Why RRIFs are BAD!!!

[The Prowler]

So Senile @Joe said not too long ago that he is withdrawing from his RRSP because he does not want to have to convert it into a RRIF (a requirement when a person reaches the age of 71 years old).

Now, as agreed...

I'll discuss it in a different thread or meltdown if you like Lex @The Prowler

But this is the forum owner's investment thread or investment strategies. so start a RIFF thread and I'll chime in. Not in this thread tho.

Is that a deal, Prowler ?

Senile @Joe is going to enlighten me as to why RRIFs are a BAD THING!!!


Go Senile @Joe !!!

 

[The Prowler]

Oh Senile @Joe !!!!!


Do it!!!!!!!!!!!!

 

[X]

Hi Prowler what’s shakin’?

 

[The Prowler]

Hi Prowler what’s shakin’?

Me.

I am nervous that Senile @Joe is going to teach me something about RRIFs and make me look stupid.

And also make me re-think my entire retirement plan....

 

[Joe]

What should I do Lex @The Prowler ?

Cash in the RRSP gradually or convert it to a riff ?

I read that theres tax benefits for converting to a riff. but once they do they cant stop withdrawing every year and it becomes mandatory.

So if I convert that rrsp does it mesn cant contribute to them anymore?

Any event riff or rrsp they person still has to pay taxes on withdrawals.

Reason i thought about cashing in some of the rrsp is its 10% on $5000 or $500. but maybe a riff is better?

 

[The Prowler]

I'm gradually in the process of 'melting it down' of having nothing in it by that time.

I know some people, who are cashing out the RRSP's and they're paying 20% tax or more just to do it.

Do you remember saying that, Senile @Joe ?

I read that theres tax benefits for converting to a riff. but once they do they cant stop withdrawing every year and it becomes mandatory.

So because there is a mandatory minimum annual withdrawal, you are going to withdraw everything?!?!

How does that make any sense?

"If you are going to make me withdraw a little bit, I am going to take it all out!!!"

WTF?!?!

So if I convert that rrsp does it mesn cant contribute to them anymore?

You cannot continue with the RRSP after the age of 71. Period.

Any event riff or rrsp they person still has to pay taxes on withdrawals.

Yeah, you were deferring taxable income, not somehow totally avoiding it.

Reason i thought about cashing in some of the rrsp is its 10% on $5000 or $500. but maybe a riff is better?

Now I am losing my patience.

You are saying that they withheld 10% in taxes, Senile @Joe.

That does not mean that you paid those taxes.

It is just like when taxes are withheld on employment income. That money goes against your income tax payable when you submit your annual Income Tax Return. It all gets reconciled at that time. If they withheld too much, you will get a refund.

Do you really not understand this, Senile @Joe ?

 

[The Cuntess]

Mannn this reminds me of the Prowler vs Fat Danny wars

 

[The Prowler]

Mannn this reminds me of the Prowler vs Fat Danny wars

Fat Danny was at least 2x smarter than Senile @Joe.

 

[Joe]

Mannn this reminds me of the Prowler vs Fat Danny wars

Hi @The Cuntess .

Methinx @The Prowler is havin another one of his 'roid rage episodes eh,

Maybe you can calm him down a bit.

 

[wizer]

Hi @The Cuntess .

Methinx @The Prowler is havin another one of his 'roid rage episodes eh,

Maybe you can calm him down a bit.

Why don't you answer @The Prowler's reasonable and thought provoking questions rather than launching insults?

When I saw that you had responded I was genuinely curious as to why you chose to do what you did in regard to your retirement account and I was disappointed yet not the least bit surprised that you deflected and neglected to answer.

 

[Joe]

Why don't you answer @The Prowler's reasonable and thought provoking questions rather than launching insults?

When I saw that you had responded I was genuinely curious as to why you chose to do what you did in regard to your retirement account and I was disappointed yet not the least bit surprised that you deflected and neglected to answer.

I haven't decided what to do with that retirement account @wizer. i might convert it to a riff

RRSP in Canada is similar to 401k plan in the USA. I believe at some point Americans have to cash out their 401k plans too, right? and if Americans withdraw early they pay 20% or more, right?

TFSA in Canada seems similar to a ROTH IRA in the US. TFSA isn't taxed for withdrawals But the US does not recognize them as retirement accounts like RRSP. ai US holdings within tfsa get taxed i believe

 

[wizer]

I haven't decided what to do with that retirement account @wizer

RRSP in Canada is similar to 401k plan in the USA. I believe at some point Americans have to cash out their 401k plans too, right? and if Americans withdraw early they pay 20% or more, right?

TFSA in Canada seems similar to a ROTH IRA in the US. TFSA isn't taxed for withdrawals But the US does not recognize them as retirement accounts like RRSP. ai US holdings within tfsa get taxed i believe

There are similarities but as you suggested the numbers vary. I don't know the exact amounts and I'm not inclined to do any research at the moment. Yes we have to pull money out of our 401k at some point or be subject to penalties and early withdrawal also subjects the account owner to serious penalties and taxes.

 

[Joe]

There are similarities but as you suggested the numbers vary. I don't know the exact amounts and I'm not inclined to do any research at the moment. Yes we have to pull money out of our 401k at some point or be subject to penalties and early withdrawal also subjects the account owner to serious penalties and taxes.

Canada is 10% withholding tax up to $5000.
$5001-10000 is 20%.
Beyond that is 30% for early withdrawals.

There is no taxfor withdrawal from tfsa tho

 

[wizer]

@Joe ok curiosity got the best of me and as I'm retired I'll need to deal with 401k rules eventually.

• With both a 401(k) and a traditional IRA, you must take required minimum distributions (RMDs) starting at age 72 or 73, depending on the year you were born.
• If you withdraw from a 401(k) before age 59½, you may face a 10% early withdrawal penalty on top of other taxes.
• You may be able to make a penalty-free withdrawal if you meet certain criteria, such as adopting a child, becoming disabled, or suffering economic losses from a federally declared disaster, unreimbursed medical expenses, higher education costs (to name a few)

In the US a 401k account holder can take out an interest free loan against their balance, during which time no interest is earned on those funds.

 

[The Prowler]

Canada is 10% withholding tax up to $5000.
$5001-10000 is 20%.
Beyond that is 30% for early withdrawals.

Warning: Anyone reading anything that Senile @Joe says should understand there is an approximately 95% chance that he is wrong.

 

[The Prowler]

If you withdraw from a 401(k) before age 59½, you may face a 10% early withdrawal penalty on top of other taxes

In Canada, there is absolutely no penalty for withdrawing from an RRSP other than paying normal income tax on the amount you withdraw.

They will withhold tax, but that is not a penalty. It is similar to withholding tax on your employment income. It all gets reconciled when you submit your annual tax return.