As retirement approaches, many Canadians find themselves in a dilemma when it comes to drawing down their Registered Retirement Savings Plan (RRSP). The fear of paying high taxes on withdrawals often leads individuals to delay tapping into their RRSP, even when they could benefit from the extra income. However, there are strategies that can help you withdraw from your RRSP quickly and efficiently, while minimizing the tax impact.
One common misconception is that withdrawing from your RRSP will result in a significant tax bill. While it’s true that RRSP withdrawals are subject to income tax, there are ways to minimize the tax impact. By spreading out withdrawals over several years, you can potentially lower your tax bracket and reduce the overall tax burden. Additionally, you can also take advantage of tax credits and deductions to further offset the tax owed on RRSP withdrawals.
Another strategy to efficiently draw down your RRSP is to consider your income needs and expenses in retirement. By carefully planning your withdrawals, you can ensure that you have enough income to cover your expenses without depleting your retirement savings too quickly. This may involve creating a withdrawal plan based on your projected expenses, investment returns, and other sources of income.
Furthermore, you can also consider using a phased approach to withdrawing from your RRSP. By taking out smaller amounts over time, you can potentially reduce the tax impact and allow your remaining RRSP funds to continue growing tax-deferred. This strategy can also help ensure that you don’t run out of money too soon in retirement.
It’s important to note that there are certain rules and restrictions when it comes to withdrawing from your RRSP. For example, you can take advantage of the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP) to make tax-free withdrawals for specific purposes. However, it’s essential to understand the implications of these programs and how they may impact your overall retirement strategy.
In conclusion, drawing down your RRSP quickly and efficiently can help you save thousands of dollars in taxes and maximize your retirement income. By carefully planning your withdrawals, taking advantage of tax credits and deductions, and considering a phased approach, you can make the most of your retirement savings while minimizing the tax impact. Consult with a financial advisor to develop a tailored withdrawal strategy that suits your individual needs and goals.
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For a more detailed look at our RRSP meltdown strategy, check this video out! https://youtu.be/bi1SdCGpoZw
Dumb question. How would you delay cpp?
Damn! Why does this have to be so complicated and confusing! Really makes it stressful on what advice to listen to.
I'm 60 years old no rrsp savings only about 5000.00 so what would be the best age to start collecting cpp
This is very useful information. Thank you.
In light of Doug Chandler’s “Retirement drawdown choices” document (Oct. 2022), it’s unclear to me that we should should drawdown yearly “discretionary” amounts out of one’s RRSP/RRIF, i.e. an amount beyond what is needed to fund one’s retirement. Sooo, I have now three questions for you: 1) What are your thoughts on Doug’s study and conclusions? 2) Does Snap Project Projection enable the simulation of drawing “discretionary” amounts out of one’s RRSP/RRIF, taking into account the additional income tax stemming from the investing of the discretionary amount withdrawn? 3) Does Snap Project Project enable the simulation of lost governmental benefits (OAS, for example) when drawing yearly “discretionary” amounts out of one’s RRSP/RRIF? As I read Doug’s document, I have to say that evaluating the benefits and costs of drawing yearly “discretionary” amounts out of one’s RRSP/RRIF appears almost impossible to do, unless maybe one has a specialized software imbedded with update-to-date provincial and federal tax structures as well as other governmental benefits for retirees as they age.
Adam…is it possible to gift investments to your children? Is there a strategy to give some of your wealth to them long before you die…without killing you in taxes? I have very healthy 7 figure investments that are appreciating huge gains right now and will for the next 5 plus years (Ya, Ya nothing is a guarantee in the stock market!). Even after that should pretty much guarantee even 10% annually for the next 40 years. Hell the S&P Index has had a 9%plus rate for the last 110 years!
I've been watching Adam's videos for a while now, but this meltdown plan wont work for me. Like Adam has said in other videos, the main idea behind deferring CPP and OAS is longevity. Burning though " your money " vs the government money ( still your money) makes no sense to me. Waiting until 70 to collect CPP means you get more….but if you need extra money for care (LTC home) the cost can be based on your income..so all of the money you waited to take..can be taken…
Life is a gamble..live it dont put it off.
I'll be waiting until 65 to take CPP..the only reason why I'll not take it at 60 is I have a defined benefit pension with bridge financial until 65. I'll start cashing out my RRSP at 60 for my Go Go years.
Great stuff Adam! Real advice. Love it.
You’ll probably be making another video that addresses the tax obligations of an RSP at death
Thank you greatly for your guidance.
Should I differ CPP until RRSP is fully depleted?
I am taking lots out of our RRSPs each year in a tax efficient manner (about 80K split between us) but as the markets have generally been good since 2015, save for the occasional blip here and there, my RRSP balance has hardly changed. We've deferred both our CPP & OAS to age 70 and at 68 have only 2 years to go. I suppose it's a good problem to have but I do wonder what will happen once we start our enhanced OAS and CPP (I will get the max CPP, my wife about 80% of the max).
I’m debating on a good problem. About 6-7 years away from retirement. Received a fairly large inheritance. We have maxed out our TFSA every year. We are looking at a combined retirement income of about $82000. We have $150000 contribution room in out RRSP. I’m thinking of not maxing out the RRSP but instead retiring at age 60 and 64 and using that non registered to live on thus keeping future RIF lower. Or…make large RRSP contributions in the next 6 years but our income will be in the same tax bracket as now with large taxes owing. Should I keep the inheritance in non registered?