Getting your money out
How do I get my money out of an RRSP?
Recently I did a presentation to a group of retirees on RRIFs (registered retirement income funds). We discussed the general rules of RRIFs such as the age in which you must turn your RRSP into RRIF’s which is age 69. Your withdrawal amounts are based on a formula (which you can get at www.retireware.com).
If you are 70 years old, the minimum you must withdraw per year is 5% of the value of the plan at the beginning of the year.
In the group presentation, we discussed three RRIF strategies based on three different types of investors.
First, there’s Marcus who has enough retirement income and is worried about capital preservation and CPP claw-back. He decides to take the minimum payment at the end of the year and based the payments on his younger wifes age so the minimum payment is lower. He is not looking for less income from his RRIF.
Next, there is Brendan, who doesn’t really need a lot more income but enjoys the additional income his RRIF can provide him. He wants to try to preserve capital but doesn’t mind it slowly declining overtime to keep up with inflation since he has other investments to fall back on. He withdrawals the minimum for a number of years. At age 70 his withdrawal is 5% of the value of his plan and at age 71 increases to 7.38% of the value of the plan. He knows that the minimum increases over time so if he is not earning the minimum he will be slowly reducing his capital. He is prepared to do that for his retirement plan and knows his capital will slowly decline. He then considers transferring the funds to an annuity around age 80 to give him a comfortable income for life.
Finally, there’s Todd. He doesn’t mind his RRIF depleting over time, he doesn’t have any major tax concerns and is not worried about preserving his capital for his estate. He sets up a withdrawal of 1% per month or 12% per year. He wants the additional income now and is prepared to deplete his RRIF funds. Todd is also a more aggressive investor and doesn’t mind fluctuations in the value of his portfolio.
Each of the three investors has different paths to choose when it comes to getting their money out of their RRIF.