You are absolutely right, Adam, definitely the way to go. When I started to draw down on my $630,000 RRSP in 2019 by taking out $50,000/year, here I am six years later and after withdrawing $250,000 there's still $500,000 in the portfolio, thanks to the magic of the stock market over the last five years. At this rate I don't know how long it will take me to melt down the RRSP, but I'm happy with the way things are going so far! I only started my CPP last year at 70, and I'm collecting close to the maximum there. I planning to buy a second motorcycle next year...
Same ''problem '' here...After withdrawing $ 150 000 in total for the last 2 years, my RRSP has increased in value !! Can't bring it down !! But we know how stock market behaves...
Thanks for your post Roger. I am planning on retiring in 2025 and have the plan to enjoy my pension income and RRSP until I am 65 when I will take OAS and 70 for CPP. Are you happy with your income and lifestyle? I am sure you can appreciate how in the back of my mind, there is always "will I have enough" kicking around. I know that this is based on lifestyle and costs associated with that. I think I can have an annual $100k in income (in todays dollars) for my life, I should be great and have a wonderful life. Thoughts? I think I need to get a motorcycle!
@@macdaddymgiarc As you note, much depends on lifestyle and associated costs. I'll be 71 soon. I'm working with an income of around $120,000. I have no debt and I don't budget...I plan to spend it all, and my two boys know that. I live rural, so my only utility is hydro and that averages $90/mth. "Vacation" trips are mostly within Canada using my 2016 camper trailer so I don't have to look for pet-friendly hotels. Major hospitals are 30 minutes away. For my 70th birthday last year, I treated myself to a new Sierra truck, to replace my 2001 Silverado. The rural lifestyle isn't for everyone but I love it. I worked in commercial real estate, lease and legal, for 40 years...never going back, LOL! My girlfriend and I feel blessed. Best of luck to you, I hope you enjoy your retirement as much as I do mine!
@@rogercyr1551 Thank you Roger, this is super helpful. I live in Ontario and hope to keep my income below the "next tax bracket" as an initial strategy. Currently it is about $106,000 before it jumps up, so I hope that I will control my RRSP withdraws at a level to not push any dollars into a higher bracket. This bracket will creep higher each year, so that amount will also grow. I would love to (ideally) have my RRSP melted down by CPP at 70. OAS at 65 will be my plan. I think I will travel a lot in my first 5-10 years and do not really have a financial budget for this, just a time budget. Half the year in Canada, half outside, is the plan. I have lots of expenses owning a house (no mortgage, just utilities and property taxes and cost of building maintenance) so one consideration with time is what to do with the house to maximize life. It sounds like you have no regrets and nothing stopping you from doing exactly what you like and when on a decent chunk of change. LOVE hearing your story - thank you for sharing it.
Another reason to draw down on the RRSP early is what happens if one spouse passes away early. The surviving spouse receives the dying spouses RRSP tax free. So that’s fine. But now the surviving spouse will get taxed into oblivion each year because their RRSP is twice the size - and now the surviving spouse isn’t able split income. It can be a real problem. Adam I would love to see you run some of these survivor scenarios including what happens if you delay CPP to age 70, but then one spouse dies early.
How do you go from retiring with $2+ million investment and withdrawing $115K (after tax, assuming they need $115K to cover annual expenses) each year, and then during that time have your total investment (excluding their home) grow to $6.4 million so fast? Are they still working and earning income during retirement years? If not then that level of ROI doesn't seem reasonable to me.
Too much eye-strain trying to see your spreadsheet examples, I hope you will consider zooming in more on the numbers you're trying to show otherwise I won't be able to watch. Great content!
Yes! I miss the days when Adam used to ZOOM in on the numbers. The spotlight effect does not help. Hopefully he goes back to zooming in a lot like he used to. Kind of wish he would redo videos from the last several months so we can actually see the numbers.
@@bluesideupfl510 I use a 55 inch screen, full screen of course (theatre mode), but thanks - I hope you will consider making it easier for some of older folks to see some of your examples going forward (more contrast & zoom-in more). Hope you take this as informative feedback - cheers.
I do agree that if one must spend from one source in the early years of retirement it is best to spend from the most risky source. This would be the RRSPs because they are the most vulnerable and inflexible to taxation, the most vulnerable to sudden changes in one's life, and the most long term vulnerable to market fluxuations. The most resilient sources would be a defined pension plan fully indexed to inflation. Next would be the CPP (taken after age 70). After this would be the OAS. And lastly, would be the TFSA, since that although money held inside it is not indexed to inflation, and is vulnerable to market fluxuations. It is a tax free source with enormous flexibility in retirement. Money removed from RRSPs should be used to finance one's life in retirement, and (if surplus) used to fill one's TFSA account to maximum.
Adam, I noticed that when calculating each year's Future Value (after withdrawals or contributions), your software is using only 1 "Period" in the calculation. I would have thought that since most retirees would require a monthly income, the RRSP (or TFSA or Non-Reg) future value calculation would apply 12 'Periods' (along with rate/12) to get the end result for each year. The difference, over the retirement years can be significant, depending on starting principle, the assumed growth rate, and amount withdrawn/contributed. I'm not an accountant or financial planner, so am assuming there is a good reason for this, that I'm not aware of (i.e. it's a more conservative approach, and that's always a good thing?)) Cheers!
I agree with most of your ideas but have a problem with the wait to increase CPP. For every year you wait, yes you increase the amount but you also increase the chances of being dead. Yup they can send the increase to cemetery row.
Hey Adam. Love your very informative video's as you know. Drawing down your RRSP so the last surviving spouse doesn't end up with a huge tax bill sure is eye opening to many. l would love to see you do a video on the one investment account that doesn't get much attention, and that is the non registered account. Not long ago, l learned that whatever investments l have through my brokerage in a non registered account ends up having to go through probate upon death for the surviving spouse. l would love to hear suggestions on this subject.
Re. "Drawing down your RRSP so the last surviving spouse doesn't end up with a huge tax bill" With everything setup correctly, the spouse will not get a tax bill; it's the estate that gets a tax bill on the death of the last surviving spouse.
@@harveythompson6951 I never heard of that and that's not what l was told by my brokerage. As far as l was told, whatever is in my non-registered account would have to go through probate. Hopefully Adam will fill us in with the correct info and what better to do.
Great content! I've learned so much from your channel. Thank you! I am curious if your software uses a flat return for your equity growth (~5%), or does it use some variability in those returns but keeps the long-term average at your input (~5%)? This variability can drastically change your prediction of success. If you are drawing down your equity investments when markets are going down, that is money that won't enjoy the long term returns. If you simply assume yearly growth of your input, this could vastly overstate your chance of success. Thanks again!
Plan to retire at 50's... support myself for age 65-70 with investments since we will Emigrate out of Canada with a minimum 25% at all investments in terms of taxes... But at least we will not be waiting for hospital wait rooms with our private health insurance and less $ for recreation and eating out and actually living. Hoping to get 3-4k more once CPP and OAS kicks in (also expecting OAS to not exist)
Hit 120k in investments😢 (RRSP ,TFSA and GICs) retiring in November with DB pension and started collecting CPP at 62. I wish I had known about converting my RRSP into a RRIF early. I would have drawn on my RRIF at 63 when I plan to retire and started CPP at 65. Oh well, what's done is done. I'll save my TFSA until my RRSP is melted all the way down and delay OAS a year or 2.
Hi, I’m enjoying your videos. Just wondering why melting down the RRSP is more favourable. Isn’t the main advantage actually created by deferring CPP to later? Can you publish your assumptions for example future tax rates and inflation? Thank you.
All those numbers are in the videos. By deferring CPP and drawing down RRSP is where the efficiency happens. One benefit leads to another. Assets need to work together in retirement.
Nice video. By the way, did the software considered (1) annual tax on non-registered account? This could reduce the effective growth by at least 0.5% comparing to the growth rates in RRSP and TFSA. (2) to cover the $115,000 expense, one needs to withdraw more from RRSP accounts to pay more tax compares to withdraw from non-registered account.
Thank you so much. One further question. Your software's comparison tool shows the difference in lifetime personal tax. Is this number PV adjusted for when it is paid? There are cases where it could be better to pay an overall higher dollar amount of tax if it is mostly later in life vs today. Thanks again!
Hi Adam Thanks again for another great video. Another clip you could maybe do. Unless you have one that speaks to this. My ? Is In regards to riff withdrawls. Monthly , weekly, by weekly. What’s best. My thoughts are weekly, ( if you can do that) leaving your investments to keep generating. Thks in advance
Just wondering if there is an example on this: since RRIF still grows tax free, with 30 years investment horizon from age 65 - 95, whether it makes sense to withdraw up to OAS claw back threshold and invest any not needed in unregistered account OR only withdraw mandatory amount from RRIF and pay lump sum tax on balance at the end? Of course, it assumes annual contribution to TFSA is maximized throughout the period.
This starts with the assumption that "everybody" has kids, or intends to pass money on to their kids, or pass money on to organizations, charities and such. Not "everybody" wants, or intends to do this. Some, want to die with zero dollars left in their estate, and no inheritance or after death taxes to be paid.
Just to be clear, there are no "inheritance" taxes in Canada but there is probate, Capital Gains Tax and registered retirement accounts are fully taxable as income upon the death of the last surviving spouse. Financial planning can model any scenario you want but focusing on taxes at death and any estate is a mistake because most people have no idea how long they will live. As illustrated in this video, it may be better to pay a little more tax and receive a lot more in government benefits or investment returns.
QUESTION - I noticed that your Software regularly increases the Annual TFSA Room a lot faster than the $500 every 5 years that I am used to seeing (2%/yr inflation x 5yrs =10%). Does your Software know something about future inflation that I don't? Thx Adam. Love the videos.
i've had the same question.... I believe the SNAP software uses the projected inflation rate (entered for each scenario for the calculations)... so a 5% yr inflation rate would mean that TFSA rates should go up by 10% = 700 every 2 years!
@@sholbech22 in 2024 the Canadian Government used a CPI of 4.4% and is projected to continue to fall going forward. So I don't see the 5% you mention. But thanks for the comment. Hoping Adam has an answer for both of us.
Are the demonstrated withdrawals from the RRIFs more the allocated minimum withdrawal amounts. I find the information that minimum withdrawal amounts a bit more than 5% annually of the Total amount. Are the withholding taxes included in the calculation?
Great information as always. A friend of mine that has a 2 million dollar RRSP and is making about 225K on dividends each year. Would would be the strategy for RRSP meltdown at these high levels of dividends? Thanks
get your friend to contact Adam.. a single $5K review could save them 100K+ in taxes over the next 20 years!... and there probably isn't a single strategy!
Would this same strategy work for a more realistic retirement where a couple has only saved about $250,000 in an RRSP with no TFSA. And why does this strategy save taxes?
You bet it does. Helps level out the average tax rate, as well as allows you to draw more on the registered accounts to delay your CPP which grows at a faster rate. It's multiple moving parts that make the process work in your favor.
What are your thoughts on POD and TOD (Payable on Death ) and Transfer on Death? You never discuss it. To me it might be away paying tax on the estate? thoughts?
Hello Adam. I really appreciate the knowledge to pass to me. I need your help. I’m an Ontario resident and I’m 2years on my retirement. I can you or can you recommend someone in my area. Thanking you in advance
My wife withdraws the maximum from her LIF and less from the RRIF. The reason is because the LIF is less flexible, i.e. she can't make a large unexpected withdrawal from the LIF, whereas she can from the RRIF.
why are the majority of your retirement videos based on such high amounts, is there really that many people out there with over 500,000 dollars in a rrsp, it seems pretty unrealistic to me the numbers you use
It's "normal" if they started preparing early on (20s-30s) and had been putting $300-500 away each month for retirement. But it's not "normal" in that I'm sure very few people start thinking about retirement that early on.
Great video as always, Adam. I’m a fan of the RRSP meltdown strategy, but I’m curious about its impact on those using high-yield income strategies, like Covered Calls, within their RRSPs that generate 13-16% annual dividends. Wouldn’t they need to withdraw more to reduce the principal? Otherwise, they’d only be withdrawing the dividend portion, and the principal would continue to grow.
No guarantee the prinicipal will grow (depends on the market), but I agree w/your statement about the dividends. The drawdown scenarios don't explain how much is from the dividends being earned and how much is from the principal.
One question I have is that if cpp is adjusted for inflation does that mean for example If 2025 is 3 percent inflation that that mean cpp goes up by 3 percent?
When CPP is being received, it is indexed by the 2-year average CPI (as at October). Prior to commencing CPP, it is indexed by the 5-year average YMPE increases (also as at October).
the overall CPP benefit would be index, as described.. and if you're deferring until age 70 you would also get the benefit of the indexing.... in reality if you deferred for 5 years (8.4% years=42% increase) that rate would actually be much higher probably closer to 50-55% with inflation adjustment taken in.
When you withdraw from RRSP/RIP from my understanding it is considered income, in turn increasing your effective tax rate, marginal tax rate. Additionally since it is withdrawn before the age of 65, you cannot even do pension splitting. Instead if you are withdrawing from registered only 50% is considered as income. Would appreciate if someone could explain how RRSP meltdown saved tax for this case.
This is not correct: "if you are withdrawing from [non-]registered only 50% is considered as income" Only 50% of the gain is considered as income. So, if you paid $50K for the stock, and sold it for $70K and used that for income, only $10K is taxable. Now, if you have a capital loss from a previous year, that can offset the taxable gain, reducing the tax due. Other factors may also reduce the tax due. As for the RRSP meltdown, it's a fairly complex problem, as you need to take into account many different factors. I'd recommend you have your situation run through financial planning software. We did, and it made our path clear.
The stragedy generally points towards the same solutions as usual - delay CPP , use TFSA first, Watch withdrawal and amounts to prevent callbacks. Right?
@@JohnGor-ch9tv I tried modelling this and my total estate value is always maximized when withdrawing from my RRIF/LIF first, my non registered accounts second and my TFSA last…
You should be able to leave your money in your rrsp instead of having to turn it into a rif and be forced to remove money whether you need it or not. Being be able to do that would be a true self directed retirement plan.Why aren’t people pushing for that?
@@nicklanfear4303 Yes and they will get it when you die and if there is more in your rrsp when you die because you chose the withdrawal rate then they will get that much more because you are taxed at the top marginal rate.
If you give your kids money while alive. Do kids have to pay taxes on the money ? Also, is the difference between giving your children while alive VS when you pass part of the estate proceeds ?
No, it's not income. You can sell everything and give them all the cash. They pay no taxes on it except for the income it would generate going forward.
best to find a safe tax friendly country and leave Canada. The current Lib gov and taxes will only decrease our "after tax dollars" and considering the ridiculous cost of living in this country..... were out'a here!!
2M? I don't know anyone who has 2M saved for retirement. Your videos cater lean towards the top 1% wage earners. What about us normal middle class folks?
My wife and I have close to 4 million saved now (excluding our $650,000 house.) How? Started in our early 20's saving. Always very conservative investments. Never owned a stock or mutual fund. Never had an investment advisor sucking off a percentage. No inheritances either. We are careful with our money, but not misers at all.
Bring Stephanie Janis Stiefel on the show. She changed my life Financially I managed to grow a nest egg of around 120k to over a Million. I'm especially grateful to Stephanie Janis Stiefel, for her expertise and exposure to different areas of the market.
I know this lady you just mentioned. Stephanie Janis Stiefel is a portfolio manager and investment advisor. She gained recognition as a former employee at Goldman Sachs; a renowned investor she is. Stephanie Janis Stiefel has demonstrated expertise in investment strategies and has been involved in managing portfolios and providing guidance to clients.
Lets say you melt down your RRSP by $100,00 per year for 10 years. All else remaining equal - You pocket $65,000 and pay $35,000 in tax each year. What is the opportunity cost of NOT having that $35,000 per year remaining in the RRSP growing at 6% per annum in lieu to paying it as tax? I don't appear to me that you take that into consideration when doing you analysis.
For $100k gross, they'd actually only pay ~14k in tax each year (50k gross each), and once the couple is 65, they'd pay only 10.5% tax (on that 100k inflation adjusted)
@@ParallelWealth Good to know - irregardless of the amount of taxes paid on the RRSP - I don't see a recapture column on your spreadsheet for the opportunity cost of tax pard - or is it built in another part of your calculations. If so could you point out were. THX
Taxes HAVE to be paid, they aren't an option one chooses to have or not. You have to live on something and taxes have to be paid on the income. There is no opportunity cost.
You are absolutely right, Adam, definitely the way to go. When I started to draw down on my $630,000 RRSP in 2019 by taking out $50,000/year, here I am six years later and after withdrawing $250,000 there's still $500,000 in the portfolio, thanks to the magic of the stock market over the last five years. At this rate I don't know how long it will take me to melt down the RRSP, but I'm happy with the way things are going so far! I only started my CPP last year at 70, and I'm collecting close to the maximum there. I planning to buy a second motorcycle next year...
Same ''problem '' here...After withdrawing $ 150 000 in total for the last 2 years, my RRSP has increased in value !! Can't bring it down !! But we know how stock market behaves...
For sure,@@1983dmd! I always keep that in mind and am prepared to adjust as needed. I have no debts, so meanwhile, I just roll with it.
Thanks for your post Roger. I am planning on retiring in 2025 and have the plan to enjoy my pension income and RRSP until I am 65 when I will take OAS and 70 for CPP. Are you happy with your income and lifestyle? I am sure you can appreciate how in the back of my mind, there is always "will I have enough" kicking around. I know that this is based on lifestyle and costs associated with that. I think I can have an annual $100k in income (in todays dollars) for my life, I should be great and have a wonderful life. Thoughts? I think I need to get a motorcycle!
@@macdaddymgiarc As you note, much depends on lifestyle and associated costs.
I'll be 71 soon. I'm working with an income of around $120,000. I have no debt and I don't budget...I plan to spend it all, and my two boys know that. I live rural, so my only utility is hydro and that averages $90/mth. "Vacation" trips are mostly within Canada using my 2016 camper trailer so I don't have to look for pet-friendly hotels. Major hospitals are 30 minutes away. For my 70th birthday last year, I treated myself to a new
Sierra truck, to replace my 2001 Silverado. The rural lifestyle isn't for everyone but I love it. I worked in commercial real estate, lease and legal, for 40 years...never going back, LOL! My girlfriend and I feel blessed.
Best of luck to you, I hope you enjoy your retirement as much as I do mine!
@@rogercyr1551 Thank you Roger, this is super helpful. I live in Ontario and hope to keep my income below the "next tax bracket" as an initial strategy. Currently it is about $106,000 before it jumps up, so I hope that I will control my RRSP withdraws at a level to not push any dollars into a higher bracket. This bracket will creep higher each year, so that amount will also grow. I would love to (ideally) have my RRSP melted down by CPP at 70. OAS at 65 will be my plan. I think I will travel a lot in my first 5-10 years and do not really have a financial budget for this, just a time budget. Half the year in Canada, half outside, is the plan. I have lots of expenses owning a house (no mortgage, just utilities and property taxes and cost of building maintenance) so one consideration with time is what to do with the house to maximize life. It sounds like you have no regrets and nothing stopping you from doing exactly what you like and when on a decent chunk of change. LOVE hearing your story - thank you for sharing it.
Another reason to draw down on the RRSP early is what happens if one spouse passes away early. The surviving spouse receives the dying spouses RRSP tax free. So that’s fine. But now the surviving spouse will get taxed into oblivion each year because their RRSP is twice the size - and now the surviving spouse isn’t able split income. It can be a real problem.
Adam I would love to see you run some of these survivor scenarios including what happens if you delay CPP to age 70, but then one spouse dies early.
How do you go from retiring with $2+ million investment and withdrawing $115K (after tax, assuming they need $115K to cover annual expenses) each year, and then during that time have your total investment (excluding their home) grow to $6.4 million so fast? Are they still working and earning income during retirement years? If not then that level of ROI doesn't seem reasonable to me.
Too much eye-strain trying to see your spreadsheet examples, I hope you will consider zooming in more on the numbers you're trying to show otherwise I won't be able to watch. Great content!
Yes! I miss the days when Adam used to ZOOM in on the numbers. The spotlight effect does not help. Hopefully he goes back to zooming in a lot like he used to. Kind of wish he would redo videos from the last several months so we can actually see the numbers.
Yes.
Go to theatre mode on youtube. That should help
@@bluesideupfl510 I use a 55 inch screen, full screen of course (theatre mode), but thanks - I hope you will consider making it easier for some of older folks to see some of your examples going forward (more contrast & zoom-in more). Hope you take this as informative feedback - cheers.
Another nice video Adam 👍
Wish I had that problem.
It looks like they had a windfall in the non reg
@@sandray7609 - That's what it sounded like to me. Probably a parent passed away and they sold the house.
I do agree that if one must spend from one source in the early years of retirement it is best to spend from the most risky source. This would be the RRSPs because they are the most vulnerable and inflexible to taxation, the most vulnerable to sudden changes in one's life, and the most long term vulnerable to market fluxuations.
The most resilient sources would be a defined pension plan fully indexed to inflation. Next would be the CPP (taken after age 70). After this would be the OAS. And lastly, would be the TFSA, since that although money held inside it is not indexed to inflation, and is vulnerable to market fluxuations. It is a tax free source with enormous flexibility in retirement.
Money removed from RRSPs should be used to finance one's life in retirement, and (if surplus) used to fill one's TFSA account to maximum.
Thanks Adam, always food for thought in your excellent topics. I appreciate your strategies. Cheers Doug
Adam, I noticed that when calculating each year's Future Value (after withdrawals or contributions), your software is using only 1 "Period" in the calculation. I would have thought that since most retirees would require a monthly income, the RRSP (or TFSA or Non-Reg) future value calculation would apply 12 'Periods' (along with rate/12) to get the end result for each year.
The difference, over the retirement years can be significant, depending on starting principle, the assumed growth rate, and amount withdrawn/contributed. I'm not an accountant or financial planner, so am assuming there is a good reason for this, that I'm not aware of (i.e. it's a more conservative approach, and that's always a good thing?)) Cheers!
I agree with most of your ideas but have a problem with the wait to increase CPP. For every year you wait, yes you increase the amount but you also increase the chances of being dead. Yup they can send the increase to cemetery row.
If you are dead, no CPP is possibly the least of your worries...
Hey Adam. Love your very informative video's as you know. Drawing down your RRSP so the last surviving spouse doesn't end up with a huge tax bill sure is eye opening to many. l would love to see you do a video on the one investment account that doesn't get much attention, and that is the non registered account. Not long ago, l learned that whatever investments l have through my brokerage in a non registered account ends up having to go through probate upon death for the surviving spouse. l would love to hear suggestions on this subject.
Re. "Drawing down your RRSP so the last surviving spouse doesn't end up with a huge tax bill"
With everything setup correctly, the spouse will not get a tax bill; it's the estate that gets a tax bill on the death of the last surviving spouse.
It gets rolled over into the RRSP of the surviving spouse. Not a huge tax bill.
@@harveythompson6951 That's not what l was told by my brokerage. l never heard of that either but will check it out.
@@harveythompson6951 I never heard of that and that's not what l was told by my brokerage. As far as l was told, whatever is in my non-registered account would have to go through probate. Hopefully Adam will fill us in with the correct info and what better to do.
Great content! I've learned so much from your channel. Thank you! I am curious if your software uses a flat return for your equity growth (~5%), or does it use some variability in those returns but keeps the long-term average at your input (~5%)? This variability can drastically change your prediction of success. If you are drawing down your equity investments when markets are going down, that is money that won't enjoy the long term returns. If you simply assume yearly growth of your input, this could vastly overstate your chance of success. Thanks again!
Plan to retire at 50's... support myself for age 65-70 with investments since we will Emigrate out of Canada with a minimum 25% at all investments in terms of taxes... But at least we will not be waiting for hospital wait rooms with our private health insurance and less $ for recreation and eating out and actually living. Hoping to get 3-4k more once CPP and OAS kicks in (also expecting OAS to not exist)
OAS depends on residency years in Canada. By leaving the country you will definitely get a significant hit on income from that source.
Hit 120k in investments😢 (RRSP ,TFSA and GICs) retiring in November with DB pension and started collecting CPP at 62. I wish I had known about converting my RRSP into a RRIF early. I would have drawn on my RRIF at 63 when I plan to retire and started CPP at 65. Oh well, what's done is done. I'll save my TFSA until my RRSP is melted all the way down and delay OAS a year or 2.
Pension+RRIF+TFSA (for rainy days)
some can add a company pension too!
@@ronbonora7872 of course. I did.
Hi, I’m enjoying your videos. Just wondering why melting down the RRSP is more favourable. Isn’t the main advantage actually created by deferring CPP to later? Can you publish your assumptions for example future tax rates and inflation? Thank you.
All those numbers are in the videos. By deferring CPP and drawing down RRSP is where the efficiency happens. One benefit leads to another. Assets need to work together in retirement.
Nice video. By the way, did the software considered (1) annual tax on non-registered account? This could reduce the effective growth by at least 0.5% comparing to the growth rates in RRSP and TFSA. (2) to cover the $115,000 expense, one needs to withdraw more from RRSP accounts to pay more tax compares to withdraw from non-registered account.
Yes it takes that into account
Thank you so much. One further question. Your software's comparison tool shows the difference in lifetime personal tax. Is this number PV adjusted for when it is paid? There are cases where it could be better to pay an overall higher dollar amount of tax if it is mostly later in life vs today. Thanks again!
Hi Adam
Thanks again for another great video.
Another clip you could maybe do. Unless you have one that speaks to this.
My ? Is In regards to riff withdrawls. Monthly , weekly, by weekly. What’s best. My thoughts are weekly, ( if you can do that) leaving your investments to keep generating.
Thks in advance
Thank you for your program and sharing your knowledge…
Why wouldn’t projections be available for the wide audience?
SNAP projections sells their services to financial planners
Just wondering if there is an example on this: since RRIF still grows tax free, with 30 years investment horizon from age 65 - 95, whether it makes sense to withdraw up to OAS claw back threshold and invest any not needed in unregistered account OR only withdraw mandatory amount from RRIF and pay lump sum tax on balance at the end? Of course, it assumes annual contribution to TFSA is maximized throughout the period.
This starts with the assumption that "everybody" has kids, or intends to pass money on to their kids, or pass money on to organizations, charities and such. Not "everybody" wants, or intends to do this. Some, want to die with zero dollars left in their estate, and no inheritance or after death taxes to be paid.
Just to be clear, there are no "inheritance" taxes in Canada but there is probate, Capital Gains Tax and registered retirement accounts are fully taxable as income upon the death of the last surviving spouse. Financial planning can model any scenario you want but focusing on taxes at death and any estate is a mistake because most people have no idea how long they will live. As illustrated in this video, it may be better to pay a little more tax and receive a lot more in government benefits or investment returns.
I’m always interested in your videos but those illegible spreadsheets are useless. Please enlarge the info and simplify. Love your content!!
Half our viewers are on a TV, so easy to read....but if you are on a phone it becomes challenging!
Does melting down RRSPs early also apply if you receive an adequate monthly employer pension ( as well as CPP and TFSAs)?
QUESTION - I noticed that your Software regularly increases the Annual TFSA Room a lot faster than the $500 every 5 years that I am used to seeing (2%/yr inflation x 5yrs =10%). Does your Software know something about future inflation that I don't? Thx Adam. Love the videos.
i've had the same question.... I believe the SNAP software uses the projected inflation rate (entered for each scenario for the calculations)... so a 5% yr inflation rate would mean that TFSA rates should go up by 10% = 700 every 2 years!
@@sholbech22 in 2024 the Canadian Government used a CPI of 4.4% and is projected to continue to fall going forward. So I don't see the 5% you mention. But thanks for the comment. Hoping Adam has an answer for both of us.
Are the demonstrated withdrawals from the RRIFs more the allocated minimum withdrawal amounts. I find the information that minimum withdrawal amounts a bit more than 5% annually of the Total amount. Are the withholding taxes included in the calculation?
This assumes a 5% rate of return. Is there a different rate of return where the "withdraw non-registered first" scenario is better?
Great information as always. A friend of mine that has a 2 million dollar RRSP and is making about 225K on dividends each year. Would would be the strategy for RRSP meltdown at these high levels of dividends? Thanks
party like it's 1999...
get your friend to contact Adam.. a single $5K review could save them 100K+ in taxes over the next 20 years!... and there probably isn't a single strategy!
Would this same strategy work for a more realistic retirement where a couple has only saved about $250,000 in an RRSP with no TFSA. And why does this strategy save taxes?
You bet it does. Helps level out the average tax rate, as well as allows you to draw more on the registered accounts to delay your CPP which grows at a faster rate. It's multiple moving parts that make the process work in your favor.
@ParallelWealth so true. Wish I knew this before I took CPP early.
What are your thoughts on POD and TOD (Payable on Death ) and Transfer on Death? You never discuss it. To me it might be away paying tax on the estate? thoughts?
Hello Adam. I really appreciate the knowledge to pass to me. I need your help. I’m an Ontario resident and I’m 2years on my retirement. I can you or can you recommend someone in my area. Thanking you in advance
just call adam!.. although he is in langley BC, i believe the company is located across canada.
What if they had a corporation with say $1.2M and the balance (~$800k) spread between RSP and TFSA?
If they have more in the corp than they will spend in their lifetime, the corp TFSA strategy makes sense
I have to take money out of my riff to pay my taxes which just costs me more taxes ??
What happens if you have a LIF as well? Do you withdraw the maximum allowed each year and then withdraw from the RRIF?
My wife withdraws the maximum from her LIF and less from the RRIF. The reason is because the LIF is less flexible, i.e. she can't make a large unexpected withdrawal from the LIF, whereas she can from the RRIF.
why are the majority of your retirement videos based on such high amounts, is there really that many people out there with over 500,000 dollars in a rrsp, it seems pretty unrealistic to me the numbers you use
how come normal people can have 2M 6M this is not relastic.
It's likely they had an inheritance. I know more than a few people who live in Toronto or Vancouver whose parent's house is worth quite a bit.
It's "normal" if they started preparing early on (20s-30s) and had been putting $300-500 away each month for retirement.
But it's not "normal" in that I'm sure very few people start thinking about retirement that early on.
If you are at all smart withdraw from Canada
Great video as always, Adam. I’m a fan of the RRSP meltdown strategy, but I’m curious about its impact on those using high-yield income strategies, like Covered Calls, within their RRSPs that generate 13-16% annual dividends. Wouldn’t they need to withdraw more to reduce the principal? Otherwise, they’d only be withdrawing the dividend portion, and the principal would continue to grow.
No guarantee the prinicipal will grow (depends on the market), but I agree w/your statement about the dividends. The drawdown scenarios don't explain how much is from the dividends being earned and how much is from the principal.
@@paulinanelega Beware : Past results do not guarantee future results...like they say at the bottom !!!;)
One question I have is that if cpp is adjusted for inflation does that mean for example
If 2025 is 3 percent inflation that that mean cpp goes up by 3 percent?
When CPP is being received, it is indexed by the 2-year average CPI (as at October). Prior to commencing CPP, it is indexed by the 5-year average YMPE increases (also as at October).
That would be correct.
the overall CPP benefit would be index, as described.. and if you're deferring until age 70 you would also get the benefit of the indexing.... in reality if you deferred for 5 years (8.4% years=42% increase) that rate would actually be much higher probably closer to 50-55% with inflation adjustment taken in.
@sholbech22 thanks for the clarity that is helpful 😀
When you withdraw from RRSP/RIP from my understanding it is considered income, in turn increasing your effective tax rate, marginal tax rate. Additionally since it is withdrawn before the age of 65, you cannot even do pension splitting. Instead if you are withdrawing from registered only 50% is considered as income. Would appreciate if someone could explain how RRSP meltdown saved tax for this case.
This is not correct: "if you are withdrawing from [non-]registered only 50% is considered as income"
Only 50% of the gain is considered as income. So, if you paid $50K for the stock, and sold it for $70K and used that for income, only $10K is taxable. Now, if you have a capital loss from a previous year, that can offset the taxable gain, reducing the tax due. Other factors may also reduce the tax due.
As for the RRSP meltdown, it's a fairly complex problem, as you need to take into account many different factors. I'd recommend you have your situation run through financial planning software. We did, and it made our path clear.
Sorry correction - non-registered.
Only 50% of gains is accounted as income when it is from a non-registered account.
❤
How do they end up with 6 million dollars at end of retirement
Its growing faster than they are spending it.
With 2M, you just withdraw dividends with that much.
Leaves a bad tax situation. More to it.
what age did you assume they will live to? VERY IMPORTANT no?
Yup, want to run different ages.w
We ran 90 here, which is life expectancy of a 65 year old couple.
A lot of gymnastics to leave a an estate that is 2.5% larger at age 95 to my 70 year old children.
I’d buy a helicopter. Probably a Robinson
The whole idea would be to free up the cash (which this does) to help them earlier. We have a few videos that outline that process.
I've retired with 600000K, 350k in cash, low rrsp and tfsa's....rrsp first or tfsa's first?
RRSP first. TFSA is tax free. Leave it
600000K = $600000000, you should not worry I assume
Probably meant 600K.
First
The stragedy generally points towards the same solutions as usual - delay CPP , use TFSA first, Watch withdrawal and amounts to prevent callbacks. Right?
why would you withdrawal from the TFSA first? It’s tax free let it grow. TFSA should be LAST.
His strategy says melt down the RRSP first ...
@@JohnGor-ch9tv I tried modelling this and my total estate value is always maximized when withdrawing from my RRIF/LIF first, my non registered accounts second and my TFSA last…
You should be able to leave your money in your rrsp instead of having to turn it into a rif and be forced to remove money whether you need it or not. Being be able to do that would be a true self directed retirement plan.Why aren’t people pushing for that?
Govt wants its tax on the money back
Because human nature being what it is, many will not touch it and probably live in poverty just because they don't want to pay the tax which is owed.
@@nicklanfear4303 Yes and they will get it when you die and if there is more in your rrsp when you die because you chose the withdrawal rate then they will get that much more because you are taxed at the top marginal rate.
@@harveythompson6951 If people don’t touch it then the govt has a real windfall when you die.
If you give your kids money while alive. Do kids have to pay taxes on the money ? Also, is the difference between giving your children while alive VS when you pass part of the estate proceeds ?
No, it's not income. You can sell everything and give them all the cash. They pay no taxes on it except for the income it would generate going forward.
Inheritance in Canada is tax free.
@ParallelWealth thank you. If there are physical properties, can you explain how the taxes would play out. Thank you.
@@samsam8603 .. messy! and can get very complicated with recent changes to declaring primary/secondary property residency.
Back to the spread sheet , your always talking millions of dollars . I must be the only one that has way less then that .
He’s done lots of videos of less than a million, just go back and find them. 😊
best to find a safe tax friendly country and leave Canada. The current Lib gov and taxes will only decrease our "after tax dollars" and considering the ridiculous cost of living in this country..... were out'a here!!
Retire on $2 million in Canada? Good luck!😂
Explain. His analysis shows its no problem to do so.
2M? I don't know anyone who has 2M saved for retirement. Your videos cater lean towards the top 1% wage earners. What about us normal middle class folks?
YUP. there are more people than you think mate!
My wife and I have close to 4 million saved now (excluding our $650,000 house.)
How? Started in our early 20's saving.
Always very conservative investments. Never owned a stock or mutual fund. Never had an investment advisor sucking off a percentage. No inheritances either.
We are careful with our money, but not misers at all.
They were smart enough to save 2 million for retirement, but stupid to leave it in RRSP as long as possible? Doesn't sound likely.
680 each in RRSPs could have accumulated on its own just in their fifties. They were obviously high income, why pull it out early?
Bring Stephanie Janis Stiefel on the show. She changed my life Financially I managed to grow a nest egg of around 120k to over a Million. I'm especially grateful to Stephanie Janis Stiefel, for her expertise and exposure to different areas of the market.
I know this lady you just mentioned. Stephanie Janis Stiefel is a portfolio manager and investment advisor. She gained recognition as a former employee at Goldman Sachs; a renowned investor she is. Stephanie Janis Stiefel has demonstrated expertise in investment strategies and has been involved in managing portfolios and providing guidance to clients.
stop attempting to high-jack the thread...
Lets say you melt down your RRSP by $100,00 per year for 10 years.
All else remaining equal - You pocket $65,000 and pay $35,000 in tax each year.
What is the opportunity cost of NOT having that $35,000 per year remaining in the RRSP growing at 6% per annum in lieu to paying it as tax?
I don't appear to me that you take that into consideration when doing you analysis.
All built into the plan and consideration.
For $100k gross, they'd actually only pay ~14k in tax each year (50k gross each), and once the couple is 65, they'd pay only 10.5% tax (on that 100k inflation adjusted)
@@ParallelWealth Good to know - irregardless of the amount of taxes paid on the RRSP - I don't see a recapture column on your spreadsheet for the opportunity cost of tax pard - or is it built in another part of your calculations. If so could you point out were. THX
Taxes HAVE to be paid, they aren't an option one chooses to have or not. You have to live on something and taxes have to be paid on the income. There is no opportunity cost.
@@harveythompson6951 sure