Curious, have any of you converted your RRSP to a RIFF early to use the meltdown strategy? Let’s talk about it in the comments 👇🏻 Is it a tax cheat code? How does it impact cpp/oas claw backs?
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JC @icedragon · 22dEdited
Currently I do not qualify access CPP & OAS. I have been doing monthly partial cash rollover to from my RSP to RIF. Moving ~75% of my distribution from both RSP account. I do the partial to by-pass the RSP withdraw fee. Not by-pass the tax withholding from withdraw. I am trying to plan not to convert 100% of my principle RSP to RIF when the time comes. This concept is "RSP Meltdown" To answer your question. Look up "RSP Meltdown". There are a lot of channels and resources on this. I have been follow two that talk about different scenarios. This really boils down on province you live in, amount of RSP you have, how much CPP and OAS you qualify for, plus pension and any other stuff. Coles notes...the concept is start taking your RPS/RIF out before access CPP & OAS. The theory is to lower your income tax bracket. Most people only see 1 aspect - need to look all angles. What my understanding is from what I have learned. Scenario 1: Leave RSP money until you are force to start taking money out. Your tax margin goes up + CPP + OAS. You get to the highest tax rate. Scenario 2: Start taking RSP money out before 71 when you are force and before CPP and OAS starts paying out. Lower your principle amount before you are force to. When CPP & OAS kicks in your tax rate is lower. If you are not working, taking money out of RSP in theory should already be in a lower tax bracket then your employment tax bracket. Scenario 2 is the rsp meltdown concept. It is a different game, concept, and mindset at meltdown. Most people do have a hard time changing after a good portion in life doing it a certain way. Pending on the province and how you invest - money out of RSP can be invested in non-reg to still be tax efficient
Ed @edsam · 22d
Started RRIF and LIF at 57 in 2024. Target 10% return and withdraw 14% yield from highly volatile cc ETFs to create my own 4% SWR. Use NAV erosion to reduce portfolio to 25% of original value by age 95. Will start CPP at 70. OAS will be clawed back but I count that as a blessing.
Mark Glendenning@marketwatcher · 21d
Delaying OAS AND CPP only makes sense if you expect to live beyond the average Canadian life age. If you take out both at 70 instead of 65, the breakeven age is 82+. Use the money as additional investment source and the breakeven rises to 88. Most expenses occur in the GoGo years of 65-75. So spend your money while you can enjoy it. No one wants to be the richest person in the graveyard. Either you enjoy it or the taxman will!!!
Am @whatsa · 22d
I am aggressively taking income from my RRSPs at $10k/ month a hybrid melt down of sort. Only taking most but not all income generated. I have determined that anymore would be excessively punitive. 100% clawback on OAS and CPP but deferring rsp payments just means an even larger tax hit at 71, so lesser of two evils. Ideally you start at around 60 with rsp withdrawals and defer CPP/OAS until 71. Hope this helps.
Jason @wolfcrazy · 21d
I retired over a year ago at 50 and still adjusting my strategy. I have 2 LIRAs, a sizeable RIF and a larger NR. It’s tough to develop a forever strategy but I have started to meltdown my RIF and when I am 55 I will roll my LIRAs over to NR and my RIF. Top up my TFSA if I have room. I am invested mainly in CC ETFs providing growth and income. The income is more than I can spend so 85% gets reinvested. When for casting out to my 70s to when I plan to delay my CCP to. I hope to have a small RIF if any, stuffed TFSA and growth NR. I’m also starting to give my 2 children annual lump sums to help with their financial investments ( homes and TFSA)
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