Hey Adam! I am watching your videos for a long time, but this one ... really struck me. 1) If you take CPP & OAS as early as possible you pay much more to CRA at the moment of your death. AND it does not matter when this death moment occurs: 90 or 75. 2) If you take CPP & OAS as late as possible you pay much less to CRA. Could you please explain this in more details?
I think another perspective to consider is the scenario where a married couple does not have dependent(s) to leave an estate too and rather their focus is to make sure one spouse has the most money possible upon death of the other spouse (ie larger estate before taxes). According to your scenarios RRSP meltdown is less critical and may actually result in a lower estate before tax value.
You should be able to leave your money in your RRSP and take the money out as you see fit rather than being forced to withdraw it whether you need it or not as with a rif.That would be a real self directed retirement plan which is tailored to your life circumstances.That sounds fair to me.
If any US residents with RRSPs / CPP / OAS are watching this, another benefit of burning down your RRSP before taking CPP/OAS/Social Security is that the higher the percentage of your income is from those 3 sources, the less of those 3 are considered taxable by the IRS. With a proper RRSP/401K burndown strategy you can get your tax rate down to the very low single digits after 70 years of age.
I get how people with children want to maximize their children's inheritance, but we don't have kids or any dependents, so what happens after we're both gone won't really bother us too much ....when we're dead. And My wife and I have also leaned heavily on the health care system (transplant, extensive cancer treatment) so we're happy to provide a bit of payback when we've expired. (health issues regardless of a very active lifestyle and healthy eating. Don't get us started.)
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Love these videos but this is not an apples to apples comparison. Only works if you defer taking cpp. I would like to see the numbers if you take min Rif, normal max cpp at 65 and whatever else you need from tfsa. You would definitely be paying less tax every year than drawing more from your rif. Yes the estate tax at the end would be higher but that is extra money left to others. They still benefit and while alive my tax bill is lower giving me more security to live a comfortable retirement. Am I missing something.
I accept the logic of your argument but I am not sure it covers our particular situation which cannot be unique. We do not need any extra money beyond the minimum RRIF withdrawal to live on and our TFSAs are maxed out. If we withdraw beyond the minimum we must put it in a taxable account but if we leave it in the RRIF at least it grows tax free. Yes, we pay tax when these extra earnings are withdrawn eventually but I think I would rather pay this tax in the future than be forced to re-invest it outside the RRIF and pay more tax immediately. Does your spreadsheet cover this situation? Tony
I am curious to the answer for this, great question. My case I think I will would give the extra to my heirs (adult children) each year, let them decide what to do with it. Parallel Wealth is doing my plan but it is a month away before done so will be pondering what the answer is to withdrawing more than I can spend would be.
I'll put together this video for later August. It's still going to work better. If you pull behind your TFSA limit, yes you may use a taxable account but I'll show why this makes sense. Obviously amounts will vary by person, so will try and pick a middle ground. As others have said, many start passing the extra to next generation as well.
If you’re thinking to do this video, perhaps you could include any scenarios where it does not make sense to do the RSP meltdown and delay CPP? For example, similar to the question being asked in this thread, a scenario where non-registered assets yield an income that puts the taxpayer in the highest tax bracket. So that any withdrawal of RSP money would always be in the highest tax bracket regardless of when it is withdrawn.
@@ParallelWealth There is a danger that you may be over simplyfing If you are doing another video make sure you cover the situation where the TFSA is already maxed out and the danger of OAS clawback. Tony
@@CornerstoneSewing Adam and his team are the experts, but I'll say that while growth in a registered account sounds better, eventually it's coming out at your marginal rate. If that's at your death, 50% is going to Ottawa. I get it; it's not black and white. If those funds grow in your non-reg account, dividends will be taxed in today's dollars and the eventual sale will trigger capital gains. If you sell-off and spend wildly, consumption taxes will get you. There is no avoiding taxes. Hopefully a strong strategy will reduce them as much as possible.
I started taking money from my LIF almost two years ago and I have been drawing from my RIF since the beginning of this year (8 months). I am drawing 95% of the maximum from my LIF and 2.5 times the minimum from my RIF. Now I am still in my late fifties so my investments need to last me a while. Even with the withdrawls I have been making, my investments have actually grown over the past year (about 7%). My monthly dividends actually cover my withdrawl amounts so I am not touching my principal in either account. Would it be a good idea to take even more from my RIF? I am limited on my LIF as it has a cap. I know I could take the other 5% which I may do as a one time payout in December just so that I can take as much as I can from that account.
Hey Adam - I've been following your channel for quite a while and have enjoyed all the episodes I've watched. Something that you rarely seem to talk about is OAS claw back. In the context of this video, if you step up your RRIF payout rate but it pushes you over the OAS claw back limit then are you still further ahead? Is the OAS claw back inconsequential?
If there is OAS, the plan will reflect that. If clawback does happen from a more aggressive drawdown, then you have to run a few different ways to ensure you optimize
schools do a horrible job explaining RRSP/RRIF, etc. In fact, I don't believe a word of this was taught in high school, unless you went economics/accounting stream. balancing chequebooks, P=A(1+i)^n is all I can remember from my school days that might be applicable to being financially competant as an adult -> ie TRASH.
I think Adam has stated many times and repeated a few times in this video if average tax is more consistent then you will pay less tax over the total course of your lifetime. This makes logical sense because you can assume tax rates threshold amounts will increase over time therefore you can put more money in your pocket over time and pay a lesser amount of total tax dollars over the same time period.
I thought the same, why not say - once you die, if you don't have a spouse, all your rsp is added to your income in one year which will put the majority of it being taxed at 50%.
@@user-dq4ri6fi7b@3:14 of this video Adam does state in early 80's there is still over 200,000 of estate taxes due and payable. You can also see there is a net worth of $475K and 218K taxes payable on that sum as well as the other numbers below. I guess he could state the obvious but I do think all the information is highlighted in video for all viewers as well 440K with 198K tax 400K with 176K tax 356K with 152K tax 308K with 125K tax
This is effectively just another example of Adam's "RRSP meltdown" strategy where you pull (more of) your money out of your RRSPs before you hit 71 at which time the government starts forcing you to take larger minimums and by doing so, (potentially forcing you take more money than you actually need and) forcing you into higher(-than-you-want-or-need-to-be) tax brackets. With the tax planning software I use, (at least for my distribution of assets across RRSP/TFSA/non-reg.) my highest lifetime net worth is actually achieved by leaving RRSPs until after I have used up all of my non-reg. accounts. I wonder if Adam has done any videos comparing lifetime net worth and/or lifetime tax paid of melting down RRSPs first vs. using non-reg. accounts first. That said, lifetime net worth is not the be-all and end-all, but I'd still like to see Adam's software compare them. I'm personally pessimistic about what the government is going to do in the next 15 years with RRSPs to grab more out of them than they are currently (they are getting desperate for tax revenues to cover all of the massive wasting of money they have done for the last 12 years). Furthermore, leaving only RRSPs to live off of leaves you at risk of needing to take a large unplanned emergency withdrawal and paying a huge amount of tax on it rather than having non-taxable non-reg. accounts to pull that emergency withdrawal from.
Thanks for the informative video! Question: Does the tax savings situation take into account the time value of money? A dollar of taxes paid while younger is not equivalent to a dollar paid much later in life.
Taxes will be based on the nominal income value. As time goes by for real dollars to stay the same you'll bring home more income meaning total tax paid will be higher as well in nominal dollar terms.
