Before You Retire

• Get ride of your debt. 
• Don't enter into a car loan before entering into retirement. Pay cash for cars.
• Evaluate your insurance. Maybe you don't your life insurance, etc.
• Determine how you are going to pay for healthcare. Most Canadians pay these extra expenses out of pocket.
• Update your estate plan (will, power of attorney, document your digital assets(logins, etc).
• Determine your retirement age.  (Will need to line up with your retirement plan!)

Tax Rates

Retirement Budget

Figure out how much you need monthly once you retired.

Having money in a TFSA will help if you have a big expense, bucket list item, etc... since they don't count as income.

Income Base on Savings 

Assumptions:

• Retiring at 60
• CPP at age 70, 75% of max
• Running estate to $0 until
• From age 60 to 95

RRIF

Earnings in a RRIF are tax-free and amounts paid out of a RRIF are taxable on receipt.

When you retire, your RRSP needs to be converted to a RRIF before the age of 71.

At 71, you will be forced to convert your RRSP to a RRIF.

At 72, you need to start withdrawing from it.

There is a minimum amount that you need to withdraw once converted to a RRIF.

It is very unlikely that you would ever just take out the minimum. 

Benefits of a RRIF over RRSP

• no commissions on withdrawal
• income splitting if 65 or older
• no withholding tax on the minimum, there is a withholding tax above the minimum.

Withholding Rates

• 10% on amounts up to $5,000
• 20% on amounts over to $5,000
• 30% on amounts up to $15,000

RRSP Meltdown Strategy

The RRSP Meltdown Strategy is an aggressive drawdown of your RRSP(RRIF) early in retirement.

• Drawing down your RRSP will allow you to delay your CPP/OAC.
• Money left in your RRSP(RRIF) upon your death will be taxed as if it was income received in that one year. 
• You can use your TFSA for emergencies while pulling an income from your RRSP(RRIF). ie. new roof, etc... 

TFSA

• Use it as a lever account. If you need some extra money, pull it from your TFSA account.
• Over contributing to your TFSA are subject to a 1% penalty tax per month charged on the excess amount.

Withdrawal Example

Moving Abroad

• You can keep your TFSA
• As a non-resident, you won't accumulate new contribution room and you won't be able to contribute to your TFSA

References