Huge RRSP Mistake to AVOID - You will LOSE 40% of Your RRSP
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- Опубліковано 27 тра 2024
- Huge RRSP Mistake to AVOID - You will LOSE 40% of Your RRSP
The most overlooked area of retirement planning in Canada are taxes owing to the Canada Revenue Agency due to your remaining Registered Retirement Income Fund (RRIF) balance.
When a person passes away with an RRSP or RRIF and they have no surviving spouse, the balance of your RRSP or RRIF is deemed to have been paid in full. The result is a high income in the year of your passing. You will lose at least 40 percent of your RRSP or RRIF to tax.
If you're like most people, each year you try to keep more of your hard earned money by contributing to an RRSP. Your RRSP contribution reduces the income tax payable to CRA.
Eliminating or reducing the taxes on your estate is actually very simple. A life insurance policy where the cash value and the death benefit grows over time to meet the needs of the of paying your final needs expenses (funeral, debts, taxes, beneficiaries & charities)
Participating or Whole Life insurance will provide this solution for you in addition to being an alternative to your fixed income investments.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to schedule your confidential meeting with me. You can schedule your meeting here: calendly.com/aaronwealthmanag...
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Excellent summary ✅
Thank you!
Thank you.
Meltdown the RRSP and transfer excess to TFSA.
You do get more contribution room every year, so you can keep topping it up.
@@my3dviews The yearly additional allowed contribution is not that big...$ 7000 in 2024.
@@1983dmd Do that over ten more years and you have an additional $70,000 in your TFSA, plus $88,000 of previous years contributions up to 2023. That's $158,000.
Maybe not a lot to a millionaire, but to the average Canadian that is a fair bit of tax protected money.
@@my3dviews I agree...I just wished they would allow us to put more every year....
@@1983dmd When the Conservatives were in power they put it up to $10,000/year in 2015. Then the Liberals dropped it back down to $5,500/year in 2016 after they won the election.
I have a fair bit of contribution room, because instead of putting money into my TFSA, I have been paying down my mortgage due to the higher interest rates. Once I get it paid off, in a few years, I will have lots of room in my TFSA.
Another way is to increase the amount of withdrawals from RRIF while you are at lower tax rates and put the additional amounts into your TFSA
or give them to your kids/charities you like. Better still: spend more money when you're relatively young (66)!
@@gabrieliordache296Yep .. Couple nights out with Charlie Sheen should take care of that for me... lol
Well, missed those couple years when was on a disability and my income was low. No single "friend" advised me at that time to withdraw from RRSP.
Absolutely sub par video. Incredibly simplistic. Life insurance like you are describing is expensive. The premiums are sky-high and so are the fees. I suspect for most there is probably no compelling business case for life insurance to avoid terminal RRIF taxes. Accelerate your withdrawal and pay the tax on that. After all, the RRSP is not a tax avoidance scheme but a tax deferral plan. Also, even with insurance CRA still gets its tax - your heirs just are not paying it because of the expensive life insurance you have put in place and financed with your premiums.
Appreciate your comment. I don’t agree of course. I find people who use the word “expensive” to describe life insurance have either had a bad experience or they really just don’t understand life insurance.
Thank you. I had a "very good" insurance of Industrial Alliance (Quebec based). When it came to the insurable case ( deadly cancer), they refused to pay. 12 years I was their client.
@@adu2526 Was this a Critical Illness Insurance policy?
I am so glad I liquidated my RRSP investments in 2006. I had recently opened a business and needed to grow it with the revenue. For three years I paid myself 75 cents/hour and liquidated my RRSP account to live off of. I have made good savings/investments and my TFSA is generating $500/month in dividends. No complications.
Thank you...
Solution. Instead of withdrawing $40000 per year….Start with $53000 withdrawal per year. That way you are drawing down your rrsp. Dying with $535000 in your account is extreme poor money management. Use much more of it up and enjoy your life to the fullest.
If everybody had the mindset of using most of it up instead of worrying about leaving a hefty estate than the tax man wouldn’t win.
Just leave enough to cover funeral expenses.
I agree.....Take out the most you can and stay within the 20% tax bracket and delay your CPP and OAS as long as possible.
Generally, both you and Hawkeye are thinking straightforward although life is rarely that simple. For instance, a couple, one has $1 million RRSP, the other $300K RRSP plus a pension. The spouse with the pension passes say at age 76 and the surviving spouse receives 60% of the pension, their RRIF plus their own RRIF, plus Survivor's pension and their own CPP/OAS. There's no possible way to remain below 20% tax bracket. The reality is this person will outlive their assets and will have a huge tax bill to their estate. This is more common than you think.
@@AaronWealthManagement Poor planning for sure for anyone with 1 million RRSP when you are 76. You need to drawdown early while delay CPP & OAS, so when you pass 70, majority of your income is coming from those two secure sources, supplemented with small RRIF withdraw and from TFSA which no tax burden added.
@@philricotta Maybe not as long as possible. Perhaps take at 65
I Retired early...49 after my wife passed from cancer...we were both insured and paid the house off. I have a survivor benefit from Cpp and another annuity until I pass. I have most of my 800k in my rrsp earning dividends...I don't need to touch the principal..I am thinking maybe I should covert half to a riff...I am now 55..that way I can withdraw half my rrsp by the time I hit 71 if I make it that far. I've also got a fiancee..who is a nurse..but with no assets...who gas two unemployed adult kids.i would like for my assets to go to my kids..who both are contributing to society..as a nurse and a future pharmacist...tax planning is a major issue..I want my fiancee to have income..but I don't want my assets given to undeserving kids...so I may need legal council..as how to do this in a will. More money you have..the more headaches you have...
It’s refreshing to hear someone talk about mutual funds/ RSP who isn’t in the business of selling mutual funds.
Hi General, didn't mention Mutual funds in this video so not sure if your comment is sarcasm or a compliment. I'll take it as a compliment 😀
What is your fee to advise for financial plan? Or for wealth management?
3 phases in retirement 1) Go Go years where you are active and spending a lot more money. 2) Slow go years likely not spending at the same rate as things tend to slow down. 3) No Go years you don't need as much money as an active lifestyle tends to slow much more with less travel not as much entertainment and less outlay of funds. Phase 1 - use your TFSAs and keep your 'reportable income low so you pay less tax. Phase 2 - You are not requiring as much income so use the excess cash you have to purchase TFSAs from your RRIF withdrawals at whatever excess you have but stay in the lowest reportable income bracket that you can.. Phase 3 maximize contribution to TFSAs while using RRIF money but managing reportable income to stay in a lower tax bracket. The TFSAs should be maximized whereby the amount is not taxed and you can gift to your kids as part of the estate prior to departure and not pay the tax man as much.
Aaron, please do this again. I don't understand the basics of how insurance will allow me to avoid t
the riff tax. I imagine you mean paying more than the premium by emptying the riff into the insurance on an annual basis thereby having a saving component in the insurance, but I'm only guessing.
Insurance doesn't avoid paying tax on your RRIF. The video discusses using the death benefit to replace the money lost to taxes on the RRIF.
I appreciate this option but it needs to be included in a much broader analysis. Like others mentioned RRSP melt down absolutely has to be considered; also you need to protect for the possibility of needing assistant living let
Thanks Ben. This video discussing 1 strategy of possibly 6 different strategies in a plan. It's difficult to examine all the strategies in under 13 mins. I'm trying to to focus my viewers on one idea at a time.
@@AaronWealthManagementOk thank you for the clarification and I can appreciate that. Suggestion: use a video title hinting to this would help viewers awareness of that and get you more views for the other videos
Very well done and informative. Wondering if there is another calculator that allows you to get your RRIF to 0 at a predetermined age? For example, start at 71 with $1M and how much monthly it would be to end at age 85? The tax implications can be dealt with otherwise.
Thanks for your questions. Try this link.www.taxtips.ca/calculators/rrsp-rrif/rrsp-rrif-withdrawal-calculator.htm
Choose Max Withdrawal tab, Use 1 million, then age boxes I used 70, 71, 71 5% return, 15 years, 2.5% inflation. That gets the balance to zero.
debt and mortgage free, defined benefit pension, TFSA maxed and funds invested with current 8% return, Non-registered accounts and RIF that shows returns currently more than I take out. excess cash at the end of the month adds to the Fun account. 10k/yr avg on holidays... Life is good.. and I am thankful I got good coaching from my father.
R U single I hope ;)
You can make a large charitable contribution to offset taxes upon death.
I plan to die with NO money left. My husband makes fun of me because I'm a BIG planner.
Aaron - sincere and sound advice - but - I’ve lived my full life alone - I have no one - and so oddly enough - it’s all about comfort and convenience and enjoyment … / and so it’s more of a spending splurge - from year to year - and so dying broke - could make sense, in my own case /
Thanks for looking..😅
yes, he should do a followup on your post. I'd like to see some analysis about getting to spend the most while you're alive and who cares how much you lose in taxes at death. Maybe include charitable gift annuities in the mix
@@noneofyourbusiness2092Fark that... Me , me me me me... 😂
I am 85 years old ! i have worked my entire life, and have collected at 65. I only receive $1,600. Is that correct? John M. Hill
If you have a successor named on your RIFF a spouse I thought the plan differed into their names and they now withdraw the funds.
True
I guess the problem would be if you outlive your spouse.@@nevermind3425
Great discussion! 4% return however seems to be a reach. Using conservative ETF with MER of 0.25% has lost me ~5% over last year lol! So although 4% may be achievable over 30-35 years, if you are retiring now or soon, 4% appears too optimistic going into retirement (bad sequence of returns). Should have got more life insurance but money was tight back then bringing up a family AND contributing to RRSP etc. But good to be thinking about what you have presented. Think annuity (age 70 and up and yes lose some to inflation as long as you have CPP and OAS which are CPI covered to balance inflation). Let 70% ride the roller coaster fickle market! Sigh!
You can lock in 4.5% for the next five years in a regular plain-vanilla GIC.
I don't get it, how does life insurance reduce tax owing? Or are you suggesting to use life insurance to compensate for the tax paid to cra thus having more to gift?
Right on!
Yes that is what he is
Saying. Bill to CRA will be the same
Lets not forget the OAS claw back if your net income is over $81K. You need to be very strategic about how much you take out of RSP's each year ,while combining that with when you take CPP and OAS.
If i am making 81K in my retirement I couldnt care less about few hundred dollors in OAS.
@@ileshp4837 This is not about someone with a consistent high retirement income. For many in retirement income is not even over the years. It goes up and down with your decisions around when to take pensions and how you withdraw RSP's. Taking steps to smooth out your income over the years will both minimize tax and ensure that you don't go over $81 in a random year causing a future claw back.
What type of insurance is that you are referring to that grows ?
Whole life
Wealthy Canadians have a huge tax break even with the budget to capital gain....again a privilege
If you retire early before 65, then you can withdraw money from your RRSP at a low rate, because you have no income, including no pension. The more money you get out of your RRSP before you take pension, the less money you will be taxed on it. I'm close to 60 and plan to do that. Maybe retire in 2 or 3 years, then take out as much as I can at a low rate, then take CPP later than 65, as it will mean more will get paid out, while having to draw less from my RRSP through a RIF. Then keep topping off my TFSA and investing in it to avoid all taxes. I guess that I'm one of those people who doesn't care about how much tax my estate gets taxed, since I have no beneficiaries (not married, no kids).
I think I need to get some money in tfsa and slow down the rrsp
@@666dynomax Ya. TFSA is a good way to save. You don't get a tax deduction upfront, but all the money that you earn inside of it is tax free. All of the RRSP including earnings are taxable when you take them out, so I prefer the TFSA.
Ok, you have roughly, and very adequately, quantified the amount of growth of the RRIF and the associated tax ramifications at, say age 88. The key, and most important point, is nowhere do you, even attempt, to quantify the cost of Life Insurance. I contend that the cost of Life Insurance is massive and in the end probably comes close to the cost of taxes, if you lived to 88 because you will want to start the insurance at, say, age 55.
Thanks for your comment. Watch this video ua-cam.com/video/O5KxQZmTkAY/v-deo.htmlsi=lRvCLzICfqlVOFMV
Great .Thank you. We cancelled our life insurance after pay off the mortgage .Now we are 62 &63 hope to retire .As you say it is worth to have a life insurance but we do not have now .What is your advice for that.
I was told that on your passing your beneficiary get the leftover RRSP, and he pays the taxes according to his tax level.
Your beneficiary receives after the tax is paid unless your using Segregated funds in which case 100% of the market balance is paid to your beneficiaries. Your estate still needs to pay the tax it just doesn't come from the account which held the segregated funds.
Very informative, thank you.
Have you any thoughts on a life insurance company for a widowed 63 year old woman with a son and grandson living with me?
Only way to know is speak with an insurance advisor and review illustrations. Happy to help you with that. aaronwealthmanagement@gmail.com
Yeah but your still pay9ng the 300k in taxes - you just have something to offset it.
When you should consider is taking money out of your rrsp before then end at lower taxes. You can spend this latter - of give it as a gift - but taxes will be saved!
Interesting information, thank you. Just learning first hand about these tax hits in administering my parents’ estate. However, the constant references to “Revenue Canada” are distracting. It hasn’t been Revenue Canada for about 18 years. Why refer to CRA by an old name that hasn’t existed in decades?
Wow! Insurance companies are masters at extracting maximum amount of fees from customers of these highly complex insurance products. They are expensive and the returns to the customer are very poor in reality. How about just invest the money that would be spent on the insurance premiums and use that for the taxes or draw down the RRIF quicker as suggested by a few commenters
Thanks for watching the video and for your comment. Saying insurance is expensive is a general statement. Increasing RRIF withdrawals to simply drawdown faster might also create an OAS clawback. A business owner is being taxed 53% on investment gains whereas in corporately owned life insurance zero tax. You have to look at someone's complete situation an apply the most beneficial solution.
The only thing that is guaranteed in a life insurance policy is the face value of the policy.
Contractually, there has to be a guaranteed cash value. For this illustration the guaranteed cash value in the year loans begin was $606K
@@AaronWealthManagement you don’t get the face value AND the cash surrender value. You only get one OR the other.
@@ColinSemple Hi Colin, Not sure how you watched this video and have a comment about cash value and face amount because I didn't mention anything about that. The video discusses the merits of using life insurance to replace the money lost to taxes. If your simply wanting to make a point about cash value which is unrelated to this video then that's fine. Cash value is used while living and the death benefit is paid at death. Technically speaking, the cash value is included in the death death benefit not in addition to the death benefit.
@@AaronWealthManagement because you spoke about growth. There is no growth in a whole life policy. I would be happy to provide more details about this issue later today or tomorrow
Is there a time limit when my beneficiary will get a money that he can invest them back in something (his rrsp), property etc. to avoid 40% tax?
Avoid the evil pitfalls of things like whole life and reverse mortgages. There may be a role for term life insurance but never whole life. “I do it for free” translates to “I do it for the massive commission”. Other commenters are right, pull more RIF earlier, pay a little tax and delay CPP and OIS. Put the extra RIF withdrawals into TFSA and plan to die with little or no RIF, some unregistered, your primary residence (unless you want to sell) and big tFSA. Tax a death will be very minimal.
Agree, I tell all my clients that the kindest thing you can do for your spouse (as successor annuitant) is ensure your TFSA is maxed out when you die.
I’m not sure I understand the insurance piece. How does it reduce your taxes? Is it a write off? Do you invest most of your money in insurance so your investments are less but insurance is high when you die? Or does the insurance pay the tax bill when you die?
Your RRIF can transfer to your spouse at your passing. We're referencing a situation where your spouse has already passed or you are single. This is about the tax on the last death.
The insurance payout upon death is tax free and can be used to offset the taxes owed by a bloated RRIF. However, insurance coverage is not free and gets more expensive as you get older. So I am just as unhappy paying an insurance company while alive as I am paying CRA upon death.
Sorry, new to this and don't understand how do you save money by buying life insurance? RRSP you pay less taxes, but if I put money on life insurance it will not save me taxes. I'm sure I miss something, please explain. Very interested to learn.
Pretty sure the idea is for the taxes to be paid from the Life Insurance.
Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor made me understand the market and things of making money and maintain money through investment which one thing we were never thought in schools.
We need help with our taxes for 2022. Our tax person has been retired.
Send me an email with your details please.
They should allow people to keep their RRSP until death and take money out as needed instead of having to collapse it at a set rate whether you need it or not.That is a true retirement savings plan and it makes sense.
What about taking more than 4% every year from RIFF? To make sure little is left?
Bingo! We have a winner!
Actually, RIF is designed to be finished in 20 years so you get 1/20th the first year, 1/18th the second on and on so it should be pretty well used up unless you make really good returns.
maybe I missed something in the video take out life insurance and get a cheque when you die to pay off your estate is what I think I heard.. your RRSP money is still going to the government didn't hear how to avoid that.
What if I'm single and have no family or dependants to leave my money to? Am I not better off just enjoying my retirement at a younger age while I can since I'm healthy . I'm only 56 yrs old by he way.
Yes. The main message of the video is to have a withdrawal strategy and illustrating how life insurance can replace the value lost to taxation.
Stop wearing grey. Navy blue is a much more flattering colour for you. The video is insightful and practical but I was distracted by the overall greyness.. An easy fix
Hi Dayle, I completely agree with you and also white shirts. The white background and white shirt completely washes me out. Now that summer is near, you'll see me in some polo shirts as well. 🤣
Hi Aaron pls provide your email contact thanks
@@vesnavukelich7296 aaronwealthmanagement@gmail.com
Question: how do insurance companies make profit if theyre paying out 6x what youre putting in?
Without going into the balance sheet of an insurance company i can provide one example. 98% of all term insurance never pays out a death benefit because people terminate their polices. All those years of premium payments went straight to profit.
@AaronWealthManagement that's my own concern. Abandoning my payments for whatever reason... but you've given me something new to think about and look into!
I cash my RRSP at $20 000 per year......objectif is 0 RRSP at retirement age..
Since 2013 I pay ZERO personal income tax....also I withdraw from the goverment pension...
Also I have multiple rental property in Canada and US .......personnal investment bank and manufacturing facilitys
All legal....with the magic of corporate structure and family trust.......
Love it when a good plan comes together
Hello David. With all the news about an up coming market crash/collapse I bailed on almost all of my stocks and mutual funds in my RRSP account. The money is still in RRSP's I put about half in daily interest money market fund and the other half I purchased physical silver also in an RRSP account in storage with Brinks. I'm 61, self employed and make 65k per year. Maybe you can answer this question for me? With all the doom and gloom that I think may be coming I almost want to get that silver in my hand and pay the income tax just so it's in my possession. Yes, I'm a conspiracy theorist lol. I don't know if this helps but I bought the silver in Feb 22, and it's taken quite a beating these last few months. THanks David. I had more questions but your videos cleared them up. Cheers Pete
Hi Pete, thanks for watching the video and for your comment. Timing the market is very difficult and often investors buy back in at a higher cost than what they sold at. One strategy for investors who are more sensitive to market volatility is to have 1-2 years of annual expenses in cash and continue investing. Then change your investment mix to more favourable positions that do reasonably well during recessions or market volatility. You a longtime to invest still.
If you make 61k , how on earth can you afford to put any money into investment 😂 do you live under the bridge or your mother's basement for free?😂
@@jozefciszewski2074 It's 65K per year but yeah 65 isn't much. With profit on investments I'm closer to 90 to 100k. I've worked since I was 14 and I was a cheap sob back then. Lots of perks owning your own business to as long as you don't get caught lol.
Re. Life Insurance suggestion. I understand that Life Insurance companies make more money than they collect. Therefore, if true, the average person will pay more to them than their estate will get back. How then does this solve the tax problem for people with RIFFs and Real Estate?
Thanks for your comment. OK let's unwrap this. About 98% of Term insurance does not pay out a death benefit because people cancel their policy. Term insurance is very costly (unaffordable for most) in late 70-80s so as a result they cancel the policy. Whole life also known as Participating life is a different matter. In these policies you receive an annual dividend. This accumulation of cash grows even after you have stopped paying premiums into the policy.
Now about your estate taxes. Let's assume you started paying into a policy at age 30 and stopped paying at age 50. The amount you paid into the policy would be far less than the death benefit at say age 85. You've still paid money into the policy but a good analogy is that you've eliminated the estate taxes with 10 cents on the dollar vs 50 cents on the dollar.
why rrsp repayment affect line 20800 rrsp deduction limit
Key question: What is the cost of the Life Insurance per year (either as an absolute figure or as a %)? You'll find that the cost of the Life Insurance is more than the amount of tax you'll save over the long run - I ran the numbers. The only time you win, is if you die early in the process. This is easily quantified by looking at the mortality tables.
My thoughts as well. Life insurance doesn’t create money out of thin air. Insurance takes money from those who don’t need it and gives it to those who do. Insurance is a good thing to manage early exposure to risk, but it’s not a printing press for all who buy it.
Is there any point in contributing to RRSPs if there are TFSAs? Currently I have all my funds invested in TFSAs and nothing in RRSPs. Given the tax a person eventually has to pay on RRSPs, should I just avoid them altogether? Or invest in something safe like GICs within RRSPs? Your feedback & from readers would be appreciated.
Great question. Is a $7K annual deposit (TFSA) enough savings rate for you? It's unlikely a TFSA could grow to $500K unless you had superior returns. Do you have other sources of retirement income?
Save your RRSP room when the marginal tax rate is in 20s or 30s. I am using RRSP to keep my marginal tax from going over 45%. TFSA, RESP, FHSA & RRSP in that order. If doing retirement withdrawal, then RRSP first. My plan is to have all RRSPs empty by 80 years old.
Can you not put your personal home in a living trust for your children so it just get's transferred over to them when you die?
Good question, I’ve asked and been told there’s no way to pass on your assets to your kids without them having to pay taxes - open to suggestions if someone has ideas or knows of a way
Good information. Thank you. Time of death is unpredictable. Based on our personal situation, we are planning to establish RIFF withdrawals above the minimum but below what would take us into the next tax bracket. These would then become personal unregistered investments. The tax payable on them at death would only be the accumulated capital gains. Is this correct thinking?
Depending on the size of your RIFF, I think you will have no choice but go to a higher tax bracket with your withdrawals because just the minimum will leave you with too much money at the end....And don't forget it is just the amount over the next bracket that is taxed at the higher rate, not all the amount you are withdrawing !! People often do not understand the MARGINAL tax concept...
Good point. Of course the first bit would go into the TFSA and the rest into unregistered. The withdrawal time period would come into it as well. Even the next marginal step would be better than having the bulk of it taxed at the highest rate. Thanks for your insights.
@@user-zp8nr8wn7d Yes !! You will have to leave money at the CRA table at the end, but let's make that the smallest amount possible...There is sadly no magic tric available !!!
Yes, for the non-registered account assuming you left it there and did not gift it to children before your passing. You would also continue making TFSA contributions to shield what you can from taxation.
Besides the increased taxation on the RRIF withdrawal, watch to make sure you don't have any OAS clawback.
Can I put my home in a living trust for my son and grandson?
I can't believe that the full amount of RRSP left after death is added to ones partners yearly salary that's a massive amount of taxes that partner has to pay it's sickening :(
The RRSP of deceased person is added to their tax return not their partner. e.g. a person earns $100K and has $300K RRSP and passes. The deceased income tax return shows $400K income for that year.
thanks for the reply that's still a huge amount of tax that deseaced person has to pay ouch@@AaronWealthManagement
@@AaronWealthManagement is this the same for pension ?
@@Jamcore2008 You'll need to ask your pension administrator. Some pensions roll-over to the surviving spouse, some pensions can go to surviving children. In most of those cases its when you have a dependant child.
@@AaronWealthManagement Yes but the total amount of the RRSP ( 300K) will be transfered to the surviving spouse w/o any tax to pay..(T4RSP) .Only the 100K salary will be taxed...The way you say it let us think all the 400K will be taxed, which is not the cae...
Very misleading click bait title.
This is the situation my mother is in now. At 81 is it too late to change this outcome?
Thanks for your comment. It’s a little late now. Anything you do now wouldn’t result in a significant difference
@@AaronWealthManagement
Thank you
*great video Aaron👍. question are there any taxes on TFSA accounts parents leave to their kids in Ontario*
In short, no taxes. It's a bit of trick question. You can't directly transfer your TFSA into your child's TFSA. This is only for spouse to spouse during death or divorce. Your TFSA would be deregistered as cash and your kids can deposit to their TFSA depending on their room. There is no tax to your estate as its a Tax-Free account. If your TFSA lands in your estate then it could be subject to Probate tax and your executor is entitled to about 5%
I,m 80 years old divorced, my 2 daughters are my beneficiaries, I've About 400K in my RRSp from which I draw the minimum annually. how to protect as much as possible for the tax mans claws.
You need to make sure your leaving as little behind for CRA to take. Call me to discuss. 416-602-3533
R they Single...I hope lol
Say your 60 with 500,000 in RRSP the idea is you take a insurance policy for 500,000 so even if it cost you 400,000 for that policy the life insurance payout is.not taxable!!
So there are alot of question to ask Interest rates depending were that money is invested? Capital guarantee? And guaranteed values not estimated??
Yes, you’ve got the strategy correct. CRA is still getting their tax but your replacing the tax loss with the insurance
You need to make some intelligent assumptions when it comes to investing. Do your own plan so you understand it better than your financial planner does. It is not that complicated.
What an eye opener. Glad I came across your video.
I invested 16000$ in rrsp this year and want to withdraw it because of family emergency, if I withdraw the sane year i put rrsp, can i get the same dedudtions back next year when I file taxes
No you cannot. Once you have made a withdrawal of your RRSPs, you need to pay the taxes and you also you lose that contribution room in your RRSP. (TFSA is different. If you withdraw from your TFSA, you can put the money back the following year that it was withdrawn.)
The quantum financial system that’s up and running took a snapshot of everyone’s account everyone will get their money back just so you know
one interesting question to ask is when somebody has no spouse and children, who is going to do the last return for the deceased and where will their RRIF or other assets go ?
Great question. Your executor will have your tax returns completed and your named beneficiaries receive your assets. With no kids or spouse, your will could designate anyone to receive your assets.
@@AaronWealthManagement Tks to reply but I mean no family members, no relatives either, no WILL and nobody designed to receive the assets, then what ?
@@Cableman-hr2uu In that case you leave it to the courts to decide. Better to have a will at the very least you get to control where your assets go.
Finding a fee for service financial planner is like finding a Unicorn
There are plenty. Email me and i will point you in the right direction.
How about transferring part of your RRSP to your child RRSP?
Great idea but that's not possible. There are provisions for transfers of an RRSP to a child using an Registered Disability Savings Plan (RDSP) although it's only done at your passing.
Thanks Aaron, why not instead of life insurance meltdown your RRIF faster by increasing your yearly withdrawal amount. Life insurance is just another expense in life, its understood that the proceeds would address estate taxes. We can't predict when we will pass however if you have a spouse some advance planning can generally address this situation The probability in both parents passing away at the same time are somewhat rare. Family history on parents ;life expectancy etc all play a big part in trying to plan to have $0 in your RRIF at death The key as you highlight is understanding your tax bracket and trying to maintain an even loaded lowest tax bracket possible. This usually means holding off on collecting CPP and OAS..
My parents died at the same time in an MVA, age 70 and 76. I wish they'd done things differently with their estate and talked to their kids about it especially since one of my siblings has mental health issues and is in a group home.
"PANAMA RELOCATION TOURS! WITH JACKIE!😊🙋👍❤👈"
Question. Wouldn't the amount you pay on insurance premiums be equal to whatever you're saving on taxes?
Not really explained how to save the 40%.
One thing that was missing was the cost of the life insurance. First of a 65 year old has to qualify for the insurance. If he has any health problems he may not qualify or at an increased cost. You are probably looking at $10,000 + for a yearly premium. You would have to withdraw at least an extra $15,000 (the extra to cover taxes) from your account. By age 88 you have paid $345000 for the life insurance and you have zero left in your account Does this make sense??
Great comment. A financial plan reveals the answer
You should be able to keep your rrsp after 71 years of age so you can withdraw money as needed not as prescribed in a rif.
Sure you can do that as well. Don't forget about the withhodling tax above your rrif minimum withdrawal
Maybe you should be able to keep your RRSP after 71 but you can't. It has to be converted to a RRIF which forces you to withdraw a minimum amount. But by taking what's needed as you say, enforces the argument of the presenter; you die with a oversized balance with a huge tax bill as high as 53%
Nothing made sense about investing in RRSP. They take your money regardless, so why not use the money yourself in your own investments which are not known to the system.
Tax evasion is a real thing for good reason. Some laws actually encourage business to exploit these loopholes
I developed a RRIF meltdown spreadsheet that includes tax calculations and by increasing the minimums by about +5%, the RRIF depletes to near zero in 25 years but taxes only rise slightly, far less than the life insurance premiums one would have paid over the same timeframe.
I was thinking along these lines and then saw your comment. Makes sense!
But you have to live that 25 years.
@@generalsixty2133 Optimizing will depend on your portfolio size and yield. ie: 300k at age 65 will deplete to 100k in 15 years at a 4% yield; 500k would deplete to 170k
Doesn’t that leave you with nothing to give your kids? My parent depleted his RRSP by using it to buy life insurance which paid out to us…seven kids..,with quick payouts, no probate and no tax.
@@sylvialindgren6676 Well there's the 2M house lol This strategy reduces the huge tax bill on the estate. Money not spent from the larger withdrawals is transferred to TFSA and non-reg accounts
You lost me when you put 1 million dollar value in RRIF calcuation. That's is very hard to relate to.
Hi Katie, thanks for watching the video and for your comment. I can understand that. Try using this calculator. It will illustrate your expecting annual withdrawal and how much you will leave behind in your RRIF to be taxed by CRA. www.getsmarteraboutmoney.ca/calculators/rrif-withdrawal-calculator/
Appreciate this video and gives a good reason to pause and think. Question on RSP tax. Looking at the top rate of 53% over $221k. Let’s say my income is $300k and I have 30k in RSP contribution space, am I right to assume that contributing the $30k is in reality is not going to impact my taxes for this year anyway but I remain above the $221k level ? If so it seems contributing under this condition for the purposes of reducing taxes does not make any difference ?
Hi Thanks for your question and for watching the video. For a high income earner such as yourself, an RRSP contribution is not going to significantly reduce your taxes. The maximum contribution to an RRSP in 2021 is $27,830 which would only be about 9% of your gross income. You'll get about half of that contribution back in making an RRSP contribution.
Work with your accountant and financial advisor to develop a plan to reduce your taxes and begin sheltering your income. If you need help let me know 😀
Ugh of course it's a whole life insurance guy.
Beware of the person who judges a book by the cover. There are more than 80 videos discussing the pros and cons of different investment concepts. a solution for one person may not be the best for another. If you watch the other videos you will conclude, I have no bias towards one product over another.
Whole life, really! What is this 1980
Not sure what your trying to say. Could you be just a little more specific
I believe the first reason to put money in an RRSP is to save for retirement. It's right in the name. The tax savings is the incentive for people to save.
Thanks for watching the video. Not sure if you missed the message for the video. I do say what the purpose of an RRSP is right at the beginning ua-cam.com/video/e91Y95U2qfE/v-deo.html The video is to shed light on the fact that most people pass away with large RRSP/RRIF balances. Ask yourself this question: Do you have an RRSP contribution goal or a withdrawal goal?
With misleading titles like that, how do you expect to be taken seriously?
Asking for a friend.
Awesome video, just came across your channel and started following. So well presented and easy to understand. I'll be reaching out and have become a regular follower.
Al
I am not here to sell you anything
but if i were you lot i would look into Bitcoin.
I have and have not regretted it at all
If you compare your 1 $ put into the bank in 2008...today it is worth 70 cents with all inflation and so forth taken into account
A BTC was 0.08 cents in 2008 and toady in 2024 it is 70 k
Do your research and rethink your TFSA or RRSP .
For your retirement you need something that will really bring in a lot of money and even after paying your capital gains, you will live like a king with BTc
So in other words, pay the taxman or pay the insurance companies.
I believe you did not account for inflation.
If you can make 4% on truly conservative investments made today, and with inflation running at over 4%, your model breaks down … dramatically!
You will burn through your RRIF way, way more quickly, and the withdrawals will be worth far less than suggested.
You have to show both sides, people’s retirement money is at stake.
As a Fundraising professional (full disclosure), I'm not surprised but somewhat upset that you downplay donations to charities as one of the best ways to leave a legacy from your life and eliminate much of the end-of-life tax burden. I already subscribed to an insurance that will create a scholarship fund at my children's alma mater. I now realize that I've saved way more for retirement than I thought possible, so I will provide a "last to die" clause in my RRSPs or RRIFs to give a portion of my holdings directly to charity and receive a significant tax receipt for my estate. I've worked hard for over four decades for my money. I want some of it going to something other than a boat or a fancy vacation. Sorry for the rant, good video, I'll be checking out the others.
As a fundraising professional, full disclosure, Can you explain why I am hearing that less than 4% goes to actual cause, and the rest is for "expenses" . Board members etc. Example 1. Pga...registered non profit. There is an article on the web. Thank you for your reply.
Great content, Thank you. What is the advantage to converting RRSPs into RIFFs instead of simply withdrawing directly from RRSPs?
That's a big answer, but here are a few ideas. Income splitting. You cannot split RRSP withdrawals with your spouse to mitigate your taxable income. RRSP withdrawals are subject to withholding tax whereas RRIF minimum withdrawals are not.
Some banks like CIBC charges a fee for RRSP withdrawal, but no fee on RRIF payouts.
If you withdraw from rrsp.
Your taxed a small % on amout withdrawal then your taxed again for that extra income at yearly tax time.
So that's why you y
If you withdraw from rrsp.
Your taxed a small % on amout withdrawal then your taxed again for that extra income at yearly tax time.
So that's why you y
If you withdraw from rrsp.
Your taxed a small % on amout withdrawal then your taxed again for that extra income at yearly tax time.
So that's why you y
Hi David. Can you explain the difference between universal life insurance and participating whole life insurance with the aim of reducing taxes. Can this strategy apply to universal life insurance. Thanks
Hi Rosemarie, Great video idea. I'll post your video suggestion on Thursday. Remember to comment on the video, after all you're the inspiration behind it.
@@AaronWealthManagement Hi David. Are your live sessions changed from Wed to Thurs?
You weren’t speaking a language that most of your audience understands. More clarity and examples needed.
Maybe Ive had too much coffee but goddamn, get to the point!
😂😂 thanks Jack. Trying to do better at shorter videos. Recording a video today, only about 6 mins
Sorry but you do not get the the point and the bottom line of what can be done
Hi Michael, sorry about not getting to the point but it’s not a UA-cam Short video
Great info Aaron but how about utilizing a RRSP Meltdown strategy to mitigate the looming tax burden?
AVOID anyone selling you whole life insurance. Invest that money somewhere else like a diversified low fee index fund.
I think we’re on the same page. My plan for my whole life policy (that I got in my 20s) was to leave something to my heirs if I had exhausted all my retirement funds. My plan to is to meltdown my RRSP a sizeable chunk before age 71 and put extras into TFSA and non registered accounts. During retirement it’s better to gift sums of money than let it all get sorted at death. As my mom says, “better to give gifts with a warm hand than a cold one”.
All i get from this vid is this dude is trying to sell me life insurance
That's fair...It is a video about life insurance after all. If you can get past that thought, what do you think about the strategy?
First time watching your videos. This one should be called "Don't leave money after death" and be like 5 minutes long at the most. Really a huge waste of time.
Some are short, some are longer. Appreciate your comment and for watching the video.
Basic. Boring. Ontario of course again.
What would you like to see?
you should really plan not to have money in your RRSP beyond your retirement. As you get closer, you should really start taking money out of your RRSP the closer you get to your retirement to avoid the big tax.
Before you die, after you life long spouse has passed.... just marry the person to whom you want to leave the money.
...and what about your children. Do they just see their inheritance go to the new wife?