Advising a family friend on her financial situation but I don't know much about the mechanics of how things work in Canada regarding RRSP and RRIF. I've read a few articles so I understand the basics but looking for some advice from any Canadians more familiar with the optimal strategies...
Situation:
- 68 years old, dual citizen, living in the US and plans to remain in the US permanently. Divorced from a Canadian ex-spouse and re-married to a US citizen.
- Has an RRSP ~600,000 CAD at BMO mostly in cash and bonds and not sure if it is a self-directed account or what
- Plans to withdraw the money starting at 71 by transferring to an RRIF and taking the required distributions each year. The lump sum option would require too much in taxes I think and the annuity doesn't seem very appealing either but I'm open to alternative suggestions
- Has other assets to cover her basic needs in retirement including spousal social security, this RRSP money is mostly bonus money and she just wants to minimize the taxes and will spend any distributions or invest the proceeds in her US taxable brokerage account
Questions:
- What is the best RRSP/RRIF provider? Looking for something akin to vanguard or fidelity in the USA, she currently uses BMO and is not happy with them but she doesn't have a strong opinion, just wants something simple, safe, low fees, is it easy to switch from one provider to another? is it necessary to switch or is BMO a fine option?
- What are the best investment options for the equivalent of VMFXX (cash currently yielding ~5%) VT (global stock index etf) and BND (total US bond market etf) and are they available at BMO? Does she need a specific account type (ie self-directed?)
- When she converts this to an RRIF can she remain invested in the same funds held in the RRSP?
- What happens to the money when she dies? Are there beneficiary designations in Canada? Does it go to her current spouse or children, can he/they continue to withdraw the money annually or does he have to take it as a lump sum?
My general advice to her is to invest the funds according to her desired asset allocation and take at least the minimum required annual distribution each year with the plan to increase those distributions depending on her tax situation and spending needs. She has enough in other accounts to keep this in 100% cash and bonds if there is a good option that keeps things simple and she can invest in low cost stock index funds elsewhere (US taxable brokerage account) to achieve her overall desired asset allocation
What other considerations would you recommend for someone in this situation? If there are good articles from knowledgeable bloggers in this space please feel free to link and I can do the research myself. I appreciate any advice you can offer.
