An RRSP versus A RRIF скачать в хорошем качестве

An RRSP versus A RRIF

For Your FREE Consultation with Rob, simply fill out the form and directly book your strategy session in his calendar here: https://robtetrault.com/speak-to-rob/ Register to our FREE Retirement Planning Masterclass - https://bit.ly/2THZzNj Register to our FREE Alternative Real Estate Investing Masterclass - https://bit.ly/34ySkgB 📽 Watch our other video on RRSP Withholding Tax:    • RRSP Withholding Tax   Should you convert your RRSP to a RRIF? If so, when should you do it? It's not an easy decision folks. I know first-hand people are confused. 1)Registered Retirement Savings Plan -The big difference between the RRIF and the RRSP is that the RRSP is a savings plan. The RRIF is an income fund. -Savings versus income. Savings is when you are taking money from your hard-earned salary or income and you're putting it into a savings plan for retirement. Generally, the concept from the government was that when you're ready to draw down on that income, they will convert it to an income fund, a RRIF (Registered Retirement Income Fund). -All right, so RRSP is the product that you contribute to and when you do contribute, you do get that tax deduction from your income. This has been covered in another of my videos, but the key with the RRSP is when you contribute, you're reducing your taxable income by the amount in which you contributed. Your effective tax savings become your marginal tax rate. -If you are in the top tax bracket in Canada, most provinces are around 50%. You are getting 50 cents back on every dollar that you contribute to your RRSP. Conversely, when you are drawing on that RRIF, it’s now being added to your income. -That is now income that is being added to all your other income: your pension income, your OAS (old age security), your investment income and whatever other income you might have. Your RRIF income gets added to that income as well and conversely, you're now paying tax on that marginal tax rate. 2) Let’s take a look specifically at that decision of when you should be converting your RRSP to a RRIF. -First of all, there is no minimum age to convert an RRSP to a RRIF. You must, however, convert it in the year you turn 71 years old - before the end of the year where you turn 71. Converting it does not mean you need to draw all the income out of the account. In fact, that'd be a terrible strategy for most people. -Typically, what you want to do, depending on your situation, but for most people, an ideal situation is to defer it as long as you can. You convert it when you're willing to draw the income. -Let's say you do know that now it's time to draw the income. You're drawing the income a couple of different ways. You could leave it as an RRSP and draw the income or you can convert to a RRIF and draw the income. 3) Now if you leave it in an RRSP, you are going to pay a de-registration fee every time you de-register the RRSP. -Now, with respect to the actual withdrawal itself, eventually the tax rate is the same except you're paying the tax up-front. With a RRIF, that situation is different because of your minimum withdrawal amounts. -The withdrawal rates vary based on your age. It’s 5% approximately when you start, and it goes all the way up to 20% or higher even - by the time you're in your nineties. That is an amount that you must take down on from there. -Now if you're doing the minimum withdrawal amount from the RRIF, there is no withholding tax that gets applied to that and there is no de-registration fee. If you're in a situation where you're actually going to draw on the income, you should certainly consider converting it to a RRIF. -If you're in a situation where you do not need the money, you've built up wealth somewhere else and you're deferring your RRSP withdrawals, you should absolutely NOT convert to a RRIF because you do not want to be forced to take out the minimum withdrawal. If the incomes aren't the same, if you are married or if you have a spouse (married or common law) and the incomes are not the same, you can actually income split your RRIF income, which is really neat because that allows you to kind of stabilize your incomes, reduce your taxes and basically, be much more tax efficient in your later years. 4)Now the key to all this, is retirement cashflow. We've talked a lot about deciding whether or not you do need the cash. -Perhaps you should derive from your RRIF, maybe you take it from your non-registered or maybe you take it from a corporate account. You can also take advantage of the pension tax credit. Depending on where you are, it's a few thousand dollars that you could take advantage of. That's something you could do as well. There’s a lot of moving pieces to this. 📽 Watch our other video on RRSP Investment Options:    • RRSP Investment Options   For more information on Rob & The Tetrault Wealth Advisory Group, click here: https://robtetrault.com/about/