What’s the best way to get money out of RRSPs?

Look for ways to keep your income from ballooning when you hit 71.

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tax_1008_322If you thought saving up for your retirement was tricky, wait until you quit working and start spending some of that money.

The trouble often starts when people turn 65. If they have a good pension and other investments to draw from, they don’t dip into their RRSPs at all at first. But when they turn 71, the government forces them to start withdrawals, and because their income is so high, more than 40% of that money could go to the taxman.

One way to avoid this problem is to look at ways to keep your income from ballooning when you hit 71. If you’re not going to need much money from RRSPs until your 70s, you may want to consider retiring earlier than you planned and taking money out of your RRSPs early so it’ll get taxed at a lower rate.

You can also try a few tax-saving manoeuvres. For instance, in the years just before you retire, don’t claim the tax deduction on your RRSP contributions. You can defer those deductions to later years when your income is higher and you really need them, says Tim Cestnick, author of 101 Tax Secrets for Canadians.

Another option is to buy flow-through shares issued by certain mining and oil exploration companies. The tax credit you get from investing in these firms can be high enough to offset the taxes you have to pay on RRSP withdrawals.

4 comments on “What’s the best way to get money out of RRSPs?

  1. I recommend starting smaller, using the dividends to purchase more stocks, you add them to the collateral at the bank, to avoid getting margin calls when the market goes down so far that the value of the asset isn't enough to back the loan … so the bank wants either more assets to use as collateral … or money to reduce the loan to required proportion … and that's as of right now (tomorrow at the latest).

    Or – they sell some of your assets to repay some of the loan … then there's less collateral left to back that loan.

    I don't like them apples!

    Reply

  2. Another option is to buy flow-through shares issued by certain mining and oil exploration companies. The tax credit you get from investing in these firms can be high enough to offset the taxes you have to pay on RRSP withdrawals.

    Reply

  3. Another option is to buy flow-through shares issued by certain mining and oil exploration companies. The tax credit you get from investing in these firms can be high enough to offset the taxes you have to pay on RRSP withdrawals.

    This comment is interesting but the article does not state how this can be done, whether it is a good plan with high or low risk, which persons or financial advisors to contact or which mining firms and oil exploration firms to contact to be able to use the strategy referred to in the comment. I would appreciate it if the authors of the article would let us know what the strategy is all about and how it works and if anyone has used the strategy succcessfully.

    Reply

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