Log In
Register
Home
Topic RSS
Facebook
Twitter
Email this11:25 am
March 30, 2017
Offline
HermanH said
My mom had a similar mania regarding too much income. She didn't like paying income tax and would do what she could to minimize it. We tried to explain to her that no matter how high the income tax rate was, it was never going to be 100%, so she would always get some money to spend.
Exactly, nothing wrong with keep paying tax to support those in Canada who are less fortunate.
Any seniors that continue to pay high taxes in their golden years should be proud of themselves, seriously !
9:07 am
December 12, 2009
Offline
This absolutely is a serious post, and it has to do with one of the dilemmas of living frugally. Spending money on possessions and things irritates one's self, so one lives intentionally and is conscious with every purchasing decision. By controlling one's expenses, one avoids the "lifestyle creep" with living within one's income, as one aims to live below a certain line well below their income level.
You can get a good sense on living to an arbitrary expenditure line rather than an income level from the YouTuber known as Prepper Princess:
That being said, AltaRed has shared some suggestions. I would suggest this is more of a psychological issue. CAD's friend needs to be able withdraw more from his or her RRSP. That doesn't mean spending on one's self. I would suggest they could increase their charitable donations, donate to worthwhile political parties (federal and provincial) (a very tax-efficient strategy), and perhaps indulging in experiences and travel. Travel to see the grandchildren and children more. Travel the world. All of that is a good way to reduce one's RRSP balance.
Cheers,
Doug
7:54 am
November 8, 2018
Offline
Doug said
CAD's friend needs to be able withdraw more from his or her RRSP. That doesn't mean spending on one's self. I would suggest they could increase their charitable donations, donate to worthwhile political parties, and perhaps indulging in experiences and travel.
I think you may be trying to put CAD's friend in your shoes instead of putting yourself in their shoes. Read first post of this forum topic, among other things notice "hates cruises."
This is how what you suggested will sound for that person:
Withdraw money you don't need, pay tax on it that you hate to do, only to give that money to those who didn't earn it.
I'll tell that person instead just live their life worry free, in Forrest Gump style: "they called him up one day and told him "we don't need to worry about money anymore", to which he replied, "Good, one less thing to worry about.""
8:17 am
February 7, 2019
Offline
Just a few thoughts ...
Perhaps they have friends or relatives they could lend money to.
Perhaps friends or relatives in their will they could gift to now instead of later.
| CGO |
6:18 am
September 11, 2013
Offline
Based on my personal observation in life, at this age I wouldn't recommend giving friends or relatives money unless you're a super-nice person and prepared for some regret, disappointment, etc about it at some point. It's a minefield.
Though I have seen a very few instances where there weren't complaints about unfairness, or where the giver didn't care if the money wasn't spent wisely, or etc, but I don't have the grace for any bee ess so I just don't do or recommend it.
6:35 am
February 7, 2019
Offline
Bill said
Based on my personal observation in life, at this age I wouldn't recommend giving friends or relatives money unless you're a super-nice person and prepared for some regret, disappointment, etc about it at some point. It's a minefield.Though I have seen a very few instances where there weren't complaints about unfairness, or where the giver didn't care if the money wasn't spent wisely, or etc, but I don't have the grace for any bee ess so I just don't do or recommend it.
In our case we did our best to spread it fairly. That was easy for us since we have one "child". The Bank of Mom & Dad has made it much easier for them to get their house in the city of Toronto.
| CGO |
7:13 am
October 27, 2013
Offline
It is a wonderful position to be in, sharing one's investment success with charitable giving and gifting. My circa CAGR of 8-9% on my portfolio over the past 15-20 years has allowed me to be generous with my favourite causes and to assist Gen-X and Millennial children here and there along the way. I could get very conservative with my portfolio to the point where it delivers no more than 3-4% returns, but why? I hope to be able to continue to generate returns to continue what I am doing for the rest of my competent days on this planet.
9:39 am
September 11, 2013
Offline
cgouimet, I can see maybe doing that too if I had one child and living in high price GTA, though I'd probably add the conditions that they are ambitious, productive, etc enough, i.e. doing their max to make a go of it without help.
Plus if in a marriage it has to be stable and happy (in my assessment), I've seen more than one case where a marriage breakup ended up with one of the spouse's parents' financial contributions going half to the other spouse.
Plus they'd have to agree not to cash in and move too far away to help me when I get in my dotage.
So likely not as nice/unconditional as you, but I MIGHT consider some help in the right situation. Unlikely but maybe.
I've seen a number of wealthy folks do it all for their kids, and watching that I'm now really glad my parents didn't rob me of the satisfaction of doing it myself - I now view that as one of their true gifts to me.
9:45 am
February 7, 2019
Offline
Bill said
cgouimet, I can see maybe doing that too if I had one child and living in high price GTA, though I'd probably add the conditions that they are ambitious, productive, etc enough, i.e. doing their max to make a go of it without help.Plus if in a marriage it has to be stable and happy (in my assessment), I've seen more than one case where a marriage breakup ended up with one of the spouse's parents' financial contributions going half to the other spouse.
Plus they'd have to agree not to cash in and move too far away to help me when I get in my dotage.
So likely not as nice/unconditional as you, but I MIGHT consider some help in the right situation. Unlikely but maybe.
I've seen a number of wealthy folks do it all for their kids, and watching that I'm now really glad my parents didn't rob me of the satisfaction of doing it myself - I now view that as one of their true gifts to me.
FYI ... I'm in Eastern Ontario, not the GTA ...
| CGO |
10:14 am
April 14, 2021
Offline
Bill said
Plus if in a marriage it has to be stable and happy (in my assessment), I've seen more than one case where a marriage breakup ended up with one of the spouse's parents' financial contributions going half to the other spouse.
My mother tried to mitigate that possibility, when my sister wed. She gave them a sum, but had them both sign a no-interest promissary note for the amount. She would make no demands on them, as long as they were married. When they filed for divorce after 20 yrs, she insisted on re-payment, before their division of assets.
10:22 am
October 27, 2013
Offline
Bill, giving is being compassionate without exercising control. It also does not mean being the gravy train and an enabler making folks dependent, but to pick and choose where one can leverage value. A subject for a different thread maybe.
Regardless, in the context of this thread, there are a variety of choices one can make with resources available to them. The couple being referred to here is clearly not taking advantage of their 'good fortune' by leveraging it in an investment portfolio to bring benefit to others (charities or gifting). It does not mean increasing personal consumption necessarily.
I have taken the view to leverage the good fortune I have been blessed with (hard work and luck perhaps) to generate financial returns for others, both current and eventually via estate. No strings attached but an expressed expectation that such gifts be put to good use (investment or consumption).
11:24 am
September 11, 2013
Offline
HermanH, was your mom able to collect in full on that note? Agreements are great, the hard part is actually collecting the dough.
cgouimet, you said the Bank of Mom & Dad helped purchase a home in Toronto, I was just meaning I might be a bit more tempted to help if living in a super-high price city was the only option.
AltaRed, I get it, I'm just saying I'm not interested in being in a situation where my "expressed expectation" is not met, that would bug me and I don't want to be bugged, even for a minute.
4:46 pm
April 14, 2021
Offline
Bill said
HermanH, was your mom able to collect in full on that note? Agreements are great, the hard part is actually collecting the dough.
The divorce was civil. She got a full return of funds.
5:41 pm
September 11, 2013
Offline
Great, glad it worked out.
9:36 am
January 25, 2024
Offline
This was a very Serious post!
Thank you ALL for contribution and valuable suggestions and advises! Really appreciate.
As some mentioned, problem is in frugal living and suddenly all savings have to be spend somehow not to be 'gifted' to Turdo and similar.
My friend visited his banker (very reasonable person and not always looking for a bank's benefit) and one of advises was to convert RRSP into RIFF and start taking money before 71. That was one way to deplete RRSP and friend should consider it as regular 'salary' or pension he saved all life for. Plus getting money from RIFF is different than from RRSP as RIFF is designed to withdraw money from and no fee will be associated with, while taking money from RRSP is considered 'deregistration' and for every withdrawal fee has to be paid.
As banker said, it is better to pay taxes than to depend on government.
As for interest from GIC he has to make a switch in his head he HAS to pay taxes!
All other suggestions (donation, legacy, etc.) are very correct and in line with what friendly banker said to him.
Thank you all!
12:49 pm
November 8, 2018
Offline
CAD said
one of advises was to convert RRSP into RIFF and start taking money before 71 ... getting money from RIFF is different than from RRSP as RIFF is designed to withdraw money from and no fee will be associated with, while taking money from RRSP is considered 'deregistration' and for every withdrawal fee has to be paid.
You will need to have conversation on RRSP/RRIF topic with your friend before it is too late, i.e., before he converted RRSP to RRIF.
Both RRIF minimum withdrawal and RRPS withdrawals are considered income, both taxed at taxpayer income tax rate. They just taxed at different times.
RRIF minimum withdrawal is taxed like interest income: no tax when taking money, but come next year you pay tax in your tax return.
RRSP withdrawal is taxed similar to salary: on payout some tax amount is withdrawn by the bank (like employer withholds estimated income tax), at tax filing time that tax amount is reconciled.
Example:
Suppose, your friend's personal tax rate is 15%. Suppose, his RRIF minimum withdrawal for current year is $5,000 and that is the only amount he withdraws.
This is how it will work if he has RRSP vs. RRIF.
RRSP: $1,000 taken during $5,000 RRSP withdrawal, but when filing taxes CRA will return $250 to him. Total tax on $5,000: $750 (15%).
RRIF: nothing taken during RRIF minimum withdrawal, but when filing taxes CRA will take $750 from him. Total tax on $5,000: $750 (15%).
Same tax amount, just different time.
----------------------------
Because RRSP and RRIF withdrawal considered income, it may impact other benefits your friend is receiving. It is better to have discussion with tax accountant, but these are two obvious examples when he absolutely should delay RRSP withdrawals till he is 71 and then convert RRSP to RRIF:
1. If your friend receives GIS;
or
2. If you friend's income is very close to when OAS clawback starts.
He should also check all other income tested benefits he is receiving.
That was the reason I recommended, if he is in no need for extra money, to just delay RRSP withdrawals till he is 71, then convert RRSP to RRIF because it will be inevitable and then consider RRIF minimum withdrawal an income he must receive.
problem is in frugal living and suddenly all savings have to be spend somehow not to be 'gifted' to Turdo and similar
Tell him that with current political climate in Canada he will most likely outlive whoever is in power now.
Also, writing a will to give what's left to whatever good cause he thinks of (there should be at least one) may be a good idea.
-----------------
This is another attitude he should overcome: no need to force himself to spend all money he has. It is OK to die with some money left not spent. What important is to live the way that fits him, and withing the budget.
4:40 pm
April 6, 2013
Offline
CAD said
… Plus getting money from RIFF is different than from RRSP as RIFF is designed to withdraw money from and no fee will be associated with, while taking money from RRSP is considered 'deregistration' and for every withdrawal fee has to be paid.
…
It's up to each RRIF carrier how they charge for the withdrawals. The carrier can charge a "partial deregistration fee" on some withdrawals.
The OSC article RRIF fees describes some possibilities:
3. Fees for making changes
You may also pay fees for making changes like:
- Closing your RRIF.
- Changing the amount or frequency of your scheduled withdrawals.
- Making a lump-sum withdrawal.
5:50 pm
October 21, 2013
Offline
FYI: There are no fees for partial RIF withdrawals at Hubert. I've done it several times, including post-merger.
I agree that this could be an issue at some FIs.
6:24 pm
October 27, 2013
Offline
I am also not aware of withdrawal fees from any FI for RRIF withdrawals. Because there is at least one mandatory withdrawal per year, in cash or in kind, it would be despicable for there to be a charge for one withdrawal. In the case of perhaps 12 monthly withdrawals or an unscheduled withdrawal, perhaps some FIs do charge, but again I am not aware of any.
However, the only differences to my knowledge between a RRSP withdrawal and a RRIF withdrawal are:
1) A RRSP withdrawal may incur a fee, since there is no regulatory reason to do a withdrawal.
2) RRIFs have a minimum annual withdrawal 'percentage of account' which of course becomes income for income tax purposes, but that said, no one is obliged to actually spend the withdrawn amount.
3) RRSP withdrawals do not count as pension income and cannot be split via pension income splitting with a spouse. RRIF withdrawals do count if a spouse is 65 years of age or older.
I am still at a bit of a loss what the issue is with the man (couple) referred to in the OP. It is always better to have more income than not to have it, even if some of it is taxed, or social benefits are subject to clawback.
IF my portfolio was spinning off $200k of ongoing recurring income each year, it would be perfectly welcome to me even if a significant part of it would go to taxes and all social benefits would be clawed back. I'd still have a majority of it to either re-invest, spend, or gift....or all 3 of those things.
4:54 am
November 8, 2018
Offline
AltaRed said
It is always better to have more income than not to have it, even if some of it is taxed, or social benefits are subject to clawback.
I suspect many financial tax advisors would disagree. Generally speaking, if someone can defer income they currently don't need in order to get more in social benefits and/or pay less income tax - that would be valid tax strategy, would not it?
Please write your comments in the forum.