Excess Withdrawals from Your RRSP or RRIF – Part 3

Excess Withdrawals from Your RRSP or RRIF – Part 3

“I would like to model an early and aggressive draw down of my RRSP/RRIF to move the funds into non-registered accounts. Is there a way to do that in the software?”

An excess withdrawal from your RRSP/RRIF can be a very effective method of increasing your {Assets remaining at years of death}. An excess withdrawal may especially benefit if your RRSP/ RRIF left at death is large enough to have some of it taxable at the higher tax rates. (53% in Ontario). It may also be a way to eliminate a {Shortfall} in retirement funds.

You will benefit because the investment earnings will be more lightly taxed as capital gains and eligible dividends, or not taxed at all in a TFSA. The longer from the time of withdrawal to the time of death; the greater the benefit. However, taking the RRSP/RRIF funds all out in the current year seems to be excessive if the withdrawal is taxed at the higher tax rates.

Also, be wary in leaving your RRSP/RRIF to your spouse if this just piles more RRSP/RRIF funds onto the 53% pile on second death. So, carefully consider whether to leave RRIFs to your spouse.

“Is there a way to do that in The Canadian Retirement Planner's Software?”

The Software allows you to make an Excess Withdrawal in any particular year by simply entering a withdrawal on the {Projections of retirement incomes}.

If you want to test withdrawals over your entire period of retirement or just a part of it, there is a schedule for entering the first and last years of withdrawal, the amount to withdraw over the years, and any indexing that you want to consider.

For more insights, check out the blog/email, When should I start receiving my CPP/QPP Retirement Benefits?

YOU must take the initiative to shape your retirement finances for your benefit.

David R. Gobeil, MSc, CPA, CA, CFP®

Gobeil & Associates