Has anyone ever come across a calculator that considers overall tax paid and factors OAS claw-back implications due to RRIF minimum withdrawals? Every financial plan I've ever seen always draws down non RRIF funds first, without considering the implications of minimum RRIF withdrawals on a million dollar RRIF, the argument being "it's better to shelter funds as long as possible".
I'm happy that some of the talking heads have finally come around to my way of thinking (so they must be right). Some 'experts' are now saying that if you're retiring 'early' with both registered and non registered accounts, to consider drawing down your RRSP (and converting a portion to a RRIF at 65 to get the pension credit). I think this makes alot of sense for folks with large enough RRSP balances that the RRIF minimum withdrawal limits would exceed income requirements and push folks into a higher tax bracket and possibly OAS claw-back territory. This will be especially true after the death of a spouse, when the RRIF balances combine and the living spouse has an even bigger balance.
Our plan is to retire at 56/55 (earliest date for a reduced defined benefit pension for hubby). I'm currently in the second highest income tax bracket, so RRSP contributions make sense (although we're only a few years out from retirement, so this is a moot point). I expect we'll each be in the lowest bracket in retirement (may just squeak into the next one but probably not). My plan is to pull some monies out of RRSPs rather than depleting the non registered accounts first. I'm pretty handy with a spreadsheet and could probably build one that would let me test out various scenarios, but if anyone has such a thing or has come across a calculator, I'd love to see it.
Situation:
- retiring in 3 years or slightly less
- hubby has a defined benefit pension (not huge, buy hey, it's indexed)
- TFSA
- non-registered accounts
- we each have RRSP
Plan:
- live off pension and a combination of registered and non-registered accounts
Goal:
- Pay the least over-all taxes over our retired lives
- avoid OAS claw-back for as long as possible (I fully 'get' that this is a wonderful problem to have - enough retirement funds that I'm even thinking about it)
PS - long time lurker, first time poster. I love that I have somewhere to post this stuff - it's not something I can discuss with folks in real life, money being such a taboo in our society.