RRSP withdrawal staying in Canada


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Jayant   
Member since: Mar 08
Posts: 17
Location:

Post ID: #PID Posted on: 21-02-21 22:51:11

Hello,
Question regarding RRSP withdrawal for my wife:

-She is 55
-Quit job in 2019 Dec.
-She has no pension from employer
-She has RRSP + I contributed to spousal RRSP (stopped SP.RRSP contribution in 2016)

-I am 56
-Planning to retire in 2023
-I have employer pension & planning to split pension for tax purpose.
-I have RRSP

Because I have pension and in my absence she will have 66% of my pension amount, we want to withdraw her RRSP. What would be the tax efficient way?

I would appreciate your answers/views.



MITRON   
Member since: Sep 17
Posts: 249
Location:

Post ID: #PID Posted on: 28-02-21 18:56:35

Any withdrawals from your RRSP are immediately subject to withholding tax. If you withdraw up to $5,000, the withholding tax rate is 10%. If you withdraw between $5,001 and $15,000, the withholding tax rate is 20%. If you withdraw more than $15,000, the withholding tax rate rises to 30%.

-----

So only withdraw in chunks of $ 5,000 or less at any given time. So only 10% withholding tax is held.

So if you want to withdraw $ 10,000 - do TWO $ 5,000
withdrawal as opposed to ONE - $ 10,000

------

How much total RRSP are we talking about?

Have you factored in OAS, CPP and GIS in your retirement plans. Both of you probably won't get GIS as that's only for low income people. But you will get OAS & CPP at 65.

You can delay taking it till 70 if you want.



Jayant   
Member since: Mar 08
Posts: 17
Location:

Post ID: #PID Posted on: 06-03-21 17:26:12

Thank you for your reply. I will try to understand withdrawing process considering OAS/CPP.



MITRON   
Member since: Sep 17
Posts: 249
Location:

Post ID: #PID Posted on: 13-03-21 13:50:01

Quote:
Originally posted by Jayant

Thank you for your reply. I will try to understand withdrawing process considering OAS/CPP.



Both OAS & CPP are also taxable income. GIS is not taxable income.

Both OAS & CPP also have a spousal benefits attached under certain conditions if you pass away.

So if you withdraw your RRSP when you are getting your OAS & CPP & Company pension - you will be basically paying tax on 4 sources of income.

Better to withdraw your RRSP now, and delay getting your OAS & CPP.

You get rewarded well if you voluntarily delay getting your OAS & CPP.



MITRON   
Member since: Sep 17
Posts: 249
Location:

Post ID: #PID Posted on: 13-03-21 13:54:32

Canada is a welfare state. People who never contributed to RRSP get a nice GIS from the government in old age!

But people who contributed their hard earned money into RRSP get no GIS as withdrawal from RRSP puts them in a high income bracket & hence ineligible gor GIS.

But they will still get OAS & CPP though.



MITRON   
Member since: Sep 17
Posts: 249
Location:

Post ID: #PID Posted on: 13-03-21 13:55:52

Check

www.retirehappy.ca

Good information there.



MITRON   
Member since: Sep 17
Posts: 249
Location:

Post ID: #PID Posted on: 14-03-21 06:56:03

Quote:
Originally posted by Jayant

Thank you for your reply. I will try to understand withdrawing process considering OAS/CPP.



Maximum CPP is $ 1,200/month and OAS is $ 615/month.

So potentially after retirement each one of you can get $ 1,800/month in just OAS & CPP, plus your company pension, plus your RRSP withdrawal.





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