How to Transfer an RRSP to a TFSA without Tax Consequences
ฝัง
- เผยแพร่เมื่อ 26 มิ.ย. 2024
- **View the Updated Video of this Strategy on our TH-cam Channel**
𝐓𝐨 𝐡𝐚𝐯𝐞 𝐚 𝐝𝐢𝐫𝐞𝐜𝐭 𝐜𝐨𝐧𝐯𝐞𝐫𝐬𝐚𝐭𝐢𝐨𝐧 𝐰𝐢𝐭𝐡 𝐨𝐮𝐫 𝐥𝐞𝐚𝐝 𝐚𝐝𝐯𝐢𝐬𝐨𝐫, 𝐓𝐨𝐝𝐝 𝐌𝐜𝐋𝐚𝐲, 𝐤𝐢𝐧𝐝𝐥𝐲 𝐫𝐞𝐚𝐜𝐡 𝐨𝐮𝐭 𝐯𝐢𝐚 𝐞𝐦𝐚𝐢𝐥 𝐭𝐨 𝐢𝐧𝐟𝐨@𝐩𝐫𝐞𝐜𝐞𝐝𝐞𝐧𝐜𝐞𝐰𝐞𝐚𝐥𝐭𝐡.𝐜𝐨𝐦. 𝐔𝐩𝐨𝐧 𝐲𝐨𝐮𝐫 𝐫𝐞𝐪𝐮𝐞𝐬𝐭, 𝐈'𝐥𝐥 𝐩𝐫𝐨𝐦𝐩𝐭𝐥𝐲 𝐩𝐫𝐨𝐯𝐢𝐝𝐞 𝐲𝐨𝐮 𝐰𝐢𝐭𝐡 𝐚 𝐥𝐢𝐧𝐤 𝐭𝐨 𝐡𝐢𝐬 𝐜𝐚𝐥𝐞𝐧𝐝𝐚𝐫, 𝐚𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐲𝐨𝐮 𝐭𝐨 𝐬𝐜𝐡𝐞𝐝𝐮𝐥𝐞 𝐚 𝐜𝐨𝐧𝐯𝐞𝐧𝐢𝐞𝐧𝐭 𝐭𝐢𝐦𝐞 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐢𝐨𝐧
YOUR BRIDGE TO A TAX-FREE RETIREMENT....Most Canadians are unaware that there are strategies that exist that can transfer assets from taxable RRSPs and Pension over to Tax-Free Savings Accounts.
The end result is TAX-FREE RETIREMENT INCOME!!!
In this video, we show you EXACTLY how we do this for our clients.
The client example discussed provides the following financial benefits:
1. Transfers a $500K RRSP over to a Tax-Free Savings Account in just under 11 years!!!
2. Saves over $500K+ in future income tax during retirement
3. Converts your investments into a structure so that you are eligible to deduct investment management fees to further enhance your net retirement income.
4. Create a potential "Tax-Free" transfer of your assets to your beneficiaries that otherwise would face enormous tax consequences upon death.
After you watch this video, PLEASE, PLEASE, PLEASE share with us your thoughts below or reach out to us at www.precedencewealth.com
* Ask Questions....
* Leave Comments....
* Give us your feedback....
We want to share this message with absolutely every single Canadian so they too can take advantage of these amazing benefits and enjoy a much better retirement lifestyle.
Using borrowed money to finance the purchase of securities involves greater risk than using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and interest as required by the loan terms remains the same, even if the value of the securities purchased declines. Leveraged investing and other high-risk strategies should only be considered in conjunction with proper investment, tax & legal planning advice. Always talk to a professional before investing
We sincerely thank you for your time, attention and consideration.
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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!🇨🇦
I think I have to watch it 4 more times to understand it, but looks like a very good strategy to avoid excess taxation.
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
It is of great value to watch.
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. 🤩
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
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 😂
Fantastic video everyone has to watch!
Amazing strategy, amazing video! Thanks so much for sharing this information.
i'll watch this video again in 30 years
Well RRSP is meant to be withdrawn over time, not at once. But if you must, it will be taxed. Great video.
Check out the investment section of our channel at Precedence Capital. th-cam.com/channels/Sf9AIHWdet5HMlWoY_231Q.html
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.
Great video.. thank you sooo much
You’re very welcome Linda. Glad you found it to be valuable. Let us know if you have any specific questions. Thanks again for your time and attention!
Great insights!
its real stuff.THANKS
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.
that is a great ! presentation
Great video
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! 😄
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.
Great information. Thank you!
Nice video!
William Arias thanks! 🙏🏻
@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.
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.
Thank you very much fore this Todd! Honestly, this is a strategy that I had no clue about. Well explained and simply demonstrated.
Here is what you need to qualify. 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.
One thing that most Canadians overlook is that pension values also can be used to qualify. For example a pension commuted value of $500k along with $500k of other investibke assets would help an individual qualify that otherwise would not without factoring in the pension assets.
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!!!
Very interesting.
Great video.
Whould the payment made to the rrsp and tfsa be consider has contribution?
Thanks
Awesome video!! I am for sure coming to your firm😀
Thanks Saurabh Jain! Glad you found value in the information. Yes, it is an amazing strategy! You can reach us at (306) 657-5733 or by email at service@precedencewealth.com
Your very welcome Connie Deja! 😊
That was a very informative video.
Tony Gman thanks Tony! Appreciate the feedback. Glad you found it of value to you. Be sure to reach out to us if you have any questions!
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
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?
Pretty interesting I must admit … are you following this strategy with your own accounts ?
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.
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.
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?
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.
I have a self directed investors account and a RRSP. I am 68 and retired. I try to move a bit over from my investors account every year over to my TSFA without going over a limit where I would lose my OAS for a year. Can you tell me if I would be better to withdraw from my RRSP every year or my investors account where I pay capital gains? Thanks.
RRIF, RRSP can be rolled over to surviving spouse on death, so no tax implications.
The catch: $600,000 is now growing in a non registered account at 5% return, that means tax on $30,000 in the first year which would not have been taxed an RSP/TFSA, and this will be an annual reducing loss until the strategy is fully implemented.
However, this was a very creative way to offset the RSP WD taxes.
Also, other comments are right there are set up and Maintainance costs.
Beneficial if you have alot of income in retirement, most have just the basic around 15k - 20k a year so wouldn't be worth it for those types.
What the presenter said was that the gain in the taxable account is taxed differently. He said that bcz intrest earned inside the taxable account would be considered a “capital gain”, only half of it would be subject to taxation. Idk if that is correct, but that is what he said
You're earning capital gains and dividend income. Most Canadian companies' dividends are taxed at a better rate than regular income and RIF withdrawals. Capital gains also have a better tax rate.
with today high interest rate, one can get GIC @ 5.75% annually, the interest income is 100% taxable income...
but of course there is no risk
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.
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.
Need more of this info forsure
HI Violet,
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
How well would this strategy work when one of the couple is a US citizen? e.g. The interests earned in a tax free savings account are income that is still taxable income for the US. Which means total TSFA contribution room for the couple is $75,500 in 2021...
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
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.
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?
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.
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.
Hi Ed, we replied to you question from your Facebook message. Please let us know if you do not receive it or if you have further questions. Happy Holidays! 🎄
I did not receive a tax deduction when I opened my RRSP. It did not make a difference for my tax return as I have yet to pay back money to Revenue Canada, I always have enough medical to get a refund. Will this make a difference as to why I did not receive the tax break?
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 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.
I have no RRSP being 67 having small mortgage paid from private pension.
In such case is there any advantage or nterest mortgage rate tax deductable?
Can all these transfer from RRSP to TFSA done at the bank?
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.
Thanks adam❤❤❤
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! 😊
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.
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 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?
can I set up mortgage with RRSP, TFSA, using it to pay off my current mortgage with bank when my term is up?
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
great information , really helpfull ,but i have a question, i dont own my house outright yet but i do own 240 acres outright ,,,could i do the same thing with my land instead of the mortgage on the house?
Perhaps. It depends on the land location and value. I suggest reaching out to us at info@precedencewealth.com and we can clarify these details with you.
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.
With the numbers you used in this video, how many years would it take to convert the entire 500k rrsp into the tfsa? Also, does the strategy work the same if 250k is mine ad the other 250k is my spouses? This would require two sets of accounts and therefore more management fees? Thanks
Jim H thank you watching our video Jim. The length of time would depend more upon the size of your TFSA accounts. With fully maximized TFSA accounts, you’re transfer would easily occur within 8-10 years. Best way to know is to view a detailed illustration with you exact figures. This is something we can easily provide you upon request. The fees are based on the level of assets and not on the amount of accounts, although regular annual account registration fees would apply. No different then any other self directed investment account. Hope that helps clarify!
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!
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?
Hello and thank you for sharing this information to us fellow Canadians. I am looking to see if something like this could apply to me, in regards to being a soon to be (5 year out plan) home owner, who plans on buying a new home using the first time home buyers plan. Executing 35k on my first home, and using the existing assets left in my RRSP. Let's say after my purchase of a home using an example that I have made my downpayment and have 65k left in my RRSP. Could I then use this stradegy to reallocate my funds tax free to my TFSA tax free?
I am 38 years of age, so let's say by 43 I use the 100k in my RRSP. So I use the 35k first time home buyers plan, and plan on transferring my assets (sold to cash as mentioned in your example) to my TFSA tax free, will this apply to me?
If you could let me know that would be great. As my concern being 38 at present time, and having the 65k remaining in my RRSP at 43, I would think I'd like to have access to the remaining balance in my TFSA ready at my disposal. Thoughts and advice would be appreciated. Thanks again, hope to hear from you soon. Again thank you for sharing this valuable information 👍🏽😊
Hi Walter,
Thanks very much for watching our video and your overview. Would you have a few minutes to speak to our lead advisor Todd McLay this week? Send me a note at info@precedencewealth.com and I can set up a time.
Thanks again for watching.
Thanks for sharing this strategy!
Does the RIF amount each year equal the TOTAL mortgage payment or the motgage INTEREST amount? If I can move the total annual mortgage payment from RRSP to TFSA this sounds time efficient. If it is just the interest portion, and I want to complete the movement of 500k before I die, I need to start at age 40, not 60.
To qualify for an insured mortgage, I will need sufficient income when I apply. Therefore this conversion of accumulated wealth from RRSP to TFSA must occur before, rather than during my retirement, right?
Can I qualify for the mortgage during my final year of employment, then retire, and hold the mortgage without complications as long as I continue to make timely payments?
Hi David, thanks for the questions.
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
What about capital, doesn't that have to be paid as a part of the mortgage payment, along with the interest?
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'm about to buy a 1st house next year, can I use rrsp to mortgage my home 400k worth say?
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.
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.
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.
I've never heard of "TFSA mortgage". I know of RRSP mortgage, but TFSA? Even now I tried to look it up.
Also, I have doubts about interest payments into mortgage being tax deductible. You are paying interest to yourself, how can it be tax deductible?
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 😉
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
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!
Has this loop hole been closed by CRA?
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
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 🔨
Hi, love your videos, keep it up. Is this a viable strategy for some who is 68 and working part time and has 170k rrsp and 15k tfsa?
Unfortunately this strategy is only available to "Accredited Investors" : (
A discription of what qualifies as such is on our website under TFSA Maximizer Strategy FAQ's...
So this would not work for most Canadians?
what you can do is take the lump sum whatever way you can and buy 3 bitcoins. Then wait 5 to 8 years. You will earn a million. Bitcoin is the only thing that cannot be manipulated by Wall St.
This strategy is only available to ACCREDITED INVESTORS ONLY RIGHT?
@@precedenceprivatewealth2872 1
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!
@@precedenceprivatewealth2872 would this be applicable to smaller fish as well(22YO have ~100k)? I am looking into a duplex(worth about 90k and looks like I got a good deal on one) and intend to use this process potentially not sure how to in conjunction with the other video of paying mortgage off faster with deductible mortgage(non-registered investments). Should I be contributing to an rrsp as well, since I’ve been contributing to a non-registered account because I’m young and vision my future years to pay more income.
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.
What kind of asset would be needed as a guarantee or leveraged against? What i understand is that they would need some kind of asset as a guarantee to issue loan against your property? Can this work without any assets?
Hi Bhavin,
Unfortunately this strategy requires a residential, commercial, or farm property within Canada. Hope that helps clarify things!
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
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.
Interesting....any office in Toronto area?
Hi Richard,
Thanks for watching our video. We are based in Saskatoon, but the majority of our clients are in the GTA area.
If you would like to speak with our lead advisor Todd McLay, please send us an email at info@precedencewealth.com
Can this be done with a RDSP?
And secondly, isn't the RRSP and TFSA new investments the collateral for the mortgage? IT seems that a property, mortgage free no less, is required in your presentation?
Jon Weigand yes that is exactly correct!
You can have a small mortgage on the property however there needs to be enough equity to fund the two special purpose mortgages in the RSP and TFSA.
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
Does this not cut into your cash flow? The principle portion of the mortgage payments is not tax deductible. Or are you simply paying the tax on the extra funds taken from the RRIF to cover the principle?
Shayne Slinn great question! Actually it doesn’t. The mortgages are set up as 1 year interest only mortgages. Therefore they are very efficient. There is a slight amount of tax drag from the tax withheld on the RRIF withdrawal but these funds are redistributed back into the program as RRSP contributions (as long as the client is younger than 71). Hope that helps clarify Shayne. Let us know if you have any other questions.
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.
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
This is brilliant!
Because it would be a non-arms length mortgage, is there any regulation regarding what a fair interest rate would be? I.e. is there any guidelines by which one must abide?
Hi James Gu, great question! CRA allows a comparable interest rate to what other mortgages with similar risk and borrowing would entail. Because the TFSA is in second position it easily qualifies for up to a 15% interest test. However, this adjusts as the strategy continues to shift more money towards the TFSA leaving a lower proportion in first position. If this doesn’t make sense or if you have further questions, please feel free to reach out to us at service@precedencewealth.com. Thanks again for your time and attention in watching our video!!!