Weekend Reading: A RRIF Case Study Edition
Beth came to me with questions about her mother Susan’s finances.
Susan is 80 and widowed. She lives in a retirement home and spends about $60,000 per year after tax. Her health is declining and she’s not expected to live beyond age 85.
After her husband passed away, she now has $1.2 million in a RRIF, $300,000 in a TFSA, and $1.2 million in a taxable account from the sale of the family home. The investments are mostly individual Canadian dividend-paying stocks. There are no bonds and very little cash.
Her other income is modest relative to her assets. She receives a $20,000 survivor pension, $10,000 of CPP, and her OAS is fully clawed back.
Related: Don't Wait Until 70 – The Costly Retirement Planning Trap
Three years ago, Beth’s accountant flagged the size of Susan's RRIF and warned that it could lead to a large tax bill at death. On that advice, Beth asked Susan’s advisor to increase RRIF withdrawals well beyond the minimum.
After covering Susan’s spending and topping up the TFSA each year, the excess withdrawals were invested in her taxable account.
On the surface, the strategy seemed reasonable. Pull money out now, pay some tax, and reduce the risk of a large tax bill later.
The result was two tax returns showing roughly $290,000 of taxable income per year. Most of that came from RRIF withdrawals layered on top of her pension income and about $50,000 of taxable dividends.
Those extra RRIF withdrawals were not lightly taxed. About $40,000 of the withdrawals were taxed at Ontario's top marginal rate of 53.53 percent, with another $75,000 taxed at between 48 to 49 percent under Ontario’s second and third highest marginal tax brackets.
That raises an obvious question. If the concern is paying high tax on RRIF money in the estate, why are we deliberately paying the highest possible tax rates today, only to move the after tax dollars into a fully taxable account?
This is where the logic often breaks down.
RRSPs and RRIFs remain extremely effective tax shelters, even late in life. When you pull extra money out of a RRIF, you are triggering tax at potentially very high marginal rates and moving money into a taxable account where dividends, interest, and future capital gains are taxed along the way. That ongoing tax drag quietly erodes wealth over time.
At age 80, the RRIF minimum withdrawal rate is 6.82 percent, or about $81,840 on Susan’s RRIF. That amount easily covers her spending, pays her taxes, and funds the TFSA.
There was no need for excess withdrawals and no reason to push more money into the taxable account. More importantly, it allowed more of Susan’s capital to remain inside the RRIF, compounding without annual tax friction.
When we compared the two approaches, aggressive RRIF withdrawals versus sticking to the minimum, the outcome surprised Beth. The minimum withdrawal strategy leaves a larger RRIF balance at death, which indeed means a higher tax bill on the final return.
But it also leaves more after-tax wealth overall.
| Metric | Scenario #2: Faster RRIF withdrawals | Scenario #1: Minimum RRIF withdrawals | Difference |
|---|---|---|---|
| Projection End Age | 85 | 85 | 0 |
| Lifetime Personal Tax | $722,285 | $384,351 | $-337,934 |
| Lifetime Government Benefits | $70,587 | $70,587 | $0 |
| Lifetime OAS Clawback | $71,624 | $71,624 | $0 |
| Personal Estate | |||
| Estate Before Tax | $3,498,641 | $3,950,593 | $451,952 |
| Tax on Estate | $258,669 | $683,233 | $424,564 |
| Estate After Tax | $3,239,971 | $3,267,359 | $27,388 |
By paying less tax during Susan’s lifetime and preserving the RRIF’s tax shelter, the estate ends up larger even after the terminal tax is settled.
This comes up a lot. People focus on the tax bill at death and forget about the tax paid along the way. Pulling money out of a RRIF at top marginal rates just to avoid future tax often shifts the problem rather than solving it, and usually makes it worse.
Remember the three Ds of smart tax planning: deduct, divide, and defer. Susan is well beyond the deducting stage, and sadly has lost the ability to divide with income splitting. But that still leaves the third D – defer – as an effective tool in her toolkit.
RRIFs are not the issue. Paying high tax now to avoid high tax later usually makes things worse.
Sometimes the right answer really is the unconventional and boring one. Take the RRIF minimum and leave the rest alone.
This Week's Recap:
The “Let's Circle Back After The Holidays” season has officially begun.
Lindsay and I are officially on Christmas holidays, wrapping up an incredible year for our business and enjoying a well deserved break for the remainder of the month.
Our kids have one more week of school, so we'll use the upcoming week to catch up on our last minute shopping and prepare for the holidays.
Last week I shared my op-ed in the Globe & Mail about RRIF minimums and the plight of single seniors. Thanks for all of your thoughtful comments.
Weekend Reading:
Here are eight tips to stop worrying about running out of money in retirement.
On that note, part-time work in retirement has social, financial benefits, but beware of clawbacks.
It's that time of year again. Nick Maggiulli shares his favourite investment writing of 2025.
A picture is worth a thousand words as Michael James on Money explains investing in alternatives with one simple graphic.
A Wealth of Common Sense blogger Ben Carlson shares how to become a moderate millionaire ($1M to $5M in assets).
In this video Ben Felix reviews the main lessons from The Wealthy Barber (2025), and explains why it's the best introduction to personal finance he has ever read:
Heather and Doug Boneparth shares their thoughts on what to do when you receive a bonus.
Finally, travel expert Barry Choi says the once-elite airport lounge is now just another crowded space.
Have a great weekend, everyone!
Pulling money out of a RRIF/RRSP early (when you don’t need the money) is all about using up low tax brackets. Even then, the tax rate difference has to be balanced against the value of continued deferral. As you said, paying the top tax rate early doesn’t make sense. Even the next lower tax bracket may not make sense. It’s disappointing to see people seeking advice and running into someone innumerate. Hopefully, you were able to stop this client from continuing with this mistaken strategy.
100% agree, and best done between retirement and the uptake of government benefits to take full advantage of the low tax brackets.
In this specific case there is little to be done now from a tax optimizing perspective other than show that the previous strategy of drawing heavily from the RRIF and moving funds to the taxable account is sub-optimal if the goal is to maximize the final after-tax estate.
Very true, but also… We are talking about <1% delta in the value of the estate. Could be even less if she dies before 85.
I think the real issue is that she is reinvesting withdrawals in non-reg. Money might be better spent by giving them away to whoever she plans to be the beneficiary (assuming she can’t increase own spending). . And then accelerating withdrawals would be justified. Maybe that’s what her accountant had in mind…
You are on the right track! I never understand why these scenarios NEVER include donating, especially donating shares that have capital gains. My recipe:
1.Find shares with substantial gains
2. Calculate loss of income by donating low yield
3.Decide amount to donate knowing that you will get back ~50% in tax refunds and your support of such needy areas as health, education, food banks, shelters, culture, medical research
4. Enjoy your refunds and sense of leaving a legacy
Works well for non-reg and even better for CCPC. But her taxable account is likely new and does not have a lot of gains.
True, the taxable account is fairly new with minimal capital gains at this point.
The other consideration is the daughter is POA and dealing with her mother in declining health. Probably the furthest thing from her mind is to try to find a suitable charity near and dear to her mother’s heart to even enact this strategy in the first place.
Agree with Chuck, in general, that donating appreciated securities in a taxable account is a great way to give while you live.
The question posed was whether the current strategy of withdrawing significantly from the RRIF to reduce the eventual tax upon death was the right approach to maximize the after-estate value.
The two adult children are nearly retired and doing well financially – they had no desire to inherit funds prior to death. Their concern was how much tax would eventually be paid in the estate, but they didn’t realize how much tax would be paid personally with this approach during her lifetime.
In the minimum RRIF withdrawal scenario, no funds were added to the taxable account. It was enough to comfortably meet living expenses, pay taxes, and fill the TFSA.
Excellent point.
The article was good, but ignored the benefit of implementing a strategy of trying to equalize taxes over retirement; avoiding the highest tax brackets.
This has the benefit of reducing overall taxes and minimizing the portion of the RIF that is taxed at 53%.
Sadly too many people are in a hurry to start OAS/CPP (even if they don’t have an immediate need) at the expense of tax planning.
Here I agree with you. I am increasing my RRIF withdrawals up to the ceiling of my current tax bracket, gifting excess money and feeling good about it all. Chairitable contributions get a tax receipt and non-chairitable gifts make a positive difference in people’s lives.
I like Mordko’s thoughts. I an not as old as Susan but am in a higher tax bracket than I ever expected. I have given children some funds to reduce their mortgage and therefore pay less interest overall on it. Son has reduced his amortization of his house to perhaps 17 years from 25 years as he has continued his regular payments. He is also topping up his monthly payments when able. I think he will have it paid for in under 10 years.
We are also being clawed back some on our OAS. I have just this week made more donations than we have ever done before. This is reducing our tax liability at a 51% rate which is higher than my marginal rate. 29% Fed and 21% Provincial.
By giving some funds to children now it helps them out and reduces my income as less non Reg capital to earn on. They are in their 30’s. And very financially responsible.
Another option is lending your children interest free money for mortgage as you are perhaps losing 3 or 4% after tax and they are saving 5% interest on the capital. We still required them to make payments to us so that they did not increase their cash flow/lifestyle. This should only be done if you have a very high level of confidence in their ability to pay….they have are very Resp people….
Start to withdraw from your RRSP before the age of 71 – as the RRIF takes over then.
Put the withdrawn amounts from your RRSP into your TFSA account and then any remaining amount- open up a Non- Registered trading account and buy high paying dividend stocks- the dividends are taxed at a favourable rate because of the dividend tax credit.
Definitely smart to melt down the RRSP prior to 71 (I’ve written plenty about that: https://boomerandecho.com/dont-wait-until-70-the-costly-retirement-planning-trap/). After that, options are very limited.
Holding Canadian dividend stocks in the non-registered account is actually detrimental at this point because the $50k of dividends are still taxable and grossed-up for the purpose of calculating the OAS clawback. Meaning, she could have actually captured some OAS if those dividends weren’t there.
For example, a global equity ETF like VEQT has a dividend yield of just 1.31% – much more tax efficient for this situation.
I am curious, would your answer be the same if she was say 75 and healthy? Seems to me that leaving the money in the RRIF in this case is to the benefit of the beneficiaries as Susan does not have the health to be able to enjoy her money. If she were active I would pay the tax and kill the money out.
Hi Mark, I would withdraw from the RRIF enough to fill up lower marginal tax brackets and then draw from the non-registered account for the top-up to spend and give away as desired.
The broader point of the article stands. It likely makes more sense to minimize RRIF withdrawals after 71 due to the tax-sheltering properties of the RRIF. You would end up with more after-tax wealth that way, even with a high RRIF balance upon death. So get your spending money from somewhere else, if you have non-registered funds.
It appears the marginal tax rate from the $58-94K is all the same at 29.65%. With a $43k pension, $7k in OAS plus dividends and interest in a non registered account I’m up to $65K.
Does taking $20K from my $200K RRSP make sense annually til 70 when CPP kicks in or should I just leave the RRSP alone and let the RRIF minimums happen at 72 (2 yrs) while using non registered funds for TFSA top up?
Seems I’ll live in the 29.65% marginal bracket for life as it is very broad.
A RRIF meltdown might or might not make sense; it depends. When your CPP kicks in at 70, that extra money might start to result in some OAS clawbacks when combined with your delayed-until-70 RRIF payments and (probably increasing) dividends.
If you start melting down your RRIF now in a tax-efficient manner, you may position yourself to avoid those OAS clawbacks when your income gets bumped up @70 with your CPP.
You really need to run the numbers. Have a look at the PWL calculators.
The dividends you receive from putting the RRSP withdrawals into a non registered trading account will offset the tax you pay from the RRSP withdrawal- over 2 to 3 years of dividend income – the net result is no tax- as the RRSP withdrawal tax is paid by the dividends. – This is simply a math solution- simple and effective.
No, this would make the situation worse.
Totally agree with the idea/strategy of ‘giving away’ money prior to death – donations; money to (responsible) children, grandchildren. Any amount of money I received that I could use to make lump sum payments on mortgage, contributions to RESP, TFSA, RRSP were deeply appreciated and are what helped me ‘get ahead’.
You are on the right track! I never understand why these scenarios NEVER include donating, especially donating shares that have capital gains. My recipe:
1.Find shares with substantial gains
2. Calculate loss of income by donating low yield
3.Decide amount to donate knowing that you will get back ~50% in tax refunds and your support of such needy areas as health, education, food banks, shelters, culture, medical research
4. Enjoy your refunds and sense of leaving a legacy
It seems to me that distributing money to heirs when the family home was sold would have been the best step. It is not too late to distribute those funds now assuming the heirs have mortgages, TFSA capacity, etc. That could significantly lower the family’s overall tax rate. We tax payers do though appreciate people who are so willing to pay higher taxes than they otherwise would need to pay. Where was the financial advisor in years past?
The children are financially independent and nearing retirement themselves. Their primary concern is for their mother’s health, so I doubt they want to be seen as “meddling” by asking for early inheritances.
Keep in mind this situation is more common thank you’d think for a surviving spouse whose partner died in their late 70s, early 80s. The surviving spouse receives the remaining RRIF balance and TFSA. In this case the surviving spouse’s own health started to deteriorate, resulting in the sale of the family home to move into a retirement home – which creates a large taxable account.
It’s not so much that an advisor neglected something over a long period of time, but that this situation evolved quite quickly over the past 3-4 years.
Suppose the RRIF starting balance was $800l rather than 1.2 million. I assume scenario 2 looks even more attractive if OAS isn’t fully clawed back?
Or, if you run the same numbers but she passes away say 1 or 2 years earlier or later, does scenario 2 still come out ahead in every scenario?
The minimum RRIF withdrawal strategy came out ahead in every situation. If OAS could’ve been preserved, it would have looked event better.
At 65 years old is there a reliable estate wealth maximizing strategy to withdraw as much as possible (more than annual spend) that stays below the OAS clawback rate, which is approx the same income as the top of Ontario/Fed 29.65% marginal tax rate of $94,907, even if you have > $100k of non-registered funds available, and full TFSAs?
Note that one portion of the solution may be for the non-registered account to be invested largely in capital gains appreciating funds – which may potentially never trigger gains until death and results in lower taxes on capital gains versus RRIF income.
Hi Mike, I’ve written at length about this – the golden window of tax planning is in the years between retirement and the inevitable collision of taxable income at 70-72 (CPP, OAS, and ever rising mandatory RRIF minimums).
Agree with your take on non-registered investments. These should not be in high dividend paying stocks, it’s only compounding the tax and clawback problem.
When it comes to planning, I can’t very well tell someone what they should have done in the past (you shouldn’t have taken CPP at 60, you should have started more aggressive RRIF withdrawals earlier, you shouldn’t target high dividends in a taxable account). All we can do is make the best of their current situation and future goals.
Then instead of -high paying dividend stocks – in a Non Registered Account- one purchases a mutual fund like – Mackenze Precious Metals (MFC 8535) and takes the risk of capital growth instead of dividend income. Trade off- less tax to be paid- higher risk of investment. The savings in tax can offset any downward price in the (MFC8535)- Trade off- is always in play.
I agree with Joanne totally about giving money away to charities, children, and grandchildren prior to death. Personally I would rather give with a “warm hand” than a “cold hand”.
Interesting article for me as my accountant recently advised doing what the accountant in the article advised. As one reader pointed out the benefit to the estate by leaving funds to grow in the particular scenario illustrated is very minimal (<1%). My financial planner was initially not keen on my accountant`s advice, but after having a direct discussion with the accountant warmed up to the idea, and said that other sophisticated accountants have been giving similar advice to clients. The suggestions from other readers as to what to do with the funds taken out early are interesting, and I look forward to reading other comments.
Hi Joe, keep in mind the longer you live the greater the advantage of preserving the RRIF.
In this example the life expectancy was just five years and it produced a $27,000 advantage. If we increased life expectancy to 95 (15 years) there would have been a $177,000 advantage for the minimum RRIF withdrawal strategy.
In the model that you have used for your calculations are you able to tell us the nature of the type of non-registered investments made from the money withdrawn from the RRIF that exceeds lifestyle needs? ie capital gains producing vs dividend producing vs interest generating? % of each? This would presumably make a considerable difference in terms of taxes to CRA
The approach had been to invest in a handful of high dividend paying stocks in the taxable account (coincidentally the same stocks held in the RRIF and TFSA).
The reported dividend income was ~$50k.
Ideally, they’d invest in a broad market ETF with minimal dividends.
One last question, does the model tell you if the accelerated withdrawals (beyond lifestyle needs) had been from a holdco rather than a RRIF if the numbers would have been much different?
This appears to be a conclusion drawn from a specific case using high RRIF values, and producing a small differential. It can mislead.
It’s all about the tax rate.
For a lot of people, especially if single (unable to use rollover to a spouse), it would probably make sense to withdraw RRIFs gradually over several years to even out the tax bill.
At least enough to 1) top up income to the maximum of the first tax bracket and 2) stuff the TFSA.
In the cited case, the investor is already 80. She probably should have been withdrawing more than the minimum over many years leading up to the year of the estate.
Be careful passing judgement on what *should* have been done. This woman was recently widowed (3-4 years ago). The couple could have been following a sensible strategy, withdrawing from their RRIFs, taking advantage of income splitting, maxing out their TFSAs, and enjoying retirement in their paid-off home.
The death of the first spouse changes everything. RRIFs are essentially combined, no more income splitting, and in this case the declining health of the surviving spouse made staying in the home impossible. The house is sold, mom is moved into a retirement home, and the house proceeds added to a taxable account. This situation is not that uncommon.
We can only advise on the current situation and future goals. Looking back on what should have happened is pointless. The main point is that preserving the RRIF led to a better final outcome.
Do I have concerns about holding a handful of individual stocks, or about targeting high dividends in the taxable account? Yes. Should they look at early inheritances or charitable giving? Of course.
But the conclusion of minimizing RRIF withdrawals at this age and stage is not at all specific to this situation.
Gifting to grandchildren is not mentioned. RESPs offer tax deferred growth and generally lower tax rates on withdrawals. At age 18 grandchildren can open both TFSAs and FHSAs accounts which offer tax free growth on surplus RESP withdrawals
You didn’t mention if Beth is an only child or if she’s the one responsible/interested in her mother’s finances. From a tax saving perspective for me (non professional investor), the first move i would consider is emptying the TFSA in total and do a live sharing of the wealth with her beneficiaries and/or charities. Then she can continue taking advantage of new contribution room but can replenish the TFSA with the unused RRIF withdrawals and other tax minimizing transactions instead of pumping up the non registered account further. Fund earns more tax free and can be flushed and refilled for as long as she lives.
With mom’s declining health and the two children (one acting as POA) already financially stable, they don’t want to be seen as meddling in mom’s finances. Life expectancy is short enough that it matters little if the funds are given away now or in 3-5 years.
Put yourself in their shoes asking the advisor to withdraw hundreds of thousands of dollars to give to the kids now – a bit awkward, don’t you think? I think it’s the furthest thing from their mind.
That absolutely was not what I was implying. It was clarifying the scenario. Declining health can mean a lot of things….
Years ago, before TFSAs were around, my mom decided to start moving some of her wealth to her 4 children by us opening a joint investment account into which she gifted funds to each of us to then invest. We paid the taxes but all had the understanding that it was her money if she needed it. This worked for over 10 years.
I guess the other thing to get from your story is it’s never to soon to be planning for these things. Parents seem to hold their financial cards very close to their chest whether they have bags of money or tons of debt. It also depends on the children – are they responsible and financially stable or are they hopelessly irresponsible, looking for handouts or heavily in debt.
Early open conversations can save a lot of money too.
No, it was a fair question – I was just clarifying the scenario as well.
Your other point about planning earlier, not holding the financial cards too close, is so important to help avoid future issues like this.
But, like in that viral CTV story about the parents who died in their 60s within a year of each other, sometimes the best plans and intentions can be disrupted in an instant. The early death of a spouse can dramatically change what was a seemingly sensible and tax efficient plan.
And we should be planning for a nice long healthy life. Running out of money if you live beyond a normal life expectancy is a much bigger problem than paying too much tax during your lifetime or in your estate.
What is needed here- “she needs more Expenses” to counter the tax bill.
She should open up an “Non Registered- MARGIN trading account.- Put a pile of money from the RRSP slowly over time to fund this account. An example- $500,000 from RRSP- then purchase dividend paying stocks worth $1M. – She then gets to write off the margin interest today being around 5.70% – margin loan $500,000 @ 5.70% = $28,500.00 of deductible interest expense.
-The more expenses the less tax to be paid. While the investment grows- the growth in investment and the dividend tax credit and the interest write off / should be more than the tax bill over time.
You cannot be serious. She is 80, in poor health.
I know she’s 80 years old.
She should start liquidating her RRSP’s etc.- and give her children co-ownership of her properties.
The end of life is expensive for the family- she is rich can afford to pay the taxes. If she holds onto all the assets- the family will then face a large probate from the Ontario government. The children could then put the money she gives them into a “non registered margin trading account. She needs to spread her wealth – her good fortune has made her rich and you cannot take with you – so might as well give it away-
These “children” are neither young nor poor and borrowing to invest would be dumb. Apart from that, their specific situation rules out transfer of funds to children (as described in Robb’s responses).
Then let her pay the taxes and her children pay the probate- it all comes down to spreading the wealth- It looks like her savings were in vain. The best scenario is to dye with little assets and spend while you are breathing and healthy. So this is a lesson to us all.
Rob, I agree that the RRIF should stay intact as long as possible, but one question. So it would make sense to transfer in-kind to your TFSA till you use up the available room and pay the tax for the transfers at your marginal rate even if it means reducing the size of the RRIF. I would still have the investment but now it is tax free.
Thanks.
Hi Gordon, that is a no-brainer to fill the TFSA annually. The problem in this situation is that it’s just such a small drop in the bucket ($7k) compared to the size of the RRIF and taxable account.
Think of it this way: the minimum RRIF withdrawal is enough (along with the pension and CPP) to meet spending needs, pay taxes, and contribute to the TFSA.
So the question becomes whether to intentionally withdraw more dollars from the RRIF to move into the taxable account. That’s what they *had* been doing previously, but this analysis suggests it’s not the best approach.
There’s always something to learn here. We’re rapidly headed for mandatory withdrawals which one has to double to consider if one looses a spouse. How might that look?
I’m thinking we’ll be taking the minimums once OAS and CPP are fully engaged at age 70 and keep TFSAs topped up. Our RRSPs are not huge. Incomes planned to stay below OAS clawback. Marginal rate is the same from mid $50’s to low $90’s.
Any additional needs including enhanced gifts to offspring/food bank can come from the non registered acct which I’m considering altering to minimize dividends and maximize capital gains.
How about Donate some shares from the RRIF to a charity eg. Food Bank – then you do not need to recognize the capital gain and also have the charitable deduction to lower taxable income.- Also donate to charities thru your will to lower terminal tax able income.
Excellent analysis of the situation and a nice value-adding dialogue with engaged readers, Robb!
Hi Robb, I can see your point in the case of that lady. The only thing her family can do is stop buying dividend stocks in her non-registered account and rather buy growth stocks/ETFs to favor capital gains.
In my case, I’m 57 (retired at 53) and my RRSP withdrawals cover all expenses and annual TFSA contribution. During these 4 years, I aimed to remain in the first two income tax brackets. Unless we see another “lost decade” episode in upcoming years, I can easily see my RRIF be in the 4-5M$ range at 71. That would mean minimum withdrawals in the 200-250K$ range.
I think it makes sense to be more aggressive with my withdrawals in the next 13-18 years (in particular, post 65, using partial RRIF conversion and income splitting). That would be perfect to finance our “go-go years”, where we intend to travel a lot, for long periods of time.
Hi Alex, I’ll refer once again to this article on why the golden tax planning window is the time between retirement and the inevitable collision of taxable income from your CPP, OAS, and ever rising minimum mandatory RRIF withdrawals: https://boomerandecho.com/dont-wait-until-70-the-costly-retirement-planning-trap/
Past age 71, there is little you can do in the way of good annual tax planning. The article suggests that if you find yourself in that situation, especially after a spouse dies and income splitting is no longer available, it does not make sense to withdraw much more than the minimum required amount from your RRIF.
In your case, at 57, you have 13-14 years of prime RRSP meltdown time to fill up your low tax brackets and try to reduce the size of your eventual RRIF.
My approach is to try and get the average tax rates to be smooth and consistent throughout that period, so we’d drive up taxable income from age 57 to 70, which will naturally drive down the expected average tax rate once CPP and OAS kick-in in the month you turn 70.
In practice, sometimes I find that with no RRSP meltdown strategy in place your average tax rate could easily be in the single to low double digits in early retirement, but then climbs to the high teens or low 20s once CPP, OAS, and larger RRIF minimums collide in your 70s.
If we can come up with a strategy to withdraw larger amounts from the RRSP, bring the average tax rate up to the mid-teens, that might reduce the eventual average tax rate into the mid-teens as well.
Hi Robb, thank you very much for such a detailed answer!
I realized at the end of 2024, after the 20+ % returns that year, that my RRSP was a fiscal time bomb. Even with conservative returns of 5%/year and considering my average withdrawal so far, I would still end up with a multi-M$ RRIF. And 2025 is almost as good as 2024 so far.
I remember reading your article in September and it convinced me even more to increase my withdrawals before the RRIF conversion. I plan to delay CPP as much as possible, to leave (taxable) room for bigger RRSP withdrawals. Regarding OAS, the only time frame where I could take it without partial (total) claw back would be between 65 and 71.I’m not decided yet about it. Anyway, I ignore OAS in my retirement planning.
I like your idea of smoothing tax rates over the retirement period. Some people are so obsessed with taxes that it can provide good emotional help to them.
Personally, I don’t mind paying more taxes between 58 and 72 if it means affording the kind of life experiences my wife and I enjoy.
I am struggling to understand the math on the tax on estate for the RRIF at death. You have it down as roughly 17.3% ($683K/$3.95M) for min withdrawals. I would have expected the tax on estate to be closer to 46% in Ontario or roughly $1.8M upon death. Is there something I am missing ?
Hi Joseph, the tax isn’t all coming from the RRIF – $732k of that is in a TFSA, the RRIF got drawn down to $929k, and the rest is in a taxable account that was pretty recently established after the sale of the house – so not a ton of unrealized capital gains.
Ah I missed that part thanks Robb
Thx for the comparative summary analysis. Useful.