Great video Adam. I retired last year at 62, getting $12k from a defined benefit plan and drawing $12k from my rrsp. I plan to drawdown my registered stocks over the next 3-4 years and put them in a tfsa and then take CPP and OAS sometime between 65-70. I believe this follows your rrsp melt down plan and it seems to be working well. We have enough money to travel and live comfortably now and it looks like we'll have even more money once I start my cpp and oas. Great advise. Thanks 🎉🙏🍻
My wife retired 2 years ago with zero income, her RRSP has increased 22.5% during that time period, she has been heavily drawing down the RRSP to delay CPP and OAS until age 70, after two full years of this strategy her is still up a little over 10% , we are not spending everything she draws out, topped up the TFSAs and put money in savings as well, we will keep this up until a downturn in the markets or just keep going. Great advice Adam, thank you
I love Adam's videos. Totally changed how I look at the drawdown. And as he does more of these videos, they just keep getting better. It is important to acknowledge that the RRSP meltdown and CPP/OAS deferral is absolutely optimal, IF AND ONLY IF the government doesn't do something stupid. And I think that's why so many people are scared to draw down their own money first. There is this fear that the CPP/OAS rug can be pulled out from under one's feet.
If OAS was pulled then more ppl on welfare. I don't see it happening, but never say never. Could see them bumping to 67 again, but with so many seniors struggling to pay their bills, not sure it's where they target. Lower hanging fruit out there
Adam. You have us convinced that the RRSP meltdown and delaying CPP works best if your income is low and RRSP is substantial. The math is correct. However there's many of us that worked hard saved moderately in RRSP ( not the 600,000 figure in your example) and are lucky enough to have a Defined Benefit Pension with a bridge benefit. Can you please do a video on those of us in this situation...there are a fair number of us. In our case an early meltdown would push the majority of us into the same tax bracket as when we were working. In your example once again the person burned through their non registered accounts first... I'm not sure who in their right mind would do that? I've already paid my taxes on my non registered accounts. .thats my emergency and fun money, not my living cash flow.. my concern about delaying CPP is I will be getting more money at 70 of course but it appears that it will only be $6000/ yr . If I meltdown now at 60 to 70 I'll be forced to take $25,000 / yr plus my pension ( bridge until 65) which will put me into a 6 figure tax bracket and clawback my OAS significantly in my OAS the first year. Do I have the correct assumptions??? is a slow burn vs a meltdown a better idea for someone who has a Defined Benefit Pension?? What about taking your CPP earlier but getting less..and as someone who has a bridge benefit..taking that CPP..because you don't need it and putting that into your TFSA until 65. Or even taking a withdrawal from your RRSPs and flipping that amount into your TFSA as well... this way You have less income from CPP and RRSP but you can dramatically increase your TFSA from your early 60s to 65...I'm thinking of income and tax stabilization. Am I out in left field with this idea??
I’m in a similar situation and have a DB pension. One thing I am doing is withdrawing from my RRSP each year to contribute to my TFSA. In my case it doesn’t push me into the next tax bracket. From what I have seen doing so is pretty much a judgement call but I think my future self will thank me.
I’m I the same boat too, plus full pension from the uk with a sizeable investment. By the time we bring that over on top of everything else we might end up paying half to taxes.
Each case is different. That’s why you’ll need to have a financial planner to draft up a plan that’s unique to your own personal situation. There are a lot of moving parts to take into consideration. The strategy that works for most people may not work for you.
@mikeb6459 I'm looking at making a small withdrawal from my RRSPs and flipping it into TFSA as well. I haven't worked yet in 2024 but did so both part-time and full time off and on since 2018 double dipping. So I was pretty much living off those additional income and banking my pension. I'm good cash wise. I'm 60 and retired 6 years , and I have yet to spend a dime of my investments.. I keep on getting offers too return to work, but all I get out of it is the opportunity to pay more taxes and bank money I'm not spending.
There may be a 6th reason why an aggressive meltdown is smart (maybe it’s buried in your software?) That is that once you take equities that produce dividends or capital gains out of a registered plan you get the benefit of lower tax rates on those capital gains and dividends. Yes, the registered plan defers taxes but ultimately all the gains will be taxed as INCOME. Many people will get to an age where the lower tax rates and flexibility of non-registered assets exceeds the benefit of registered tax deferral. That age is a lot younger than most people think.
Hi Adam, Could you please do a video on withdrawl strategies from a RRIF. I have heard that some people take 3 years of income and put it in a money market fund. I understand that there is security in knowing that the income will be there for you, however, I keep thinking that it would be better to just take out what you need from your RRIF each month, kind of like dollar cost averaging when you contribute, except reversed when you pull out an income. Without knowing what the market will do I feel like this is a better approach. Even if you take out 3 years of income, in three years the market could be down when you need to withdraw again. Your videos are great and have taught me so much. I really appreciate that you are willing to share your knowledge.
I would love to see the calculations between drawing 15k$ early when you don’t need it, at say age 60 when you wouldn’t have needed it but take it out to take advantage of the yearly tax exemption, vs having that extra 15k in an RRSP growing for potentially and extra 20-25 years
There is no scenario that is fool proof and beats the system. It’s rigged to protect the governments needs and interests. Also, everyone has different needs and expectations so each person has to review (or hire someone) to review needs and risk tolerance. That said, melting and rsp is a great option for many. Great video.
Waiting until 70 to take CPP really comes down to if you have the income stream to afford to do that. For many, it would mean working until 70 to facilitate doing that, so it's not a great trade off in my mind. And I don't have a huge RRSP, so it would be gone by 70 (I'm 65) if I did a meltdown that allowed me to live while waiting for the increased CPP. So I'd get the increased CPP, but now I have no RRIF income coming in. (and I've always been in the lowest tax bracket). And then there's this thing about assuming you'll live (and be able to truly enjoy your money) beyond 82-83 (break even point). I like the old saying "A bird in the hand is worth two in the bush". But always great videos regardless, from this firm.
When you do the RRSP meltdown, you are giving up all the future tax deferred growth which can be significant. I’m not sure the software takes that into consideration in drafting up the plan. Some well known financial planners actually suggest the opposite and delaying RRSP withdrawal as long as possible.
The software takes into account. Most planners that recommend not spending your assets are paid by managing your assets...huge conflict of interest. For many, extra funds are deposited to TFSA and delaying CPP is deferred growth (at 8.4%)
Makes perfect sense for an individual....but I dont see how it works for a couple, in regards to survivor benefits. Especially in the event of an early death. If both delay CPP and meltdown RRSP and one passes at say 72, the survivor is left with a greatly depleted RRSP, one OAS and likely total loss of spouse's CPP as they would already be collecting max CPP.
@@JoeSmith-pu9hi I cant tell you how many times I've asked the same question on various financial planning platforms. I have yet to see this angle addressed.
That's where you need to stress test the plan and Adam has more than a couple videos that show this. One example, which is common for probably most couples, is the surviving spouse can downsize their home which is invested for another income source to help replace the lost CPP and OAS.
@@colinmagee5155 Selling the home to make ends meet is generally considered the "nuclear" option and not how I want to plan my retirement. That is just another example of why this may not be the best choice for couples. At least not both partners doing the RRSP meltdown. You are taking a big risk which you suggest could mean selling your home and more and more "downsizing" isn't a great option as all houses, even smaller ones, are so expensive, it may not leave a lot left over. We have looked at what each of us would be left with if the other dies at an "early" age. For us I think trying to get a relatively even amount of CPP benefits may be good. That would mean one taking CPP at 62 and one at 68. Not an easy thing to figure out.
not sure if you’d consider this “rsp meltdown” but can you do same scenario (cpp at 60 or 65) but rather than taking minimum rif withdrawls, a more balanced approach of taking more outta rif (amt taken from non reg/tfsa); leaving those intact. I believe in this scenario, the taxes would be more level, better estate plan, same/more money in pocket, etc. I agree that later in life I’d be relying more on my rif assets/markets, possible higher estate taxes rather than solid, inflation adjusted, db like pension income of cpp. I know, this is a boring way of portraying it tho... lol
If you melt down RRSP only for the purpose of taking it out.. and then invest in taxable account.. you have to pay tax on profits later. That could be lower, I don’t know
What about drawing down a little more, say $10,000 and putting the after tax amount, about 7,000 into a TFSA to reduce the tax on your estate later? I’m going to do this unless it puts me into OAS clawback.
what about 5 years earlier? maybe there wont be 39 years of max contributions? If so then those 5 years of no contributions (using a laddered income approach) will matter. How much is the question
@@jaws-b9x the five years earlier will make a difference but they do throw out your 8 (I think, could be 7) lowest earning years so those would be the ones to go. Also, what I have noticed, the amount that I would get at age 70, goes down about $20 over the year but then makes a big jump in January, much higher than $20. This will happen until I'm 65, then it will just get the increase each year but no drop, from 65 to 70. You can look up your CRA account online. If you are 60 years old it will show you what you can currently receive and it will also show what you will potentially receive at age 65 and age 70, if you wait to collect. I say if you are 60 because I never tried looking it up prior to age 60, so I'm not sure what it would show while in your 50's.
You have to be careful though to not get too caught up in just focusing only on tax reduction. My goal is to maximize net worth and to maximize spending in retirement. So it doesn’t necessarily make sense to meltdown the RRSP. Software platforms are getting more sophisticated now and allowing retirees to model complex scenarios. In doing this myself, I no longer believe RRSP meltdown is the right approach.
We don't use what the software gives us, all manual labour. Usual focus is after tax income, estate preservation and tax reduction. Typically the meltdown will work best 99% of the time, but you could be the 1%! We have a client we are working with that falls into this. It's typically when you have a large RRSP and very large non reg.
@@ParallelWealth Hi Adam, Could you do a video with that 1% scenario where a person has a sizeable non-registered portfolio and a db pension putting them into one of the highest tax brackets prior to CPP and OAS eligibility. I am convinced that the RRSP meltdown is a bad idea in that scenario. I would appreciate you doing that scenario. Thank you
If I'm turning 65 in September this year am I entitled to the additional tax exemption of about 7 or 8K that year or does it start the following tax year. I'm pretty sure I will get the 15K plus the 8K exemption this year but just want to confirm. Thanks!
I would like to ask you. I invested my RRSP in nasdaq 100 covered call ETF which pays a very good dividents monthly and exempt from the foreign residential tax. If I convert my RRSP to RRIF is it still going to be tax free?
@@ParallelWealth Sorry, I wasn't clear enough. What if the husband dies at 71 and he didn't have a huge RSP to begin with. So now his spouse doesn't get much in the way of his remaining RRIF moved tax free into her RRIF because the majority was used for living expenses during the 5 year deferral period for CPP and OAS. So the wife is out all that husband's RRIF money and only one year of CPP and OAS was collected by him and of course, the CPP and OAS stops upon his death (well, her CPP might be topped up). I suppose you have to have a certain amount of RSP to make it worthwhile to defer but if you only have enough to cover the five waiting years, it can be very difficult for the surviving spouse if you die shortly after the five year waiting period.
Does anyone know......For the survivor pension where an individual can only collect the max CPP...is it the max from the year you retired, or the year you were 65 or the max of the current year?
I don't think that will work for me. My TFSA is full and my RRIF is a little over a million dollars. My non registered accounts between income and capital gains vary between $120,000 and $150,000. I feel that my marginal rate is too high to make this work.
@@ParallelWealth Interesting. I am going to run a spreadsheet and see what happens. Off the top of my head, I thought that the advantage of growing tax free inside the RRIF would more than offset the tax payable on drawing down. If I find something interesting I will let you know.
@@billyehh In a case where one has a substantial non-registered portfolio generating significant dividend income coupled with a db pension that puts you in the highest marginal tax bracket, I tend to agree that keeping the money in your RRSP would be the better choice so that those investments could continue to compound on a tax deferred basis. In such cases, the break even point for deferring CPP is much later in life when you include the returns you would get on the CPP earned for so many additional years. I would only defer OAS since it would likely be totally clawed back.
It will be income so look up the tax tables to see how much you will pay. Sometimes it makes sense to spread it out over a few years to reduce the average tax rate
If your money isn't locked in then you remove as much as you like at any time, it's like a savings account in that way. However, what you remove has to be added to your income, so if it keeps you in the low tax bracket, go for it, if it puts you into a higher tax bracket, I would suggest pulling it out over a couple of years just to save on the tax.
My brother and I formed an LLC on November 27, 2023 on state of Delaware. However, we have not started any business activities yet and, therefore, did not file for federal taxes. Could you please let us know if there will be any penalty for not filing the nill federal tax return for our LLC? Please guide me
Hallelujah!!! I’m blessed and favored with $60,000 every week! Now I can afford anything and support the work of God and the church. For Your glory, LORD! HALLELUJAH!
Absolutely! I have heard stories of people who started with little or no knowledge but managed to emerge victorious thanks to Ana Graciela Blackwelder.
I'd rather use the gov't oas and or cpp first before using my rrsp, my saved money! Who knows how long you will live. If you die early, NO ONE gets any oas or Cpp!! Not everyone lives a long life!
I dont know if the math works out for everyone but I'm thinking about drawing down the rrsp in years I have the lowest income to be able to max out tfsa and leave that for my kids. Either the government gets tax while I live or takes tax from my kids when I die.
Your saved money can be yours in the end if you accept what Adam explains or else it can be snatched by your friendly CRA. The real problem we all have is living longer, not dying early happy with proving ourselves right to the government
