Determining Minimum Withdrawals from a RRIF....

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iluvnascar
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Determining Minimum Withdrawals from a RRIF....

Post by iluvnascar »

I am familiar with the calculation [1/(90-age)]......

But it is my understanding that if your spouse is younger, there is an election that can be made so that the minimum withdrawal (and perhaps even the collapsing of any RRSP's to RRIF's) can be based upon the younger spouse's age?

Can anyone shed any light on this possibility and, is accurate, some link that describes the rules?
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Peculiar_Investor
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Re: Determining Minimum Withdrawals from a RRIF....

Post by Peculiar_Investor »

Seems to be covered at Receiving income from a RRIF - Canada Revenue Agency,
Your carrier calculates the minimum amount based on your age at the beginning of each year. However, you can elect to have the payment based on your spouse or common-law partner's age. You must select this option when filling out the original RRIF application form. Once you make this election, you cannot change it. If you want more information, contact your carrier.
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iluvnascar
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Re: Determining Minimum Withdrawals from a RRIF....

Post by iluvnascar »

That covers it! Thank you....
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Re: Determining Minimum Withdrawals from a RRIF....

Post by steves »

iluvnascar wrote:I am familiar with the calculation [1/(90-age)]......

But it is my understanding that if your spouse is younger, there is an election that can be made so that the minimum withdrawal (and perhaps even the collapsing of any RRSP's to RRIF's) can be based upon the younger spouse's age?

Can anyone shed any light on this possibility and, is accurate, some link that describes the rules?
1/(90-age) is no longer the factor.... Here are the current RRIF minimum rules.... RRIF Minimum Rules
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Re: Determining Minimum Withdrawals from a RRIF....

Post by Shine »

Thank you for this post.

Is the withdrawal amount based on the value of the RRIF on January 1st of the taxation year, or December 31st of the taxation year?

In an imaginary situation, one has a RRIF of $500K generating maybe 5% to 7% per year through bond/dividends/royalties which increases value of the RRIF during the specific taxation year. What is the baseline for percentage withdrawal?
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Re: Determining Minimum Withdrawals from a RRIF....

Post by pmj »

You calculate this amount by multiplying the fair market value (FMV) of the property held in the RRIF at the start of the year by a prescribed factor.
From Appendix D, here: http://www.cra-arc.gc.ca/E/pub/tg/t4079/t4079-11e.pdf
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Re: Determining Minimum Withdrawals from a RRIF....

Post by Thorn »

On a slightly different tack, RRIF withdrawals are taxed at your marginal rate.

If you have significant capital in the RRIF and you have room in your current tax bracket, you could consider taking more than the minimum.

If you withdraw an amount to "top up to bracket" you will pay a lower marginal rate than you might in the future. You can re-invest the excess in equities delivering dividends and/or capital gains, for a more beneficial tax rate when making future withdrawals.
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Re: Determining Minimum Withdrawals from a RRIF....

Post by Springbok »

Thorn wrote:On a slightly different tack, RRIF withdrawals are taxed at your marginal rate.

If you have significant capital in the RRIF and you have room in your current tax bracket, you could consider taking more than the minimum.

If you withdraw an amount to "top up to bracket" you will pay a lower marginal rate than you might in the future. You can re-invest the excess in equities delivering dividends and/or capital gains, for a more beneficial tax rate when making future withdrawals.
Topping up to bracket might help, but you do pay the taxes earlier than you otherwise would.
One problem I see, is knowing what your taxable income will be. Until we receive T-slips in Feb of the following year we don't know just what our taxable income will be. But we have to draw from the RRIF before Dec 31st. It may be possible to make a close estimate, but not always easy when, for example, we don't know split between ROC, dividends & other income, especially from mutual or closed end funds.
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