I have recently retired and am considering moving my RRSPs to RRIFs to facilitate the withdrawal of funds.
I have pension income supplemented by money I withdraw quarterly from registered funds. There are 2 RRSPs and a LIF in my name plus one RRSP in my wife's name (she is 11 years younger than I).
My financial advisor suggests transfering the RRSPs to RRIFs as it would avoid partial de-registration and a $25 fee for each withdrawal from the current RRSPs.
It seems like a good idea to me.
Am I missing any snakes in the grass?
I am sure many people do this - convert to RRIF and use income to supplement pension income when they retire early. Some factors that may be worth thinking about:
- If you withdraw from your RSP, there is withholding tax - Don't know the numbers, but I think about 10% for up to $5000 and higher % thereafter. If you take teh minimum from a RRIF, there is no withholding tax, but there is on the excess, if you draw more.
-The minimum amount is apparently calculated as follows:
"For years before age 71, the minimum amount is computed by dividing the opening RRIF balance by 90 minus the taxpayer's age." But, you can, I believe use your wifes age in determining the minimum amount if you wish.
- I think that you can also just convert part of your RSP to a RIF - just enough so the minimum withdrawal matches your needs.
Interested in discussion, because we too have a dilemma: My wife and I have enough income from all of our investments, but about 2/3 of this is inside the RSP,s. With CPP/etc we have just about enough to live on, but not for extras like home renovations, trips, cars etc.
If I don't draw on the RSP,s we will have to sell some of our unregistered investments. When we do this, we upset our Portfolio allocation and earn even less outside our RSP.
Perhaps we should also look at a partial conversion to a RRIF and get some income. I was thinking of making a small draw - say $5k each from RSP each year, but don't like teh taxaman to keep 10% of it for a year!
Because almost all our income (except for CPP/OAS) is in dividends & CG,s our tax rate is low, so adding some income may not hurt much.