RIF at age 65

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2of3aintbad
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RIF at age 65

Post by 2of3aintbad »

I will be turning 65 in January, not in 2017 but in 2018 ("God willing and the creek don’t rise"). I plan to convert some of my BMOIL RSP to a RIF mainly to take advantage of the $2000 Pension Income Tax Credit. So as I understand it, if I transfer some holdings from my RSP to a RIF that I open in 2017, then I need a Year End Portfolio value of $50,000 for the minimum withdrawal of $2000 in 2018. How have others handled this? Transfer a GIC maturing in the first year, and some equity ETFS for future years? Any other advice? I have a few GICs maturing every year, and since BMOIL has a minimum of $5000 for a GIC, one is enough for 2 years. The problem is that the GICs that I bought in the last 5 years yield less than 3%, so my Year End Portfolio value is guaranteed to decrease if I hold only GICs in the RIF. I would be interested in hearing how others handle this.
twa2w
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Re: RIF at age 65

Post by twa2w »

Not sure why you feel you need 50,000 in your RIF unless you are trying to avoid any withholding tax on the withdrawal.
You could transfer a lessor amount to the rif and take 2,000 per year to take advantage of the tax credit. You will have some tax withheld but this will be a minor amount on a small withdrawal and will be accounted at tax time. You can transfer as needed from the rsp to the rif as needed before age 71 to ensure tou have enough for the 2000 annual withdrawal.

Also I assume you have no other pension income.
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AltaRed
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Re: RIF at age 65

Post by AltaRed »

2of3aintbad wrote:The problem is that the GICs that I bought in the last 5 years yield less than 3%, so my Year End Portfolio value is guaranteed to decrease if I hold only GICs in the RIF. I would be interested in hearing how others handle this.
As Twa2w said, technically you only need to transfer in $2k per year from your RRSP to your RIF to get a $2k withdrawal. There is no law that says you can "only" withdraw your minimum. You can draw up to the entire amount. Granted you won't want to be as extreme by that, so just transfer in $10k or so and that will do you for a number of years.
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2of3aintbad
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Re: RIF at age 65

Post by 2of3aintbad »

Thanks to both of you for your replies Yes, I will check with BMOIL to confirm there are no extra fees for transferring in from my SDRSP every couple of years. Also, I wonder if BMOIL will allow a partial cash in of a GIC for the withdrawal amount. I know that for a trust company RIF with only GICs, they automatically cash in the minimum withdrawal amount. This is a little different.
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kcowan
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Re: RIF at age 65

Post by kcowan »

At TDDI, there is a $25 annual fee if your RIF drops below $25k.
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Re: RIF at age 65

Post by gsp_ »

kcowan wrote:At TDDI, there is a $25 annual fee if your RIF drops below $25k.
That does not appear to be the case. https://www.td.com/ca/document/PDF/forms/521778.pdf
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kcowan
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Re: RIF at age 65

Post by kcowan »

Good news. They must have changed it since MIL died in 2008.
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genebest
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Re: RIF at age 65

Post by genebest »

Is this $2K will be considered as income for OAS and GIS calculation?
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kcowan
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Re: RIF at age 65

Post by kcowan »

genebest wrote:Is this $2K will be considered as income for OAS and GIS calculation?
Yes but with an offsetting deduction/credit.
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Re: RIF at age 65

Post by 2of3aintbad »

kcowan wrote:
genebest wrote:Is this $2K will be considered as income for OAS and GIS calculation?
Yes but with an offsetting deduction/credit.
I don't know about GIS, but when you refer to OAS, do you mean OAS clawback? I thought that the clawback was based on net income, which does not include tax credits such as the pension income amount. As I understand it, the RIF income will be added to your income for the purpose of OAS clawback calculation, before the income tax is reduced by the tax credit.
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kcowan
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Re: RIF at age 65

Post by kcowan »

2of3aintbad wrote:As I understand it, the RIF income will be added to your income for the purpose of OAS clawback calculation, before the income tax is reduced by the tax credit.
Yes that is correct.
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Re: RIF at age 65

Post by Pitboard »

Just remember that the tax savings for this maneuver is only your federal tax not your provincial tax.
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adrian2
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Re: RIF at age 65

Post by adrian2 »

Pitboard wrote:Just remember that the tax savings for this maneuver is only your federal tax not your provincial tax.
In Ontario, there is a provincial tax credit for the first $1,364 of pension income.
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Re: RIF at age 65

Post by izzy »

Pitboard wrote:Just remember that the tax savings for this maneuver is only your federal tax not your provincial tax.
--and I seem to remember that the taxable portion of an annuity bought with non registered funds also qualifies for the deduction.That being said the actual tax saved is very little and may not justify any rearrangement of your savings such as breaking a cashable GIC in your RRSP which is currently earning a higher rate.
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