Hey Adam, I'm a Huge fan of your channel. I noticed that you mentioned about getting the $3,000 tax bill surprise but I thought you should have mentioned that if you owe CRA > $3k at tax time they will force you to pay quarterly payments throughout the next year(s). Therefore I used an Excel spreadsheet to calculate my income taxes owing early in January 2022 as soon as all the new tax variables are available from CRA. I then instructed my DB pension to take off just enough tax in 2022 so that I will wind up owing just < $3K in Income Taxes from my 3 combined DB Pensions in April 2023 when I do my taxes for 2022. With all of us now being able to get 5+% rate on a 1 Year GIC, I will deposit $3K into a 1 year GIC during the 1st week of Jan 2023 and then I will roll it into a 3 month GIC in Jan 2024 at maturity and use these funds that mature in the 1st/2nd week of April 2024 to pay my 2023 income taxes owing in Apr 2024, The remainder ($150+) in interest that I earned I can spend guilt free on a lovely dinner curtesy of the Federal Government. When I convert the 1st 1 year GIC to a 3 month GIC in January 2024 I will also put another $3k into a new 1yr GIC and rinse and repeat every year, always getting a interest free loan from the Feds paying me whatever the current 1 year GIC rate is which I convert into a delicious steak & seafood dinner. Drinks are on the Feds. It's a very small win but it feels soooo Good. A HUGE thank you from me and all of the Canadians you are helping. Cheers.
@LA Ed -- Just a heads up, According to CRA website, CRA does not request quarterly installments unless your income tax assessment show an amount of over $3,000 for any two of three consecutive years (current tax year and past two). So you would have to owe more than $3,000 in 2022 and also in one of either 2021 or 2020 to trigger. Just one year over $3000 will not trigger the quarterly payment requirement.
As young person who is no where near retirement I find this so educational to know and just be aware as I do get closer and closer to retirement. Love the examples and real life situations you share with your audience so thank you!
When I had to retired, I had 6 sources of retirement income / wage replacement income to go through and figure out my tax situation. Mine was further complicated due to retro payments. I got hit with almost $10,000 in additional income tax… and I never considered myself a high wage earner so this really hurt. What I have been doing to get a handle on my taxable income is to use tax software (turbo tax) and plug all my information in a head of time for next year using my planned / scheduled income payments, then updating that information to reflex any indexing with my pension sources announce any increases for the year, and updating again for any changes as they happen… into the previous years tax software. I have been able to get pretty exact on what I need to have deducted at source so I have not had any surprises since. So I would like to offer that a type of tax calculation tool. The tax software will have all your age or medical related offset information so this made sense to me to use this as my calculator.
Adding a point of clarification to this video... the spreadsheet used in video assumed your RRIF value was 60K (which is also assumed to be your income withdrawal amount). If your RRIF value is say $200K then the minimum withdrawal calculation would be done on the RRIF total value at Dec 31 of the previous year not the amount you are withdrawing in the current year... Before age 71 you can play with the amount of RRSP converted into RRIF to adjust minimum withdrawal amounts, but you lose that flexibility after Dec 31 of the year you turn 71 as all RRSP must be converted to RRIF no later than this time. Also, if you have multiple RRIF accounts setup the minimums apply to each account separately so you cannot aggregate your withdrawals to meet the minimums of each. Another great Video Adam shining some light on confusing rules.
Transitioning from working to being retired was where my financial adviser really showed her worth. Of course, taxes were a big part of that, but overall it can be financially confusing making that transition from employee to a RRIF pensioner. As you say the first 2-3 years are the most difficult, in fact saving the money is a much simpler process than withdrawing the money, and after that it smooths out again.
Understand ! I am drawing funds from several avenues and still work a little so trying to figure out everything is a challenge but it will come out in time.
Thank you for addressing this subject Adam. My father ran into this issue because he wasn't aware of the tax implications of multiple retirement income streams. He wasn't aware that RRSPs turn into RIFs and he'd have another income stream. He had never touched his RRSP but the RIF bumped his income up and he's been getting a reduced government pension ever since.
The tax calculation doesn’t need to be 100% accurate. If you can estimate based on your income mix and err on the side of a little too much, then I’ve found the excess handy in building my 1-year of expense savings, car replacement, or offsetting other areas that were calculated too loosely. In my opinion a good estimate is better than constantly adjusting to be 100% accurate.
The best situation that I found is to have appropriate tax taken off of CPP, OAS, private pensions and any RRSP withdrawls. Then living within those after tax earnings... minimal surprises at tax time.. Thank you Adam for all your advice!
I always try to make it so I owe taxes and hold onto my money longer. Then I pay the taxes on time. I made a mistake during covid and what a mess which I immediately corrected and the CRA acted stupid like they could not understand my explanation which was clear and concise with visual attachment . Then they tried to bill me for the amount I had already corrected and paid. It took 3 letters in which I photo copied every piece of information each time they insisted I pay and I finally said I wanted an investigation into who stole the money I had paid. They finally understood!!! WOW
Do you have any videos on what 20 and 30 year olds should do in terms of strategy or prepare for retirement? Strategies we should do not only RRSP/TFSA but maybe CPP or anything else? Many young people know about RRSP/TFSA but have no idea about the automatic things we pay into and how to optimize it for retirement whenever that day comes?😅
Ryan, We have limited on YT for this. We do offer the Financial Masterclass - which is geared to help 20-45 year olds. We will be offering a Black Friday sale on it this year again. www.parallelwealth.com/education
Great video. This might be a silly question but once you retire and begin drawing on RRSP/RRIF for income, do you only pay Fed/Prov taxes or do you still have to pay into CPP/OAS??
Would it be possible to do a post for End of Life and getting affairs in order to best save most from tax man? e.g. owning a second house or land that will trigger capital gains. Is it better to keep these and designate in the will or sell before death? Should executor be on bank accounts (assuming honesty)
Great video - thanks! A while back you did a video in which you said (I think) that if you are 65 years of age, you should move $2000 into RRIF and then take it out even if you are still working in order to get the $300 pension credit. If the marginal tax rate is 25% wouldn't you end up paying more tax than $300 so it would actually cost you money in taxes? Thank you.
Can you do a video on discharge fees charged by the different banks. I have a plan to withdraw my dividends every month and I have found out the bank charges me 50$ for every withdrawal from my RRSP. And possibly who has the lowest discharge fee.
Set up a RRIF - move the dividend money from RRSP to RRIF and withdraw. It's an income account and they won't charge a fee - that's my tip here for you!
James, typical the investment firm will sell something and pay you out by year end. You would have to ask them what their process is for this - but your min will be paid out.
I understand that the monthly RRIF withdrawal amount is based on the retirees age and withdrawal percent rate. Is the withdrawal amount based on the percentage times the RRIF balance at the beginning of each year.
Another income stream that some people forget to include in their tax calculations is dividends on non-registered investments. While these are taxed lower than regular income, they can cause a surprise at tax time. If following Adam’s RRSP melt down strategy, non-registered dividends can become sizeable over time. I find the Wealth Simple tax calculator to be decent in helping to estimate my taxes.
Hey Adam, I'm a Huge fan of your channel.
I noticed that you mentioned about getting the $3,000 tax bill surprise but I thought you should have mentioned that if you owe CRA > $3k at tax time they will force you to pay quarterly payments throughout the next year(s).
Therefore I used an Excel spreadsheet to calculate my income taxes owing early in January 2022 as soon as all the new tax variables are available from CRA. I then instructed my DB pension to take off just enough tax in 2022 so that I will wind up owing just < $3K in Income Taxes from my 3 combined DB Pensions in April 2023 when I do my taxes for 2022.
With all of us now being able to get 5+% rate on a 1 Year GIC, I will deposit $3K into a 1 year GIC during the 1st week of Jan 2023 and then I will roll it into a 3 month GIC in Jan 2024 at maturity and use these funds that mature in the 1st/2nd week of April 2024 to pay my 2023 income taxes owing in Apr 2024, The remainder ($150+) in interest that I earned I can spend guilt free on a lovely dinner curtesy of the Federal Government.
When I convert the 1st 1 year GIC to a 3 month GIC in January 2024 I will also put another $3k into a new 1yr GIC and rinse and repeat every year, always getting a interest free loan from the Feds paying me whatever the current 1 year GIC rate is which I convert into a delicious steak & seafood dinner. Drinks are on the Feds.
It's a very small win but it feels soooo Good.
A HUGE thank you from me and all of the Canadians you are helping. Cheers.
Great point, and well planned on your end. Thanks for watching and leaving a great comment.
@LA Ed -- Just a heads up, According to CRA website, CRA does not request quarterly installments unless your income tax assessment show an amount of over $3,000 for any two of three consecutive years (current tax year and past two). So you would have to owe more than $3,000 in 2022 and also in one of either 2021 or 2020 to trigger. Just one year over $3000 will not trigger the quarterly payment requirement.
Enjoy your dinner.
As young person who is no where near retirement I find this so educational to know and just be aware as I do get closer and closer to retirement. Love the examples and real life situations you share with your audience so thank you!
Thanks Ryan
When I had to retired, I had 6 sources of retirement income / wage replacement income to go through and figure out my tax situation. Mine was further complicated due to retro payments. I got hit with almost $10,000 in additional income tax… and I never considered myself a high wage earner so this really hurt. What I have been doing to get a handle on my taxable income is to use tax software (turbo tax) and plug all my information in a head of time for next year using my planned / scheduled income payments, then updating that information to reflex any indexing with my pension sources announce any increases for the year, and updating again for any changes as they happen… into the previous years tax software. I have been able to get pretty exact on what I need to have deducted at source so I have not had any surprises since. So I would like to offer that a type of tax calculation tool. The tax software will have all your age or medical related offset information so this made sense to me to use this as my calculator.
Yup! This has to be shown to your audience. Taxes! Ugh! Thank you Adam👍🇨🇦☺
I use Turbtax free version, and plug in numbers according to various scenarios. Granted, it has it’s limitations, but works as a blunt instrument.
Adding a point of clarification to this video... the spreadsheet used in video assumed your RRIF value was 60K (which is also assumed to be your income withdrawal amount). If your RRIF value is say $200K then the minimum withdrawal calculation would be done on the RRIF total value at Dec 31 of the previous year not the amount you are withdrawing in the current year... Before age 71 you can play with the amount of RRSP converted into RRIF to adjust minimum withdrawal amounts, but you lose that flexibility after Dec 31 of the year you turn 71 as all RRSP must be converted to RRIF no later than this time. Also, if you have multiple RRIF accounts setup the minimums apply to each account separately so you cannot aggregate your withdrawals to meet the minimums of each.
Another great Video Adam shining some light on confusing rules.
Transitioning from working to being retired was where my financial adviser really showed her worth. Of course, taxes were a big part of that, but overall it can be financially confusing making that transition from employee to a RRIF pensioner. As you say the first 2-3 years are the most difficult, in fact saving the money is a much simpler process than withdrawing the money, and after that it smooths out again.
Understand ! I am drawing funds from several avenues and still work a little so trying to figure out everything is a challenge but it will come out in time.
An invaluable advice that I am exactly needing right now as I am in first partial year of retirement. Thank you!
You are welcome Alnoor. Happy retirement
Fantastic advice as always, Adam!
Thanks Sharon!
Definitely going to use Adam’s services soon! Close to what I think I need for retirement, need him to confirm it 😃
Reach out when the time is right. Here to help.
Thank you for addressing this subject Adam. My father ran into this issue because he wasn't aware of the tax implications of multiple retirement income streams. He wasn't aware that RRSPs turn into RIFs and he'd have another income stream. He had never touched his RRSP but the RIF bumped his income up and he's been getting a reduced government pension ever since.
The tax calculation doesn’t need to be 100% accurate. If you can estimate based on your income mix and err on the side of a little too much, then I’ve found the excess handy in building my 1-year of expense savings, car replacement, or offsetting other areas that were calculated too loosely. In my opinion a good estimate is better than constantly adjusting to be 100% accurate.
The best situation that I found is to have appropriate tax taken off of CPP, OAS, private pensions and any RRSP withdrawls.
Then living within those after tax earnings... minimal surprises at tax time.. Thank you Adam for all your advice!
That's what works for me too. Typically I get a small refund at tax time and that's how I like it--no surprises when I do my taxes.
The best part of having the taxes taken at source is the potential refund at tax time. That's like free money!
Or a forced savings plan:)
I always try to make it so I owe taxes and hold onto my money longer. Then I pay the taxes on time.
I made a mistake during covid and what a mess which I immediately corrected and the CRA acted stupid like they could not understand my explanation which was clear and concise with visual attachment . Then they tried to bill me for the amount I had already corrected and paid. It took 3 letters in which I photo copied every piece of information each time they insisted I pay and I finally said I wanted an investigation into who stole the money I had paid. They finally understood!!! WOW
Didn’t see any retirement tax calculators shared, if you ever decide to make your own I’d love to try it.
Darcy, we are working with a 3rd party now to get something out. No timeline at this point.
@@ParallelWealth Great to hear - I’ve got 12 years til my early retirement goal so as long as you have it ready before then I should be good ;)
Do you have any videos on what 20 and 30 year olds should do in terms of strategy or prepare for retirement? Strategies we should do not only RRSP/TFSA but maybe CPP or anything else? Many young people know about RRSP/TFSA but have no idea about the automatic things we pay into and how to optimize it for retirement whenever that day comes?😅
Ryan, We have limited on YT for this. We do offer the Financial Masterclass - which is geared to help 20-45 year olds. We will be offering a Black Friday sale on it this year again. www.parallelwealth.com/education
I'm kinda thinking all the benefits I've never recieved are a trade off for future tax payments.
Another terrific learning experience. Thanks Adam. Do the withholding tax rules you discuss apply also to LIFs?
Yes they do.
Great video. This might be a silly question but once you retire and begin drawing on RRSP/RRIF for income, do you only pay Fed/Prov taxes or do you still have to pay into CPP/OAS??
You never pay into OAS. But CPP and EI are based on employment income. So the answer to your question is NO
@@ParallelWealth thank you!!!
Would it be possible to do a post for End of Life and getting affairs in order to best save most from tax man? e.g. owning a second house or land that will trigger capital gains. Is it better to keep these and designate in the will or sell before death? Should executor be on bank accounts (assuming honesty)
Hi Adam. It seems like its better to melt down your rsp before retirement or not get into an rsp at akk. Am i wrong?
Nope, the tax break for most will be greater to use the RRSP while working, melt down early in retirement and then lean on CPP and other later.
Great video - thanks! A while back you did a video in which you said (I think) that if you are 65 years of age, you should move $2000 into RRIF and then take it out even if you are still working in order to get the $300 pension credit. If the marginal tax rate is 25% wouldn't you end up paying more tax than $300 so it would actually cost you money in taxes? Thank you.
Yes, with provincial and federal credits it would range between around $450-$725
Can you do a video on discharge fees charged by the different banks. I have a plan to withdraw my dividends every month and I have found out the bank charges me 50$ for every withdrawal from my RRSP. And possibly who has the lowest discharge fee.
Set up a RRIF - move the dividend money from RRSP to RRIF and withdraw. It's an income account and they won't charge a fee - that's my tip here for you!
Thanks I did find your RRSP to RIFF video , Next time I will look back at old videos.
I should know this but what happens if you don’t withdraw the minimum by December 31st (and bonus - if there’s no cash in the RIF, just equities)?
James, typical the investment firm will sell something and pay you out by year end. You would have to ask them what their process is for this - but your min will be paid out.
Adam: " I just h a t e that!" lol
HAHA
Great, where were you two years ago!:)
I understand that the monthly RRIF withdrawal amount is based on the retirees age and withdrawal percent rate. Is the withdrawal amount based on the percentage times the RRIF balance at the beginning of each year.
Correct - well technically the Dec 31st account value x your age at the start of the following year.
Another income stream that some people forget to include in their tax calculations is dividends on non-registered investments. While these are taxed lower than regular income, they can cause a surprise at tax time. If following Adam’s RRSP melt down strategy, non-registered dividends can become sizeable over time.
I find the Wealth Simple tax calculator to be decent in helping to estimate my taxes.
What about pension splitting?
Richard, this is built into the final tax bill we show. I didn't highlight it, as not the focus of this video, but it's there!
@@ParallelWealth Thank you.
What's the tax implication if I return to work and get paid about 2 - 3 K per month
Without knowing the rest of your financial situation, your question is impossible to answer accurately.
What G T said ...and not looking for all the details here, but the idea would be to level out your average tax rate.
If only the majority of us had multiple income streams to speak of...
99% do in retirement by default - CPP and OAS...