdrawals are tax-free as well, which can be beneficial in retirement or for other financial goals.
Ultimately, it's worth considering factors like your current tax bracket, expected future tax bracket, investment timeline, and specific financial objectives. Consulting with a financial advisor can help tailor a strategy that aligns best with your circumstances.
Cheers!
@@precedenceprivatewealth2872 thank you so much 😊 I’ll will definitely reach out in the future for assistance. Loving the videos 🙌 thank you 🙏 for sharing your knowledge
Thank you so much for this video. It hurts to think that half my RSP savings will go to the government! This has been a real eye opener. 🤩
... ya, be a good slave
... income tax is extortion/theft
... go all cash income and stop paying slave tax which the government (govern=control/mente=mind....duhh)
In the vast majority of cases half of your RSP does not go to the government. It all depends on how much you take out. When we put the money into our RSP we got a deduction on our taxes. Most people will be paying significantly less than 50% and less the initial deduction when they withdrawl money from their RSP or RIF in retirement.
@Precedence Private Wealth : This is very interesting. Thanks for sharing publicly. One thing I couldn't understand is if the money from the RRSP and the TFSA are invested into a mortgage, then how can money be taken out of the RRSP via a RIF in order to make mortgage payments? I know I must be missing something, but I can't figure it out.
Thanks.
I was wondering the same thing. I think this is roughly how it is done:
Using similar numbers to the ones in the video, you'll pay to your RRSP the following amount of interest
3%*500k=15k,
and you'll pay your TSFA
10%*100k=10k
of interest.
Now that you've paid 25k of tax deductible interest, you can RIF that 15k and put it in your TFSA.
I still fall short of understanding this MATH❤😢. I do not see how it works in our favour?
@@QUARTZdls YYYEES! i agree. How does it work? For me, it seems extremely conplicated. And when i do not understand something i routinely stay away from it. Thanks.
Really innovative way to reduce tax burden. It seems like a great plan for some
I challenge your statement about having a 35-40% tax burden to remove 500k-$1m from an RRSP. I found you can drive it to 13.5% pretty easily. Here are the assumptions..
Retired at 65 with $1m in RRSP an maxed out TFSA.
1. defer OAS and CPP until 71
2. take max RRSP deductions starting at 65 to drive 13.5% ave tax rate
3. continue to max out TFSA contributions
4. Then when forced to RIF RRSP will be low enough to stay close to the target 13.5% tax rate
5. At 71 your CPP and OAS are 45% higher and indexed to inflation
Using this approach you never hit OAS claw back. Over time the RRSP drives to zero while the TFSA never gets touched. Same outcome. Costs 13.5% tax but nothing complicated and does not depend on the government not shutting down these "loopholes"
Thanks for watching our content and for your feedback. I think the assumption you provided is missing the future growth rate within the RRSP. Even a family was to income split at age 65 for approximately $80K total income the growth wtihin the RRSP it will never allow them to reduce the value within the RRSP over time. Therefore, the only way to reduce it to zero is to make more substantial withdrawals which inevitably forces higher taxation. Also, it is assuming that clients are desiring that low of income from their savings up until age 65. So there is usually alot more to an analysis of whether this is suitable for a client or not. Age and oustanding balance are important factors, but there are other things to consider such as desired lifestyle, additional pension earnings, business assets, etc. that also play a role in this process. Also, although 13.5% is a low tax consequence in comparison, it still is not zero. 😉
@@precedenceprivatewealth2872 All reasonable assumptions and perspective. I actually factor all of it into the plan and admit that I am not typical case. What makes my situation unusual, is I am happy with zero risk investment(AAA bonds and GICs), and I am happy to live comfortably below my means. So my investment return only keeps pace with inflation. The last surviving member runs out of RRSP at 99 but leaves a ton of TFSA, property and fixed assets. So it does pay 13.5% tax which seems like a win after a life of 50%+, but I am happy with zero risk, and zero concerns about whether CRA is coming to get me.
I think I have to watch it 4 more times to understand it, but looks like a very good strategy to avoid excess taxation.
... ya, be a good slave
... income tax is extortion/theft
... go all cash income and stop paying slave tax which the government (govern=control/mente=mind....duhh)
Thanks Adam , Your videos in my opinion are the best source of answers for soon to be retiring curious Canadians outside the financial advisors office .
He is not Adam, He is Todd
@@jollandleunglmfao, I am sure they will nail this strategy if they paid that little attention to Henry's name 😂
This is the type of transaction that would attract GAAR. For those who don’t know what GAAR, it basically allows the CRA to deny the benefits of a transaction where the rules are used to avoid tax in a manner in which the rules were not meant to be used. Paying interest to yourself actually involves no risk in which case the interest paid on the TFSA may not be reasonable. If the CRA seems the interest to be unreasonable, it would be denied. Furthermore, for those that rely on RRSP to fund their retirement, the tax rate is rarely over 40%. Unless the CRA has actually issued an interpretation bulletin on this type of transaction or it has been tested in court, this would considered to be what is considered risky or “aggressive” strategy
Thanks for watching and for your comments Robert. There have been several important updates to this strategy that tackle many of the underlying concerns you have put forth. The more updated version of this video can be viewed at www.precedencewealth.com. This will more accurately illustrate the steps taken within the updated structure to satisfy CRA’s requirements. If you have further questions after viewing this video please reach out to us. We’d be happy to discuss further with you. Thanks again for watching our content.
Also, please remember that if an individual has only a modest RRSP then this type of strategy should not be prioritized. However, just because an individual is not in the highest tax bracket does it mean that they should not try to structure their financial affairs and assets in the most tax efficient way possible.
Yup. This is jiggery pokery and will only "work" if you have all of the steps in place and CRA doesn't look too closely. These your own mortgage strategies are ripe for a slap.
Thank you for the heads up.
Great video!! I'm not there yet but so great to know there are legal CRA compliant strategies that allow regular Canadians to capitalize on their hard earned money in retirement!! Great explanation!
Aurora de Leon thanks! Glad to hear you found this video valuable to you.
Taxation is theft.
Just remember. Nobody is going to set all this up for you for free. It's not a given that "regular" canadians have the wealth to make this strategy profitable. I guess it depends on how you define "regular" though. I'm sure it's profitable for the tax accountants for sure.
@@jonbarnard7186 Of course but I'd rather pay a few thousand in management fees than hundreds of thousands in taxes to the government
@@jonbarnard7186 I was trying to draft a comment just like yours. Thanks.
This was fascinating to know about....viewing the video a few more times helped to get the full concept of it. Thank you so much!🇨🇦
Fantastic video! Shame more people don't take the time to learn whats available to us legally.
Kyle Roberts 👌🏽
This whole taxing citizens is legalized robbery by the government.
@@martyjovan347 yeah, right. Good luck getting around without roads. Good luck calling police or paramedics. Such a fool.
Taxation is theft.
@@alan4sure Yeah good point it is not like they are printing the money out of thin air or anything.
Amazing strategy, amazing video! Thanks so much for sharing this information.
Well RRSP is meant to be withdrawn over time, not at once. But if you must, it will be taxed. Great video.
Sounds fascinating! I shared it to the people I know who actually have their house paid! LOL
Thanks so much Tim! We really appreciate you sharing this strategy. It’s important to note that your house does not have to be completely free and clear. You just have to ensure there is at least $250-300K in available equity. Hope that is helpful.
I paid off my 356,000 dollar cottage at 44. Bought it at 29 but I got a good deal & fixed it up with another 20,000. But I took amortization / mortgage for 15 yrs.
Down side for me would be liquidating all my current holdings that generate 20 percent annual growth in order to get to cash
I may have to close my eye and bit my teeth on paying tax........, It must be financial obligation somewhere that we have to pay..., I thought manage your asset and retire early to enjoy the hard earning money.Thank you for the information.
I heard you mentioned about TFSA growth is tax deferred but also mentioned that upon withdrawal it is tax free. So just to clarify, there is no tax deferral in TFSA growth because it is tax free.
Hi Neil, Thanks for your question.
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thanks for the reply but i didn't really get it. I'm not sure why RIF is mentioned. Do you to convert the RRSP to RIF? Is the mortgage of the house will be from the MIC. What proceeds from MIC?
@@NielTenebro Probably best if you speak with our lead advisor Todd McLay. info@precedencewealth.com
@@NielTenebro Yes you convert the RRSP to a RRIF. We then make your mortgage payments to the MIC.
You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
Niel, if you would like to have the concept explained, please contact us at info@precedencwealth.com and I can set up a call.
The strategy is good...However the risk with this strategy is you have to sell your assets and then buy back in for the initial non-registered accounts.. Secondly when you move the money from the non-registered accounts you need to sell assets again to move the money back to the TFSA account. Then you need to purchase assets again if you're looking to invest and grow. My reservation on this strategy is the amount of selling and buying assets.. Something you need to consider in this strategy
Thank you for your comment Brandon.
Your initial assessment of the cash flows required is inaccurate. The only forced transaction required within this strategy is the liquidation of RRSP assets to initially fund the strategy.
However, this has since been adjusted as well and is no longer required.
Therefore, currently no other assets are required to be sold. The non-registered assets are eligible to continue to grow without being disrupted as long as the client desires.
Recall that the TFSA grows only by the interest earned on the private mortgage(s) in which it invests into.
There is not a “transfer” or moving of assets from the non-registered to the TFSA whatsoever within this strategy’s sequence of cash flows.
Hopefully that help clarify.
Should you have any further questions, feel free to send another comment/message or reach out to us directly and we can discuss more about these specific details. info@precedencewealth.com
Great, informative video that is specific to Canadians. Thank you. I do have a mortgage so this is not as applicable to me but I was wondering how to transfer my RRSPs to a TFSA without incurring any penalties or fees if possible.
Hi Mark,
Can you send an email to info@precedencewealth.com and I can have you speak to Todd McLay from the video.
@precedenceprivatewealth2872 Hey there. Would you kindly respond to @chrism7199 comment above? I notices you didn't and his response seemed to have some reasonable financial implications
This is a brilliant way to avoid tax. 👍
I have one question. The RIF income used to fund the mortgage payment is a taxable income. You mentioned the tax can be offset by the tax deductible from the loan payments made in the NR account.
However, my understanding is that mortgage payments are tax deductible in the US but not in Canada.
So how could we avoid the tax on the RIF income in this strategy? Thanks 🙏
Liked the presentation - very smooth. I don't think there is anything wrong, however, there are some risks not identified (re-investment risk of the mortgage funds borrowed & potential under performance within one's RRSP) and additional overhead/mgmt costs with this strategy. Someone with a little knowledge can replicate this in a simpler way with less risk. If someone takes out a mortgage from a bank paying 3% interest on their home to invest and earn 6% growth then they are ahead of the game since 6%>3%. The interest deductibility exists to offset the tax liability arising from the withdrawal of $10,000 from your RRSP. You can contribute the $10,000 to your TFSA, too. This result is the same as your strategy. This is simpler and better than your strategy because 1) you are investing the funds in your RRSP to earn 6% (on the same investments as your non-registered account) instead of a mortgage that only pays 3%; 2) you avoid the high management costs of the mortgage administration (min $2-3k initial + $1k/yr) and professional advice (your 1.5% fee). Keeping the strategy simple allows one to focus on each element. If you are still working and have a deduction available from the interest on the mortgage, why not just use the deduction to offset part of your regular income from your job? Why not leave the funds in your RRSP until a time when you retire and have significantly less income (and thus less income tax)? [Rhetorical questions]. Despite the fact this strategy is sub-optimal, I still appreciate the video as it brings greater visibility to the benefits of learning to invest and tax planning. Thxs!
Thanks for watching and providing your feedback. Unfortunately your calculations are not accurate. This is not the same as a basic leverage strategy and therefore shouldn’t be compared to such. Leverage involves additional 3rd party investment risk. It is very effective to use leverage appropriately but this strategy does not do that.
A couple of questions: a) How can you have a RIFF if you are supposed to sell all CASH and re-invest in a Non-REG account? This implies the RRSP and TFSA are left empty, and b) Can you transfer in-kind to avoid DSC charges?
Hi Rosa Delgado, thank you for watching our video. 🙏🏻 Great question! The special purpose mortgage vehicle is actually held inside your RSP and TFSA. The proceeds of the resulting mortgages are then invested into a non-registered investment account.
With respect to DSC charges...unfortunately they cannot be held inside the RSP as they need to be sold in order to be used in the strategy. However, we have helped many clients manage their investments and sell them over time as they become free or matured. That’s really unfortunate though...any advisor that buys DSC’d investments for their clients should be ashamed of themselves. In 2018 it is complete unacceptable...but we are aware that it still often happens. 🙄
@@toddmclay5029Hi, I'm reading this 5 years after., I'm confused on how do you pull out a RIF when the only thing sitting in the RSP account is the mortgage? I'm assuming all the cash went into the Taxable investment account - or you just pull out the interest, after the mortgage payment is deposited.
@@chm5750 it sounds like you pull out the mortgage payment, but I'm not sure how to deal with it being less than the minimum withdrawal.
@@chm5750Yeaaah! How does that work 😮😮😮
The RRSP/RIF still has its full value say the 500k at the begining. The minimum RIF payment is based on that, say 5% and rising each year. This payment is satisfied by the mortgage payments going back in so there needs to always be a greater repayment plus interest going in then RIF coming out. As the RRSP/RIF is depleted the RIF payments as a gradually rising percentage of that will diminish.
RIF payments for the full year are set each Jan 1 based on the RRSP/RIF value Dec 31 of prior year.
This is very interesting concept , reminds me bit of the " Smith " system that recommended using borrowing to make your principal residence mortgage interest tax deductible.
We have that hat and t-shirt too! 😄
What would the upfront and ongoing hardcosts be for this strategy? CMHC costs - initial, monthly? Cost of preparing all of the associated paperwork/documentation, and management fees? I thought CMHC was there to just insure/gaurantee mortgages for first-time home buyes. This is why it is good to have a good financial advisor and accountant. Thanks for the video.
Hi Andre & Beth,
The main difference between the original TFSA video and the most recent one is that we now use the Mortgage Investment Corp instead of a direct mortgage and the strategy evolved to the point where there are no longer any CMHC fees required for the set-up.
@@precedenceprivatewealth2872 a clever idea indeed. Thanks for the reply.
@@precedenceprivatewealth2872 I am still struggling to understand the exact way this should works.
Would like to see a some sort of a spreadsheet with the details showing the RRSP/TFSA, the mortgage, the taxes, the deductions ... With the interest rates now substantially higher, what rates that could be payable on back to the RRSP / TSFA.
thanks
@@Coastal-rsidedown Send us an email at info@precedencewealth.com
I don't understand the part where the RSP funds are transferred to a taxable investment account. Doesn't that trigger massive taxes because the funds are being withdrawn from the RSP?
They are offset by the tax deductible interest. Therefore eliminating the tax on the RRSP withdrawal. Hopefully that helps clarify. If not, reach out to us. Happy to walk through your questions together.
My thinking as well????
This seems similar to the “Smith” manoeuvre, but by creating your own investment into your 1st and 2nd mortgages. I’m failing to see how this is considered income by CRA??
This is good to know. I'm only 39 so I'm not sure if this applies to me yet but I liked and subscribed your channel for future reference.
It would depend upon the value within your RRSP and TFSA. There really is no perfect age. Although the earlier the better!!!
Seems too good to be true. Is this a valid tested strategy? Who is liable if it is not allowed by the CRA?
HI Sumyunguy, Thanks for your question.
Because we are using realistic prescribed rates and you are satisfying the connected person rule, the borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear.
Well, my friend, when the shit hit the fan, you're the only one who gets it. Because you're the one who submit and sign your tax return.
I guess the big question is This tragedy foul proof? It will be nice PRECEDENCE can give us a straight forward answer since the inception of their strategy, does it pass CRA review/audit? a YES will be nice, if not, whats the basis of adjustment, if any....
my gust feel is this strategy wont pass the GAAR General anti avoidance rule, Section 245 of the Income tax act.
What about capital, doesn't that have to be paid as a part of the mortgage payment, along with the interest?
Very clear explanation and was thinking of using this strategy but only to find out at the end that it has to be mortgage clear so won’t work for me.
Doesn’t require a full and clear title. But it does need substantial equity available.
correct me if i am wrong! what you're saying is you to have 1 piece of property Mortgage free. there fore it don't matter if you have 1, 2 or more pieces of property that are still mortgaged ?
Hi Jim,
Thanks for watching! Glad you found the video valuable to you. Great question!!! It depends on a number of factors including the value of the properties available to be used within the strategy. I would suggest reaching out to our team at info@precedencewealth.com and we can provide a personalized illustration based on your own specific situation. Thanks again for your time and attention!
@@precedenceprivatewealth2872 thanks for getting back to me so quickly. thanks for the link ill be checking it out asap
Very interesting video. I appreciate your confidence. Though I have a very hard time accepting there is no risk for this strategy from the CRA. Can't they apply GAAR or something and call this tax avoidance in spirit? Quacks like a duck .....
I’m with you, pongster. This may be legal but it shouldn’t be. I like living in Canada and don’t mind paying my share of taxes- we get a lot from them: health care education, roads, police, etc.
The point of RSPs is to defer taxes, to avoid them. This scheme may be legal but it stinks.
Darn, typo, should be
The point of RSPs is to defer taxes, NOT to AVOID them
@@rorymacintosh6691 alot of the money is wasted. I know this as I'm a government employee.
@@rorymacintosh6691 from someone 30 years In health care Canada’s health care is sub standard. That’s the reality
@@rorymacintosh6691 get a lot???? Get shafted. I've seen it first hand
I have done all these strategies. The problem is getting the CMHC approval, AND getting the institution to declare the mortgage as approved / allowable
JR
CMHC is no longer required. th-cam.com/video/i7Yl8uyid5U/w-d-xo.html
Does this strategy still work? I’d be concerned that CRA would stop allowing it. Could the mortgage be on a property outside Canada?
What about the TFSA Limit?? How would you continue to put the funds into TFSA without over contributing?
Would it be that the “TFSA MTG Payment” includes the interest rate (which is your rate of return on the Self-Directed TFSA MTG) so therefore that return is not a Contribution? (But rather the growth on the TFSA capital?)
Bingo! Nailed it 🔨
Sounds like a good strategy, I see lots of upfront cost - to set up/combine and sell off RRSPs. Any difference if RRSPs are converted to RIFs already?
When selling RRSP isnt there Automatic withholding taxes? Cant quite understand that piece of the equation.
Can this be done on a home that is already paid off and fully owned by the homeowner?
Hi Jason, yes it can. If you would like some more information, contact me at info@precedencewealth.com
Thank you very much fore this Todd! Honestly, this is a strategy that I had no clue about. Well explained and simply demonstrated.
Feb 2021- Once RRSP funds are converted to cash and moved to a taxable investment account the taxpayer receives a Tax slip for the withdrawal. In effect what your proposal entails is making your house a registered asset that in reality sits inside your RRSP account. I would like to know total costs of tour strategy and rulings by CRA in the past 2-3 years.
Agreed on the fact that every penny that leaves RRSP account is withdrawal and WILL be added to your gross income for the year. BTW, RRSP withdrawals can be cash or in-kind, i.e., you don't have to sell your stock/bond/mutual fund in order to withdraw.
You don’t withdrawal your assets from your RRSP... you simply invest your registered assets into a special purpose mortgage investment that I turn lends you the money back to create the tax deductible interest. Hope that helps clear things up!
@precedenceprivatewealt???? Still not grasping the concept 😢
@@precedenceprivatewealth2872 "creativity" is the word u use. I am not dumb but I do not understand your scheme with the house. I do not think it is real.
@ Hi @Grundewalt,
Thank you for your message and for sharing your concerns. I completely understand how some of these strategies can seem unclear or even overwhelming at first. To clarify, the approach we discussed is a form of tax planning, not a "scheme." Tax planning is a legitimate and well-established way to structure finances within the legal framework to help achieve specific goals, such as optimizing your resources or reducing liabilities.
That said, it’s important to note that not all strategies are suitable for everyone. Each plan is tailored to an individual’s circumstances and comfort level. If this particular strategy doesn’t feel right for you, that’s perfectly okay. I’d encourage you to speak directly with a trusted professional who can explain the details in a way that aligns with your unique needs and goals.
We’re here to help and ensure you feel informed every step of the way. Please don’t hesitate to reach out if you'd like to explore this further or discuss alternative approaches.
A bit complicated but interesting.
I’m thinking there must be a way to make it less complicated but of course with less upside too .
Maybe using a second mortgage from our house and do something with it ?
This is very interesting, but I have to know a couple things.
1. This is purely a cash transfer scenario there is no payout to yourself during the process, correct?
2. Upfront deposit? Must be less than 20% as per cmhc insurable mortgage. This cash comes from? My pocket? Tfsa? Or is it just the CMHC fee you pay?
3. Term length? At 56 and having to complete before age 71 is this depending on the size of transfer from TFSA to RRSP? It would seem to me there's some principle interest amount that would make that sweet spot work?
3. A certain portion remains in the RRSP at the end of this. Just pay the taxes and move on?
Thank you for the insight. Although I'm only 38 It may be of interest for me to pay off my mortgage before retiring for this reason.
Hi David, thanks for the questions. There is no more CMHC Involvement, please see the updated video - th-cam.com/video/i7Yl8uyid5U/w-d-xo.html
It would be best if you speak directly with Todd to discuss the strategy.
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
Then you borrow from another MIC corp at those prescribed rates and that’s what creates the tax-deductible interest.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
Hello all, really want to know this strategy pass the CRA audit with flying colors? any disallowance or challenged SUCCESSFULLY BY CRA?
Hi Alex, we replied to your email.
@@precedenceprivatewealth2872
I would also like to know if this passed a CRA audit, as I see its on the CRA website under their TFSA maximizer scheme and the Advantage Tax applies.
@@Marco-t5t Because we are using realistic prescribed rates and you are satisfying the connected person rule, borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear.
This is what the CRA is going to see:
Interest Deductions: You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove.
A pre-qualified investment inside the RRSP
A Pre-qualified investment inside a TFSA that is reasonable
A RRIF withdrawal
Tax-Deductible Interest
Why would the CRA think that you are creating an unfair advantage?
You are paying tax on your RRIF
There will be a little bit of a tax drag that you will get back at the end of the year.
There will be tax on the non-registered account.
It’s not a switch, it takes 10 - 15 years in some cases
It’s the restructuring of your affairs
@@Marco-t5t Because we are using realistic prescribed rates and you are satisfying the connected person rule, borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear.
This is what the CRA is going to see:
Interest Deductions: You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove.
A pre-qualified investment inside the RRSP
A Pre-qualified investment inside a TFSA that is reasonable
A RRIF withdrawal
Tax-Deductible Interest
Why would the CRA think that you are creating an unfair advantage?
You are paying tax on your RRIF
There will be a little bit of a tax drag that you will get back at the end of the year.
There will be tax on the non-registered account.
It’s not a switch, it takes 10 - 15 years in some cases
It’s the restructuring of your affairs
Can i claim interest expense on a gift to family to buy properly
We had borrowed RRSP not because we need tax shield but due to insufficient money even for initial 20%. We had to pay back same amount with interest to government.
If I own a free and clear property, in this strategy, am I selling the property to myself? What about all my equity in the home?
You still own the property, that doesn’t change, once you put the mortgage on, that just pulls out all the equity in the property and turns it into cash, that you reinvest
I am interested in this strategy. I own a home free and clear but I have no Rrsp or Tfsa.
Sounds interesting, but there is one thing I do not understand. When you send all the money to a non-registered account 9:30, don't you have to pay the income tax on the whole sum? Or do you mean that the mortgages stay in the RRSP and RRIF? And if the mortgages stay in the RRSP and RRIF, how do you get the tax credit for the money withdrawn from RRSP to pay the interest? Thanks!
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thank you for a detailed reply. One more question, when the mortgage is paid off, the lender receives the full amount of the principal plus interest. Therefore, the RRSP account will also receive the full amount of principal when the mortgage is paid off. Doesn't it mean that the full conversion of RRSP into TFSA is not possible?
Fantastic video everyone has to watch!
Your website says click here for fees, but no page found?
Thank you for pointing that out, and I truly appreciate your patience. Our Precedence Capital site is currently being rebuilt, which is why the fee page isn’t accessible at the moment.
I’d be happy to email you a detailed fee overview directly. Please let me know if there’s anything specific you’re looking for. You can also reach out to us anytime at info@precedencewealth.com with your questions - we’re here to help!
Looking forward to hearing from you,
I’m sure this guy is the hit of the party 😂🥳
My kind of party. Rather keep my money then have to pay taxes and let someone else decide how to spend it.
@@nemlock the game’s rigged Einstein but with the last name Trudeau I wouldn’t expect for you to comprehend such issues 😂
@@w.s.2102 Not name calling, but would you understand ''fuck You''. Just wondering your skill level here. Please explain to an understudy Prime Minister Name like Trudeau how this is rigged. Cause I fully understood what he said. Maybe you didn't?.
Please keep the comments professional and respectful. That response is completely unnecessary.
@@precedenceprivatewealth2872 i got in trouble again it seems 😂.....I just hate seeing someone sell traditional financial products when the traditional financial system is basically a rigged poker game....I encourage people to take personal responsibility for their wealth creation and management instead of just handing that responsibility to someone in a nice suit that makes his or her living off others hard earned money
Pretty interesting I must admit … are you following this strategy with your own accounts ?
Advisor fees are not tax deductible for registered investments.
Correct! Must be held in a non-registered account.
money borrow to invest and it clearly
24:16
states interest paid on money borrowed
24:19
to invest is tax deductible assets must
24:23
be held in a non registered taxable
24:25
account they must be available for any
24:28
asset class that meets the income and
24:31
profit test that would include stocks
24:35
bonds mutual funds businesses etc it has
24:39
@@precedenceprivatewealth2872 Borrowing money to invest always has some level of risk. Sure you can write-off interest. You must have enough cash flow to pay off principal.
So it sounds like writing off the interest of a leveraged investment portfolio.
Yes, very similar. But far more comprehensive and strategic.
Thank you! Nov one ever told us this, Not even my current investment advisors. Maybe our portfolio is way too small😂 what is your minimum portfolio size
Hi David,
Thank you for your message! I'm glad to hear that the information was helpful for you. I understand how important it is to have clear guidance, especially when it comes to investments.
Regarding your question, our minimum portfolio size is $250,000. This threshold allows us to provide the comprehensive attention and services that our clients deserve. If you're open to it, I would be happy to discuss your current situation and explore how we can support you in achieving your financial goals.
Feel free to reach out if you have any more questions!
Does anyone here watched Dave Ramsey show? I was wondering why you lending yourself with an interest rate of 3% plus up to 15% to a 2nd mortgage If you can pay cash. I think you are paying more with the interests rather than being taxed when you withdraw your money from rrsp. In addition, your money in the tfsa is already safe for being taxable, why you need to use it to get 6-15% interest rate of mortgage plus taxable if you you put or transfer to a non reg taxable account. If I will count the numbers, I'd rather be taxed than paying up to 18% in total for a mortgage with my own money.
Hi Connie Deja, Thank you for watching our video and for your comments. Here is a quick outline of why the strategy is set up the way it is. As discussed in the video, the benefit to having a personal mortgage inside your RSP and TFSA is that you are able to pay yourself interest. The interest itself is funded by a withdrawal from your RSP. And because the interest itself is tax deductible it totally negates the tax payable from the RSP withdrawals. You do not pay interest to anyone but yourself through this strategy. Therefore the 3% and 15% (not 18%) are actually paid directly to you personally. The end result is a tax free transfer to your TFSA overtime. Also, recall that this is not a leveraged debt situation. Because you own the mortgage on your RSP and TFSA personally, your net balance sheet does not change before or after engaging in this strategy. It is merely the taxation of the assets themselves that gets affected. Hopefully this helps to clarify. Please be sure to let us know if you have any other questions!!!
Oh I get it now. Thank you so much for this information. I think it will help to a lot of people in the future. 😍 I will take a picture of this comment of yours to make sure I will not forget if I'm going to use this strategy later on. Lol
You need to "Think Wisely" before jumping to conclusions. : )
I found the following on your website:
"And, for those concerned about how CRA will view this strategy, well, every Mortgage Investment Corporation created within an RRSP, RRIF or pension account must be registered with them, guaranteeing their approval before implementation. So, no worries on that front. The main restriction is that this approach is only available to “accredited investors,” those with $1 million of investable assets, or $200,000 earned personal income, or $300,000 earned family income."
So it looks like MOST Canadians cannot adopt this strategy. The median family income in Canada is $105K.
BTW. What counts as the $1 million investable assets? RRSP? LIRA? TSFA? RESP? 401K? IRA? Roth-IRA? Registered Stock? Home Equity? Is this joint or individual?
According to other websites, those who can do this strategy, generally don't benefit enough to make it worth their while. And those who would benefit, do not qualify. Normally the mortgage insurance is about 0.5% on the first 65% of the value of your come. And 2.75% on the value after that. So you only want to mortgage the first 65% to participate in this strategy. And given the individual maximum of $75,500 that you can add to an TSFA, unless you have been maximizing your TSFA and using at an investment vehicle, you probably don't have much more than than in a TSFA.
Crunching the numbers a 3:1 ration seems about optimal. So that means you'll probably want to work with a $300K mortgage to start with. A couple might do up to a $600K mortgage. As an American though, I would avoid that. Because it would requiring putting my name on the deed of the home, which means it would be subject to capital gains tax upon sale. And since one would only want to do this on 65% the value of there home, they would need a house worth $1 million dollars. Converting $300K to being tax free to pay capital gains on a home that might be worth $2 million when you sell will probably not be a break even deal.
However, there are probably ways this strategy could help me, I just have not figured them out yet.
@@billc.riemers3245 HI Bill,
There is a updated video that no longer has CMHC Involved.
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thanks. As a follow-up. I am a dual US Canadian citizen. My wife is Canadian. All our income is in my name. My wife owns are home. I am not on the title so that we won't owe the US capital gains tax should we sell our home. Will this strategy still work? Or would I have to add my name to the title an incur an obligation to pay capital gains tax later?
@@billc.riemers3245 HI Bill,
If you have time for a quick call with our lead advisor Todd McLay, I can have all your questions answered, and possibly do an actual illustration for you with your exact numbers. info@precedencewealth.com
You’re only allowed to contribute a prescribed amount to a TFSA each year (currently 6,500 dollars).
Thanks for watching. The money flowing into the TFSA is not by contribution but rather by interest earned. 🤔
Older video, but hopefully still valid. Does this actually change the amount in the TFSA account or the possible limits or simply transfer money from RRSP into the registered mortgage?
Yes, still very much valid. I would suggest visiting us at www.precedencewealth.com to review a more recent video as well as our FAQ section. It will help you asses this strategy best!
Doesn’t work any longer: www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/warning-watch-out-for-tfsa-maximizer-schemes.html
@@timcestnick2004 Hey Tim, haven't heard your name for quite some time.
We are certainly aware of these articles and the allegations stated within them. However, it should be of no surprise that this strategy will garnish attention from CRA. However, the facts are misrepresented within their statement. We will be putting out a video in response to their allegations very soon. Nothing has changed with respect to the validity of this strategy. We also will be sharing an alternative strategy that eliminates any possibility of scrutiny as well in the coming days.
ps: Are you still writing books with Jerry White?
@@timcestnick2004 CRA should issue an Advance Ruling on this particular Precedence Wealth investment plan rather than post a bulletin of what they deem 'Commercially Reasonable' But, they are CRA and can make your life pretty miserable. I do 2nd mortgages all the time and 15% + fees is not out of the ordinary. Most MIC's pay investors 10% - what are they charging their clients in order to make a profit?? (13-16%).
Real Estate investors are always looking for solid lenders to partner with. Canada usury rules cap interest rates on loans at 60% apr. TD used to administer these and would not touch your file if the rate was above 36%. CRA should look more closely at Payday Loan operators. In the end, this was a good plan if CRA accepted it.
Hi there, this is very interesting. Does this strategy still work? Any changes to the rules/CRA? And how does it work now with higher interest rates?
Hi Mashaca,
Thanks for watching. Yes, we are still running the program, but have made a few updates. If you're interested in speaking with our lead advisor Todd McLay, please send me an email - info@precedencewealth.com
A little above me but I think I understand the plan. I will ask my investment broker about his thoughts . Do I have to take all my rrsp out for this or can I do 1/3 like a million . What if I have no room left in my TFSA .
Hi John,
The minimum amount we would consider doing the strategy for would be $250,000. Depending on your age, we wouldn't even implement the Maximizer Strategy until age 71 and would do a traditional RRSP Meltdown process first.
Here is the video on the RRSP Meltdown Strategy. th-cam.com/video/_sx2ZOflB3w/w-d-xo.html
Question: At the 6.30 min mark you said take money out of a TFSA account without any tax liability. Is there a correction there?
Hi @saublesurfer8197,
Great question! There’s no correction needed-money withdrawn from a Tax-Free Savings Account (TFSA) is indeed not subject to tax. One of the key benefits of a TFSA is that both the contributions and the growth within the account (including interest, dividends, and capital gains) can be withdrawn tax-free at any time.
That said, it’s worth noting that withdrawals from a TFSA will free up contribution room equal to the amount withdrawn, but this room is only available starting the following calendar year. Over-contributing to a TFSA can lead to penalties, so it’s essential to stay within your allowable limits.
If you have any follow-up questions, feel free to ask!
Question regards the TFSA .. how does the contribution limit fit into this strategy .. if I dumped 100,000 out of the TFSA into cash, then I would be able to put it back (the next tax year) but I couldn’t exceed the 100k value (ok 106k but that’s not the 500k I want to transfer)
HI Blair, Thanks for watching.
The money flowing into the TFSA is not by contribution but rather by interest earned.
@@precedenceprivatewealth2872 so that interest earned is actually expanding your contribution room in your TFSA so when you begin to withdrawal you will never lose that room?
@@dtownssqwe correct! 👍🏻
@@precedenceprivatewealth2872 I still don’t understand your reply regards the contribution .. seems to me that I’m limited to what I can put into the TFSA by that limit ?
@@blairkinsman3477 The money flowing into the TFSA is not by contribution but rather by interest earned. Visit our website at www.precedencewealth.com for access to a more recent video and to learn more about this strategy.
Is this video out of date since the CRA issued that noticed back in May 2021. "Warning: Watch out for TFSA maximizer schemes" . Is your strategy different than what CRA was talking about? Also, you don't offer the TFSA Maximizer Strategy on your website anymore.
I was just reading in the Financial Post that earlier this month, the CRA updated its comprehensive folio on the topic of interest deductibility. From what I can tell, if you invest in common shares where the company explicitly states it doesn’t pay dividends, the. The interest on the borrowed money won’t be tax deductible. This really impacts the strategy you’re explaining here. I have a large amount of growth common shares that don’t pay dividends. What are your thoughts on this update from the CRA?
Investing in growth stocks is not usually advisable for borrowing to invest strategies for this very reason. A more tax efficient strategy is to use special purpose mutual funds that are built around a corporate class structure. Although, mutual funds are not very efficient vehichles for investing due to their higher fees, because of the tax treatment of corporate class structures, they are far more superior for these types of strategies. Other structures offer return of capital distributions as the majority of their income paid to investors which is also enticing. The important thing here is to have a careful consideration to the requirements set forth by CRA. When conducted propertly these strategies are able to
provide very special results.
Very interesting and am curious as to the fees involved .
HI Helen,
The set-up fee for the TFSA Maximizer Strategy that is paid to M-Link Mortgage Corporation is 1.45%
Portfolio Management fees are listed at www.precedencewealth.com/fees however, based on the size of their portfolio(s) it would be 1%.
The financial planning, tax advisory, etc. is built into the asset management fees as a value-added component of working with Precedence Wealth.
Great video.
Whould the payment made to the rrsp and tfsa be consider has contribution?
Thanks
Do you have an office in or near Kitchener-Waterloo?
Very interested, would like to learn more!
Hi Rob, thanks for reaching out to us. The majority of our clients are from the GTA, but we don't have an office in Toronto that we are at everyday. Prior to COVID our lead advisor Todd McLay would be out there every 6-8 weeks, but until things get back to normal it will likely be a while before he goes out that way again.
If you would like to speak to him by phone and have any questions or concerns answered, please send me an email at info@precedencewealth.com
Hello Todd. Thank you so much for sharing such valuable strategy. Question, if overtime 100% of the RSP assets will be in the TSFA bucket due to the withdrawal of the annual RIF and the difference in interest on the two mortgages, wouldn't the balance in the TSFA exceed my lifetime contribution limit of $95,000 (as of 2024). Is that allow?
Recall that the TFSA grows only by the interest earned on the private mortgage(s) in which it invests into.
There is not a “transfer” or moving of assets from the non-registered to the TFSA whatsoever within this strategy’s sequence of cash flows.
Hopefully that help clarify.
Should you have any further questions, feel free to send another comment/message or reach out to us directly and we can discuss more about these specific details. info@precedencewealth.com
i am reading this four years after it was first posted. interesting idea but i have a few questions:
1. has CRA taken a position on this or studied it? i.e. is it still considered ok?
2. do you have any comprehensive numbers showing how this actually plays out over time? i.e. using the $500K and $100K figures (and assuming current mortgage rates, etc.) what are the various costs per year and how does the value of the RSP, TFSA and non-registered accounts change annually over the life of the mortgage? in other words, a spreadsheet showing all the monies paid out annually, their flows through the accounts, and how the accounts change in value annually for the life of the mortgage.
3. with current house prices so high, does this strategy still apply or does it need to be tweaked? or is it in fact more beneficial now? if the house price is, say, $1.2M but you just have $600K available for the mortgage, wouldn't you need to borrow the rest from another institution?
thanks, rob
Thanks for watching RJW.
1. This is what the CRA is going to see. You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove.
2. A pre-qualified investment inside an RRSP
3. A Pre-qualified investment inside a TFSA that is reasonable
4. A RIF withdrawal
5. Tax-Deductible Interest
We have a game plan for everyone who enters into this strategy.
Why would the CRA think that you are creating an unfair advantage?
1. You are paying tax on your RRIF
2. There will be a little bit of a tax drag that you will get back at the end of the year
3. There will be a tax on the non-registered account
4. And it’s not a switch, it takes 10 - 15 years in some cases.
5. It’s the restructuring of your affairs
Now if the Government pivots and changes Syndicated Mortgage Rules on what would qualify inside a TFSA, then we will make adjustments.
I like it, it’s creative, I’m just only questioning about the interest rates. Obviously the strategy hinges on the difference in interest rates between first and second mortgage position. In your example you used 3% and 15%. What is the rationale behind choosing the interest rates? I mean, does it need to be CRA prescribed interest rates at the time of the contract (similar to a spousal loan, for example)? Or is that something that is handled on the mortgage company side of things? Would setting the interest rates for first and second position be described in or dictated by the Income Tax Act, or elsewhere? And, is interest on personal debt (I.e. yourself) for investing purposes deductible? Not sure if ITA has anything about non arms-length debt and deductibility.
P.S. I CALLED the biggest actual ‘risk’ being CRA Audit from the JUMP! Ha, go figure.
When implementing an RRSP meltdown strategy, the selection of interest rates is indeed a critical aspect.
The rationale behind choosing the interest rates, such as 3% and 15% in the example, is based on maximizing the spread between borrowing costs and investment returns.
Regarding the specific interest rates used, they don't necessarily need to align with CRA-prescribed rates, as with spousal loans. Instead, they are typically determined by the mortgage company based on market conditions and individual financial profiles.
While the Income Tax Act doesn't explicitly dictate these rates, it does provide guidelines on the deductibility of interest on personal debt for investing purposes.
As for deductibility, the ITA does address non-arm's length debt and its deductibility. However, it's essential to consult with a tax advisor to ensure compliance and understand any potential risks, such as CRA audits.
Your foresight in identifying CRA audits as a potential risk underscores the importance of thorough planning and compliance within RRSP meltdown strategies.
It's crucial to approach this strategy with a comprehensive understanding of both the financial and regulatory aspects involved.
You are borrowing from your own RRSP and TFSA. How can it be non arm length mortgage? Do you go through MI Corporation. What will be the feel like to set up say a $1000000 in first and $500000 in second mortgage? How CRA views it?
Thank you for this video,
Didn't fully understand this, however, can you use this strategy before retirement to start withdrawing money?
Absolutely! Starting to plan and strategize well before you're required to take RIF withdrawals can be highly effective in optimizing your financial situation for retirement. By implementing proactive strategies, you can potentially maximize your savings, minimize tax implications, and ensure a comfortable retirement lifestyle. If you'd like a personalized illustration tailored to your specific numbers and circumstances, please feel free to email me at info@precedencewealth.com. I'd be happy to assist you further.
@6.15 he says all growth is tax deferred in the TFSA. This is incorrect - all growth in a TFSA is tax free (you never have to pay tax on it).
Uh, oh... It’s the literal presentation police
👮♀️🚨 😉
Yes, you are certainly correct it is 100% tax free
Is this not the same strategy as a leverage loan except using your house as the collateral in a line of credit scenario? Plus you are still restricted as to how much you can contribute to TFSA annually. So if you had a mortgage of $500,000.00 at a 4% interest you would owe $20,000.00 / year in the mortgage but only have room for $11,000.00 in TFSA as a couple. So would the strategy be to have the mortgage interest cost below that of the maximum TFSA contribution? Also, how can you establish the rate so high on the second mortgage? I assume it would need to be competitive to the market.
Great question! No it is actually not the same. Because your balance sheet does not change overall. Your RRSP is indirectly lent back to you which eliminates the 3rd party investment risk. A leverage loan would result in both the RRSP and Non-registered investment loan being exposed to investment risk... and gains 😉
Great video....but....I only have one year to go before I retire and only 15G in an rrsp. How can I save the most...move it to a tfsa. before I retire or leave it? It's not much but I need as much as possible next January. We want to have it to squeak us thru till we can hopefully get the guaranteed income supplement here in Canada. What do yall think?
Rick Jones thanks for watching Rick. Honestly, if you qualify for guaranteed income supplement then you very likely will have next to no tax owing on small withdrawals from your RRSP each year in retirement. If you take them out in small chunks consistently then it will be very minimal. Hope that helps!
do you mean use current paid off house for remortage? or have to have a one house paid off mortgage as back up, the stretage for second house?
You talked about if a person were to pass away having 500k in rrsp then that would be as income on that day, i heard that you can have your spouse as beneficiary and that if you pass away it becomes your spouses money instead, are you familiar with that?? Thanks for the video.
If you declare your spouse as beneficiary of your RRSP, it's automatically his/her RRSP when you die. If the last surviving spouse still has RRSP upon his/her own death then the entire RRSP would be deemed income in the year of death and the estate would have to pay any tax owed on the final income tax return.
that is a great ! presentation
The part that I do not understand is the treatment of the principal portion of the mortgage repayments. If you are paying back principal, then presumably over the term of the mortgage, your RRSP and TFSA will have converted the mortgage into cash. This would be fine for the TFSA but if your monthly RRIF payout from the RRSP is equal to the interest + principal (so that there is NIL balance at the end) wouldn’t you have a taxable portion (ie the principal repayment portion) each year that is not sheltered by the interest deduction?
Hi Stephen,
Thank you for your question. The strategy we discuss involves interest-only payments, meaning there are no principal repayments on the mortgage during the term. This ensures that the RRSP and TFSA holdings are not converted into cash, and the focus remains on the tax-efficient use of interest deductions.
@@precedenceprivatewealth2872
That means that the mortgage is never paid off and left as an asset in the RRSP, to be taxed on death of the holder (or spouse). So essentially all you are doing is deferring the tax, not saving it.
If the repayments are interest only, at the end of the mortgage term the mortgage is still sitting in the RRSP and therefore the whole amount is taxable when it comes out. Am I then wrong to assume that the scheme is only a tax deferral arrangement? Rather than a tax savings arrangement?
@ Hi Steven,
Thank you for sharing your perspective. While it might appear that the strategy is solely a tax deferral arrangement, this is not entirely accurate. Allow me to clarify:
With interest-only payments, the mortgage balance does indeed remain at the end of the term. However, the key benefit of this strategy lies in the tax deductibility of the interest payments. By converting non-deductible personal debt into deductible investment debt, you can claim the interest expenses as deductions against your income, creating real, measurable tax savings over time.
Furthermore, the structure allows for strategic withdrawals from the RRSP (or RRIF), which can be optimized to reduce the overall tax impact-for instance, during lower-income years or at strategically advantageous tax rates. This combination of interest deductibility and strategic planning is what generates tax savings beyond simple deferral.
It’s a nuanced approach, and as with any financial strategy, it’s important to consider whether it aligns with your personal circumstances and long-term goals. If you'd like to explore how this works in greater detail, feel free to reach out. info@precedencewealth.com
Is this a legal manoeuvre that an average joe can pull off without alarming the tax man or is this reserved for lawyers with a business degree overseeing large scale portfolios for stockholders in a firm?
Hi Coltukkor, thanks for watching.
You have to be extremely detailed with the TFSA Maximizer Strategy.
The Government is likely going to change Syndicated Mortgages, that space is running wild, but until something changes, we’re going to continue to do what we can do.
Because we are using realistic prescribed rates and you are satisfying the connected person rule, the borrowing to invest provisions and a reasonable profit test, we are following the letter of the law. Yes, the CRA is going to review it, but the laws are clear.
1. This is what the CRA is going to see. You’re going to have to prove the interest deductions, and this is a slam dunk for us to prove.
2. A pre-qualified investment inside an RRSP
3. A Pre-qualified investment inside a TFSA that is reasonable
4. A RIF withdrawal
5. Tax-Deductible Interest
We have a game plan for everyone who enters into this strategy.
Why would the CRA think that you are creating an unfair advantage?
1. You are paying tax on your RRIF
2. There will be a little bit of a tax drag that you will get back at the end of the year
3. There will be a tax on the non-registered account
4. And it’s not a switch, it takes 10 - 15 years in some cases.
5. It’s the restructuring of your affairs
Now if the Government pivots and changes Syndicated Mortgage Rules on what would qualify inside a TFSA, then we will make adjustments.
What does Precedence charge to manage investments and mortgage?
Hi Mary, thanks for checking out our content. Depending on the number of assets we are managing, the fee structure changes, but here is a link to our website that breaks everything down.
www.precedencewealth.com/fees. ie) 1.25%
$500,000 +
I would love to see the steps and money flow in an excel diagram. Also How can u own non arms length mortgage?
Hi Richard,
If you're interested in seeing an illustration, send me an email at info@precedencewealth.com
Smith manoeuver didn't work out for me with market crash and dividend funds eating themselves around 2008 crash. The HELOC we set up remains very useful to us today. Very fancy manoevering by an advisor with moving around of large funds and the fancy manipulation is something I would never do on a large scale again.
What age would you start this process?
There really is not defined age, but rather once their is at least $250k or more inside an RRSP and also adequate equity within a Canadian property to accommodate the structure.
What if you do this to buy your primary residence, you can't claim the interest as a tax deduction can you? We're considering selling our home soon and renting for a few years before buying a retirement residence. In that time we'll top up our RRSP and TFSA accounts close to your example. We would then be in a position to buy a $750,000 house with 20% down and $600k mortgage. Is the interest on those mortgages tax deductible then or would we have to borrow against those assets to finance the house and deduct that tax?
I still have questions after watching this video. Isn't that TFSA has limit on the contribution that we can make every year? So I still don't get it when you explain moving the money to TFSA? Or in reality we do not move it to TFSA but just a strategy? Second question, when the money is being pulled from RRSP, and you will manage that money by purchasing computershare stock? or putting it into a REITs? Isn't this actually have another risk, as the stock of computershare company and REITs can go down in value? And at what age Canadians can start transfer their RRSP to RIF? Thanks for this insight.
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
Then you borrow from another MIC corp at those prescribed rates and that’s what creates the tax deductible interest.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
For more information, and to speak with our lead advisor Todd McLay send me an email at info@precedencewealth.com
@@precedenceprivatewealth2872 Thanks for your reply. I have not reach retirement but I'm in 50s. I still trying to understand because new to me.
Wonder if this strategy works for setting a mortgage for our own rental properties too?
Absolutely!
A very interesting video, but the strategy is very costly for those who practice it from the information that I gathered by reading comments and the responses from advisers. Let’s say CRA can not do anything against it, and after ten years all your RRSP assets are smoothly converted into TFSA without any tax, you will end up paying a total fee of 24.9% of your whole portfolio that I assume is the total amount of your RRSP and TSFA in cash before investing in MIC. I got 24.9% because responding to manage fee cost questions in some comments they are saying it is 2.49% annually for the portfolio , remember you will now pay fees for your TFSA component as well which is tax free and should not have cost extra for you. And considering this strategy’s complexity and purpose it is very risky too, CRA really be fine with this or will fine this? What if your taxable investment is in the stock and the stock market crashes and keeps long depressed, and you need withdraw money to pay your mortgage which may have much more value than your investment?
Is it really worth to take risks at the said costs?
Hi Terry, thanks for taking a look at the video.
The total cost of the strategy is 1.45% Annually and includes:
1. Creating of a full comprehensive Financial Plan
2. Portfolio Management
3. Estate Planning
4. Accounting & Tax Advisory
There are no additional professional fees involved with managing the special purpose mortgage within the TFSA Maximizer Strategy. This makes the RRIF Meltdown Strategy much more cost-efficient in the early stages up to and within retirement up to age 71.
The RRSP continues to be invested, whereas in the TFSA Maximizer Strategy it is placed inside these special-purpose mortgages and receives no additional investment return.
Overall, the math will always show that it makes far more sense to take a two-step approach. The first step is the RRIF Meltdown and the second step is the TFSA Maximizer....but the latter certainly does not need to be activated until age 71.www.precedencewealth.com/fees
It sounds like a scam. Let use your 25% management fee as an example. I will be paying 25% of my entire portfolio (RRSP+TFSA) vs 33% for my RRSP from withdrawal. It is a wash at best. Now, I am facing all the uncertainty and risk with this private wealth management firm. It is a non start for me.
I'm with you up until about 17 min. I don't understand where the borrowing to purchase income producing invesments actually takes place. I realize it is critical for not paying the tax but can't see when it actually happens.
Thanks for watching Stratt Gatt. It may be best to have a quick chat about the details. Please email us at service@precedencewealth.com. We can set up a time for a conversation to answer your question and clarify for you. We’re always happy to help! 😊
I understand the strategy but if the value of the home securing the mortgage was far in excess of the amount of both mortgages combined, would charging such a high premium on the 2nd mortgage not be deemed as being unreasonable? If so, would that not be putting you at risk of being charged for tax avoidance?
Exactly. Market 2nd mortgage rates are currently 6.95% and first mortgage rate are 3.99% (a 3% difference). Only if you expect a extremely high level of default can you charge 15%, which is unlikely given that it is a secured loan and property values would need to drop so low that the equity gets wiped out. Notice how he has on the board a rate of 6% - 15% for the second mortgage but circles the 15% as though that is the realistic number. 6% is more like it if the risk level support it, otherwise you can call the first $1,000 the first mortgage and rest of the $500,000 a second mortgage, which would be a farce. Also, if this is a closed circle where the lender/borrower is the same person, CRA will likely challenge the "market rates" charged as it is not part of the mortgage market and assign it 0.5% for admin. costs only. In the meantime company walks away with 1% of your investment every year plus other fees.
@@PNWCoastGuy I didn’t rewatch the video but I believe he also suggested the loans would have to be CMHC insured, reducing the risk of default to virtually nil. I’m thinking this strategy would carry a very high risk of being rejected through audit.
CMHC is not a requirement from private lenders so this is no longer necessary.
i think this is worse than rental furnace sold door to door, that puts lean on your house. tops single person can have in tfsa up until now is 100k.
@@PNWCoastGuy
Interesting idea but has this strategy has ever survived a tax audit? Jurisprudence 101 in tax law is that a strategy whose sole purpose is to avoid paying tax is rejected.
Yes. This certainly is not avoidance as there is tax on the non-registered investments. No strategy is perfect. However, this sequence of cash flows allows Canadians to consistently create a more favourable outcome out of their RRSP. But it definitely is not a “switch” and something that happens over night. It takes several years to obtain a substantial benefit.
@@precedenceprivatewealth2872 let me congratulate you on an imaginative strategy. However, it seems to me the only goal of the strategy is to avoid paying tax on RRSP withdrawals - after all, it is the title of the video. I would love that but would it survive a CRA audit? I also wonder if CRA would accept you paying a 15% interest rate to your TFSA. Anyway, I thank you for a thought provoking video.
So in your illustration, I will take $30,000/y as RRIF income/y and then pay back $15,000(3% of $500,000 RRSP) to RRIF and $15, 000/y (15% of $100,000 TFSA) back to TFSA? Wouldnt I be overcontributing to TFSA, given that I can only put $6000/y? Or CRA considers I withdrew the full $100,000 from TFSA through personal mtg? Even though I get the whole TFSA room back upon the mtg advance, it will be maxed in 12, 13 years(15k contribution each year) to reach the lifetime limit and I still have about $300k money left in my RRIF.
From that point, I can only contribute $6000 into TFSA( or whatever the annual limit) and more money goes back to RRIF...
And how much would my initial non reg investment be? $600,000 both RRSP & TFSA combined?
Well put, this was my concern as well.
The tfsa deposits are not contributions, they are interest payments, as the tfsa has been setup as a MIC, and demand interest payments to be paid back to it. I'd assume the tfsa limit would still grow as well in this scenario. Prob dicey if CRA comes for the audit.
I have a HELOC on my house and have used a portion of it for a down payment on a rental property. I'm going to sell the rental property within a few years. Can I use my own house to do this strategy when I'm using a portion of the HELOC for the rental? Thank you.
Yes, but what if you have no room in your TFSA. So I am taking out my RRSP bit by bit first and not talking my TFSA.
Let me see if I understand this. If you convert all your investments to cash then they are no longer growing in value correct? You are foregoing today's gains in order to get it back later when the rrsp cash transferred to the tfsa is tax-free. So a tfsa retirement dollar is worth one dollar but an rrsp retirement dollar is only worth let's say 75 cents because the government takes 25. You would have to withdraw about $1.34 from rrsp money to have a dollar.
larky368 great question Larky. Thank you for watching our content and for reaching out with your thoughts. I would suggest watching our more recent video on this strategy. It helps illustrate the flow of funds a little better than this older version. Simply visit our page and it pops up automatically. You followed along well however, the growth part you are mistaken on. Recall that the proceeds of the mortgages are invested. This can be inverses the exact same or differently than what your RRSP and TFSA assets were prior to entering into this strategy. Hope that helps clarify. Be sure to let us know if you have any other questions!
What is the cost to doing this can you do an estimate on moving the $500k
Shawn, best to speak to Todd directly, but we cn do an illustration with your exact numbers to show you the exact cost to run the strategy and the results. info@precedencewealth.com
wondering if you are still monitoring the chat on this video... :p you mentioned leveraging rrsp and tfsa to set up a pool to purchase the house (something along that line)... can you leverage a LIRA account instead of RRSP account? given the high interest rate these days.. this strategy may make sense, if i understand it correctly
Hi @zc2051 Certainly! It's great to see your interest in exploring different financial strategies. While leveraging RRSP and TFSA for a home purchase is a common approach, using a LIRA (Locked-In Retirement Account) is indeed a possibility, depending on your specific situation and goals.
Leveraging a LIRA for a home purchase could make sense under certain conditions. LIRAs typically hold pension funds, and the rules governing them can vary by jurisdiction. Here are some considerations:
Unlocking Restrictions: LIRAs often have restrictions on withdrawal until retirement age, but some jurisdictions allow unlocking under specific circumstances, such as purchasing a home. It's essential to understand the rules governing LIRAs in your region.
Interest Rates: If you're considering this strategy due to high-interest rates, it's crucial to assess the overall cost of borrowing and compare it with other financing options. Ensure that leveraging the LIRA aligns with your long-term financial goals.
Tax Implications: Withdrawals from LIRAs are generally subject to taxes. Understanding the tax implications of unlocking funds and any potential tax advantages is essential in making an informed decision.
Professional Advice: Given the complexity of retirement accounts and the potential impact on your financial future, it's highly advisable to seek professional advice from a financial advisor or tax expert. They can provide personalized guidance based on your specific circumstances.
In summary, leveraging a LIRA for a home purchase is a possibility, but it requires a careful evaluation of the rules, costs, and potential tax implications. Always consult with a financial professional to ensure that the strategy aligns with your overall financial plan and objectives.
In your example is this an interest only mortgage or is there principle in the monthly payments? If there is principle do you get that from your non registered investment?
If it’s interest only wouldn’t the rsp be still owed 500k upon death (therefore still being taxable) to the estate? Thanks
Yes, exactly. The mortgages are interest only so that 100% of the payments remain tax deductible. Principle payments would be inefficient and non-tax-deductible.
No, the RRSP is liquidated over time to make the tax deductible mortgage payments. Hence, transferring over to the TFSA completely over time. Let us know if that makes sense. If you need more clarity, don't hesitate to reach out to us at info@precedencewealth.com. Always happy to help!
From what I read and understand, a second mortgage cannot be used in a non-arms length mortgage. How does the TFSA legally come into play in this case? I like the idea and have a lot of experience with RRSP 2nd mortgage lending. I also have a paid up house and vacation property with maxed out RRSP's and TFSA accounts. If I can better understand the CRA rule with respect to the 2nd mortgage (TFSA) part, I might give this a try.
Michael Power thanks for your question! Yes, the method has adjusted slightly since the initial release of this video. I would suggest watching our more recent video at www.precedencewealth.com
We use special purpose mortgage investments to facilitate this strategy currently. It is much more efficient and cost effective then what is outlined in this video. Although the same strategy in general the specific nuances are far improved. Let us know if you have any questions after checking it out. Thanks so much again for the attention and consideration Michael.
@@precedenceprivatewealth2872unable to locate updated video on your website
Great video. I have one question. What happens if I sell my house and buy another one on this strategy? Can I port the mortgages to my new home or do I need to close out the mortgage(s) on house one and then reestablish the strategy again on my new home? Does this strategy only really work if I’m in my forever home? Thanks.
Hi Ryan, thanks for watching.
We would have to restructure the debt and keep the same structure (non-deductible vs deductible components) on the new property. If you bought a more expensive property, you would have to come up with the additional down payment (to keep you at the 80% Loan-To-Value ratio) and the increased mortgage payment on the non-deductible debt. It would be the same out of pocket if you hadn’t done the strategy at all and upgraded.
If you would like to speak with our lead advisor Todd McLay please send a note to info@precedencewealth.com
Hello, this is a very interesting strategy, I actually have a question.
I am 46 yo and planning to retire at age 50.
Currently my RRSP and TFSA are maxed and I am planning to retire on dividends.
Clearly I would love to transfer my RRSP to the TFSA tax free.
I still owe half of my mortgage and it should be payed completely at age 57.
The main question I have after watching your video is, you explained that first step is to sell all my assets in both accounts to transfer the money to a non-registered account.
Then you say, we would need to withdraw from the RRSP/LIF to pay back the mortgage, isn't the RSSP/LIF already empty? since I already sold the assets to transfer the money to the non-registered account (and re-bought the assets I had previously in the RRSP/LIF and TFSA).
I see your video dates from 2017 and possibly the rules have changed, but if it is still relevant , could you explain the idea of emptying the RRSP and then withdraw from it ?, probably I misunderstood something.
Thank you
Hi Max,
Thanks for your questions. I would suggest speaking to our lead advisor Todd McLay directly info@precedencwealth.com
Here is a brief overview that may help..
# 1. Take the assets in your RRSP & TFSA and sell them to CASH, but they are still being held inside these structures respectively.
#2 Now we Invest the CASH from inside your RRSP & TFSA into a Special Purpose Mortgage(MIC) Mortgage Investment Corp.
#3. After we invest your RRSP & TFSA CASH into the MIC, The actual mortgage proceeds are then re-lent to you and invested into NON-REGISTERED INVESTMENTS.
#4. Now we begin to withdraw the money out of your RIF which is taxable income.
#5. We then make your mortgage payments to the MIC.
#6. You will be paid a 3% distribution from your RRSP and a 15% distribution from your TFSA. - The interest on these MIC payments is tax-deductible - The exact amount that is pulled out of your RRSP that is normally taxable is completely offset.
@@precedenceprivatewealth2872 this is where I have a problem: everything inside RRSP and TFSA is invested into a mortgage. Where do the money RIF withdroawl come from?
Have you actually implemented this?
Since CMHC no longer insures refinances, does this only work when you purchase a home? If you can still do it as a refinance, what are the CMHC fees, based on a 75% LTV?
Hi Geoff, we now use the Mortgage Investment Corp instead of a direct mortgage and the strategy evolved to the point where there are no longer any CMHC fees required for the set-up.
Instead of the mortgage on a house, could you use farmland, that is mortgage free, for the mortgage? Would this negate the CMHC requirement?
will this strategy work if I have a rental property ( not personal residence) that's been paid off?