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.

 

[The Prowler]

There is no taxfor withdrawal from tfsa tho

You understand that contribution to TFSAs are done with *after tax* dollars, right Senile @Joe ??!!?

Of course you do not understand.

ai US holdings within tfsa get taxed i believe

What were you trying to say there, Senile @Joe ?


Hey Senile @Joe , you know when you have deductions taken off your pay...and they withhold some for income tax....you know that you might get some, or even all, of that back, right? It depends on what tax bracket you wind up in.

You know how that works, right!?!

 

[The Prowler]

Oh Senile @Joe !!!

You are dodging several questions here!!!!


Do not be embarrassed by your lack of knowledge and, frankly, sheer stupidity and ignorance.

Nobody thought differently of you.


Just answer the questions so I can have a laugh and teach you The Basics.

 

[Joe]

The only reason i took out an RRSP last year was to reduce my taxes Lex @The Prowler

Otherwise I would have owed a lot more taxes to the Canada Revenue Agency.

Problem I have now is finding a way to melt down the RRSP without paying too much income tax. It's like the riddle of getting the milk in a caramilk bar I suppose.



Or gettin it out without destroying or touching the chocolate. Riddle of the Sphinx problem yknow.

So perhaps a RIFF is the best way to go about it. Seems the RIFF route a person doesn't get taxed as much as withdrawing directly from the RRSP. Up to $5000 is 10% withholding tax. a penny over that 20%. And of course an RRSP withdrawal is treated as income.

For residents of Canada, the rates are:

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• 10% (5% in Quebec) on amounts up to $5,000
• 20% (10% in Quebec) on amounts exceeding $5,000, up to and including $15,000
• 30% (15% in Quebec) on amounts over $15,000

Have to go see the manager at the bank.

It's sitting in a 90 day gic atm eh.

I didn't contribute to the RRSP this year. Might not ever again. Last year was an exception.

 

[The Prowler]

The only reason i took out an RRSP last year was to reduce my taxes Lex @The Prowler

Otherwise I would have owed a lot more taxes to the Canada Revenue Agency.

Problem I have now is finding a way to melt down the RRSP without paying too much income tax. It's like the riddle of getting the milk in a caramilk bar I suppose.



Or gettin it out without destroying or touching the chocolate. Riddle of the Sphinx problem yknow.

So perhaps a RIFF is the best way to go about it. Seems the RIFF route a person doesn't get taxed as much as withdrawing directly from the RRSP. Up to $5000 is 10% withholding tax. a penny over that 20%. And of course an RRSP withdrawal is treated as income.

For residents of Canada, the rates are:

Please, Log in or Register to view URLs content!

• 10% (5% in Quebec) on amounts up to $5,000
• 20% (10% in Quebec) on amounts exceeding $5,000, up to and including $15,000
• 30% (15% in Quebec) on amounts over $15,000

Have to go see the manager at the bank.

It's sitting in a 90 day gic atm eh.

I didn't contribute to the RRSP this year. Might not ever again. Last year was an exception.

You are a fuckin' idiot.

Look at box 30 of a T4RSP. "Income Tax Deducted"

Now look at Box 22 of a T4. "Income Tax Deducted"

Those amounts are withheld, but they are considered early payments of Income Tax. If you are in a lower tax bracket, you will get some or all of the money back.

At your age you should know how this works, you imbecile.

 

[Joe]

You are a fuckin' idiot.

Look at box 30 of a T4RSP. "Income Tax Deducted"

Now look at Box 22 of a T4. "Income Tax Deducted"

Those amounts are withheld, but they are considered early payments of Income Tax. If you are in a lower tax bracket, you will get some or all of the money back.

At your age you should know how this works, you imbecile.

Either way I was gonna melt down the RRSP or possibly convert into a RIFF & then contribute it to the TFSA.

 

[The Prowler]

Either way I was gonna melt down the RRSP or possibly convert into a RIFF & then contribute it to the TFSA.

"convert into a RIFF & then contribute it to the TFSA"

Clueless.

Hahahaha!!!!

 

[Joe]

"convert into a RIFF & then contribute it to the TFSA"

Clueless.

Hahahaha!!!!

Actually this is a common problem in Canada as it must be in the USA where @wizer is from when Americans likewise withdraw from their 401k plans. Just like Canadians, Americans don't escape the axe from the tax either.

Someone in my Family is a millionaire with a 3 million+ home in Vancouver. She made a lot of money during her career particularly in the stock market with Apple & Nvidia stock. Trouble is her investments were in an RRSP not TFSA.

So she told me when she withdrew some for home repairs ahe got hit with 30% withholding tax.

RRSP almost like a noose around holders neck Lex @The Prowler

 

[The Prowler]

You are a moron, Senile @Joe .

I will watch this video and make notes as this guy talks.

Regret #1

TFSA contributions are made with after-tax money. So when you withdraw from them, the money is not taxed.

RRSP contributions are made with pre-tax money. So of course the withdrawals are taxed as income tax.

This is basic knowledge and anyone who does not understand this is a moron.

Regret #2

Again, this is just common knowledge and I cannot believe I am wasting my time watching this video with is clearly aimed at a target audience of fuckin' morons.

Regret #3

Again, aimed at idiots like you, Senile @Joe .

Holy fuck, this video is a waste of time. Dude just wants to convince morons like you to use his planning services, Senile @Joe.

Everything he is saying is basic knowledge.

Regret #4

Fucktard in the video is just repeating that withdrawals are taxable. Yeah, because the money invested was not taxed. Basic knowledge only a stooge like Senile @Joe was not aware of.


Okay, I watched the whole video and nothing he said was not common knowledge.


You are an idiot, Senile @Joe.


Everyone should know that the general idea of a RRSP is to contribute with pre-income tax dollars when you are in a high tax bracket (when you have a full time job) and then withdraw when you are in a lower tax bracket (when you are retired).

A quick example:

TP earns $150,000 annually at his job, putting him into the 50% marginal tax bracket. He will retire in 10 years.

We will look at $10,000 that TP wants to invest.

Option A: Put in a RRSP.

$10,000 is deposited in an RRSP. That amount doubles in 10 years to $20,999. TP is retired and he withdraws the $20,000. His marginal tax rate is now $30%. So that $10,000 income from 10 years ago becomes $20,000 - $6,000 or $14,000 in his hand to spend as he wants.

Option B: Put in a TFSA

$5,000 is deposited in a TFSA. That amount doubles in 10 years to become $10,000. TP withdraws that $10,000 from his TFSA and it is not taxed. So that $10,000 income from 10 years ago becomes $10,000 in his hand to spend as he wants.


So, Senile @Joe , would you rather have $14,000 to spend, or $10,000 to spend?

 

[Joe]

"convert into a RIFF & then contribute it to the TFSA"

Clueless.

Hahahaha!!!!

I don't have very much in RRSPs Lex @The Prowler

Just that $31,000 I invested last year to reduce my 2024 taxable income.

So i was either gonna withdrew a maximum of $5,000 oer year for the next 6 years and contribute $4500 after $500 withholding tax to the tfsa

Or else....

Convert it to RIFF, cash some of it every year and contribute about $5000 annually to the tfsa until theres til gradually there's nothing left

Haven't decided yet

Either way I plan to take just a small amount every year at about $5000 'maximum for the next 6 years. so the total tax withheld will be around $3000. In contrqst if I took $31,000 all at once the tax withheld would by 30% or at least $9000 with a whopping tax bill the following year

Hopefully sitting in a gic it might generate enough interest to make up at least a bit for the income tax that needs to be paid to the CRA for those withdrawals

I don't plan to contribute to the rrsp ever again. That was just a one time event to reduce my taxes in 2024.

It seems like a real pain to get ones money out of an rrsp without getting dinged too much by the government

And don't tell me a person can entirely escape their obligations to pay the tax man cuz every person i spoke with about withdrawing from the rrsp or riff always complained to me about the taxes they had to pay for those withdrawals Prowler

It's probably like that for Americans trying to withdraw funds from their 401k plans too.

 

[The Prowler]

A quick example:

TP earns $150,000 annually at his job, putting him into the 50% marginal tax bracket. He will retire in 10 years.

We will look at $10,000 that TP wants to invest.

Option A: Put in a RRSP.

$10,000 is deposited in an RRSP. That amount doubles in 10 years to $20,999. TP is retired and he withdraws the $20,000. His marginal tax rate is now $30%. So that $10,000 income from 10 years ago becomes $20,000 - $6,000 or $14,000 in his hand to spend as he wants.

Option B: Put in a TFSA

$5,000 is deposited in a TFSA. That amount doubles in 10 years to become $10,000. TP withdraws that $10,000 from his TFSA and it is not taxed. So that $10,000 income from 10 years ago becomes $10,000 in his hand to spend as he wants.

Option C: Take the money and invest it in a GIC.

$10,000 income is taxed down to $5,000. That $5,000 is invested into a GIC. That GIC snowballs to $6,500 in 10 years after paying income tax on all interest each year.


So when presented with these 3 options:

A) $14,000
B) $10,000
C) $6,500

Senile @Joe picked Option C) because he is a fuckin' stooge who does not understand basic mathematics and simple concepts like deferring income tax.

 

[The Prowler]

And don't tell me a person can entirely escape their obligations to pay the tax man cuz every person i spoke with about withdrawing from the rrsp or riff always complained to me about the taxes they had to pay for those withdrawals Prowler

Here, I will give you an example of someone "entirely escaping their obligations to pay the tax man", Senile @Joe.

Someone, we will call him Bill, who retired early and has no employment income and is living off his savings - just investments in regular cash trading accounts withdraws $10,000 from his RRSP.

The financial institution withholds $2,000. Bill puts $8,000 in his pocket.

Now Bill submits his Income Tax Return.

Because Bill's income is only $10, 000 (from the RRSP withdrawal) he is below both the federal basic personal amount and the provincial basic personal amount, he will get the entire $2,000 that was withheld refunded.

So now Bill puts another $2,000 into his pocket.

So Bill withdrew $10,000. Bill pocketed $10,000.


So fuck off, Senile @Joe.

You idiot.

 

[Joe]

Do you think @The Prowler has emotional or mental problems @wizer ?

He can't communicate without being abusive or appearing to be on the edge of exploding into a fit of rage. Or he has this compulsion to write in massive BIG Block letters like some asperger's patient screaming at the wall. Yes I met children like that when i was a contractor for the local school board. And they had to be on medication just to function & get through the day.

I suspect this is why @The Prowler HAD to 'retire' from 'work' & dreads it so much because and can't get along with others. Perhaps his employer gave him a severance package just so his coworkers wouldn't sue the company.

 

[The Prowler]

Do you think @The Prowler has emotional or mental problems @wizer ?

He can't communicate without being abusive or appearing to be on the edge of exploding into a fit of rage. Or he has this compulsion to write in massive BIG Block letters like some asperger's patient screaming at the wall. Yes I met children like that when i was a contractor for the local school board. And they had to be on medication just to function & get through the day.

I suspect this is why @The Prowler HAD to 'retire' from 'work' & dreads it so much because and can't get along with others. Perhaps his employer gave him a severance package just so his coworkers wouldn't sue the company.

Every once in a while I feel a little guilty for being so harsh with you, Senile @Joe.

I mean, as far as I know, it is not your fault that you are stupid. You might have been born that way.

On the other hand, someone who is stupid should realize that they are stupid. So instead of making assumptions or thinking that you understand things, you should have learned to ask questions.

At the end of the day, Senile @Joe, I am doing you a favour by giving you free education.

Just over the last few posts I have given you clear, simple examples to help you learn.

Are you learning, Senile @Joe ?

And if you are, then it would be appropriate to express some gratitude to me.

And if you are not, then would you mind sending me your brain in a box so I can add it to my rock collection?

 

[The Prowler]

And if you are, then it would be appropriate to express some gratitude to me.

Still waiting, Senile @Joe .