Author Topic: RRSP Pipelining  (Read 1318 times)

Learner

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RRSP Pipelining
« on: June 02, 2015, 05:49:46 AM »
Apologies if this has already been covered, the forum search was not working very well for me.

I'm planning to retire in about 10 years.  At this point, I will be tapping into a defined-benefit pension plan that I expect will provide about $54k annually (some growth/raise estimates in there, value based on current numbers is more like $49-50k).  The pension consists of a basic amount + bridge benefit.  The bridge is basically to covered the expected amount for Canada Pension Plan payments.  The pension has a 50% survivor benefit, so if I kick the bucket after 65, my wife would continue to receive approx $27k/year.

I have RRSPs currently valued at just shy of $20k, but I stopped contributing to these years ago and instead shifted to TFSA.

This past year I pulled out all my TFSA and began contributing to a spousal RRSP to get the early tax deferral.  My wife is a stay-at-home-mom, so she will either have no income in retirement or the survivor benefit pension noted above.  Going the route of spousal RRSP should minimize our long-term tax bill.  Assuming a variety of contribution factors and 6% return on a low-fee index fund that would put her balance at 65 in the 650k - 1M range.  At the 4% SWR, this would net an annual income of approx $26-40k.

I get that we're lucky to have a defined benefit pension plan kick in when I'm 43.  I won't really need the RRSP optimizing personally, but it will be a good contingency plan for my wife.

I recently saw some US info (mad FIendist I think) where they pull out minimal funds from a tax-deferred account (counting as income?) to put into their TFSA equivalent.  After the initial delay period (5 years I think), they continue this conversion until retirement, effectively deferring tax early and late.

I'm trying to find info on the possibilities for a Canadian equivalent to this.  Basically, my question is: can my wife draw from RRSPs as income (maybe after waiting a few years, and at the basic income tax exemption level, being sure to take off other sources of income such as CCTB) while I continue to contribute to her RRSP?  These funds would be rolled over immediately to a TFSA.

MorningCoffee

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Re: RRSP Pipelining
« Reply #1 on: June 02, 2015, 06:28:40 AM »
There's a 3 year rule in Canada for spousal RRSPs. If any contribution had been made to the spousal in the previous 3 years, attribution rules means the withdrawal counts as income for the contributor (you in your situation) and not the spouse.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/xmpl-eng.html

Learner

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Re: RRSP Pipelining
« Reply #2 on: June 03, 2015, 05:48:51 AM »
Thanks for the link!

I guess the current plan will be the way to go (at least for now) then.