The RRIF quandry | Page 2 | Peoples Trust | Discussion forum

SMSO: I get what you're saying and agree that it's a legitimate problem -- albeit a nicer one to have than the opposite.

Obviously, like everyone else I'll try and minimize the impact when the time comes (a ding from a flying rock is better than being hit with a wrecking ball).

But even if I am thrust into OAS clawback territory, I've already promised myself not to be miserable about it. It means I'm not eating cat food (unless I am one of those mega rich Howard Hughes types and eating cat food is something I enjoy doing).

Also, I think something that gets lost in the clawback conversation is that people who face that reality are not being 'punished' -- for decades, they availed themselves of taxpayer-funded services at a discount. Now, the bill is due.

The key as I understand it, is to start melting down an RRSP ahead of time -- or at least, understand and accept what's going to happen in terms of mandatory RRIF withdrawals.

But I agree with anyone who says that most people who contribute to an RRSP do not seem to understand how or why they actually work.

Bill, that is a great point. I have fantasized about doing something like that, and seeing a total tax owing of $0 on my return. But I don't think I have the guts to do it like your family member -- I would be too worried that I wouldn't reach the promised land, and end up looking back at several years of paying significantly more in tax than I could have + missing out on the compound interest.

Besides, I don't look at RRSPs as savings. In fact, I don't believe in the concept of savings. It's just a concept. In my little world, there is only buying. If you have $30k you either buy a car, or you buy not having to work for X number of months (depending on how much you want/need).

I think a lot of people -- especially young people -- are kind of turned off by 'saving' because it seems so boring and life-negative. I get why they see it that way. But again, I only believe in buying. You buy stuff/experiences, or you buy time/power/freedom (by doing what is conventionally called saving).

Weird, I know, but it works for me.

Bill said
Not weird at all, there's always been savers, there's always been spenders (many of us see both in our own families), and also there's folks somewhere in between the two ends, nothing new really.  

Not really what I meant -- but that's OK too!

Does your family member take you out on their yacht?

Unfortunately no yacht rides for me, Itellyouwutt, his money is for the other option your mentioned, i.e. time, freedom.

I would advise against the one year GIC at Peoples. You don't want to be caught near year end next year trying to transfer it somewhere else as well as converting. The time frame can be tight and FIs slow; save yourself the worry. Move it now to wherever you are going to hold the RIF until it's depleted.

Be ware, however, that some FIs have minimum amounts for RIF deposits. I have seen at least one at 10K. I don't know what happens if your RIF is less than that or whittles down to less than that. They may possibly close it out on you at a certain point. Need to ask AND check fine print and Policies.

My sense it that FIs don't especially like dealing with RIFs because they are a declining asset, so they don't waste much effort learning about them or dealing well with customer questions - especially smaller FIs. They will be more interested if you give them to believe you have other more substantial business that you might bring them in due course if they treat you well,

I haven't read this entire thread, but your main concern seems to be your benefits. So, you need to check into their thresholds.
If possible, take out 2000 from RIF for 2 years and remainder in 3rd year, assuming that doesn't upset your benefits and that you can find an FI that is willing to maintain such a small amount in RIF for you. (The paper work for them may be more than you're worth to them.) You can more or less make the income go away with the Pension credit.. Bear in mind, however, that the Pension Tax Credit does NOT lower your income for purposes of calculating access to benefits; it's only a credit against any tax you may owe,not a deduction.

From what you've said here and in the past, I assume you don't have to worry about the OAS clawback or losing some of the Age Amount, which would be concerns for many of us.

Alternatively to taking out 2K per year, you could just let it dribble away in mandatory withdrawals, at least for as long as the FI lets you keep it open. The FI will look after all that and send you a T slip. Depends on how close you are to benefits thresholds.

Nonetheless, if it were me, I'd take the lump sums just to be done with it. But that's me. As you age, you want things simpler, trust me! And there will be no risk of you losing or forgetting that extra T slip.

I hear you.
One other consideration in favour of the lump sum method would be that you get access to your money while you're alive. The reduction in benefits will be temporary, probably 1 to 3 years. I guess you have to do the math comparison on that for net gain and at what age you break even.

Yes, I had a hunch it was Oaken where I saw the 10K minimum, but didn't want to mislead you.

I can't make a recommendation as I've never really looked for this answer. Since you don't want online banking, you may be limited. As I said earlier, an RIF that small is more trouble than it's worth to the FI.
If you have any unused RSP contribution room, you can still top it up if that helps.

I agree. I only suggested it because you seemed determined to dribble out your RSP/RIF. I'm not confident you will find an FI that will accept such a small amount, pay a decent rate, and not require online banking - which appear to be your other criteria. I couldn't think of any other alternatives.

Let us know what you find.

I will be closing out my RIF entirely in 2024 (at least until/unless I survive my spouse and thus acquire more). It will be a very welcome Christmas present to myself next year to be rid of the darn thing!

Congrulations!
What happens when your RIF whittles down to 2K? Will they let you keep it going? That will take several years anyway.

I don't know what your plan is, but here's a suggestion: Buy GICs that will expire annually in about November. Calculate how much extra you could take out of the RIF without damaging your benefits, and do so. The magic number might vary form year to year.