Author Topic: Withdraw in kind out of an RRSP  (Read 1203 times)

techwiz

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Withdraw in kind out of an RRSP
« on: April 17, 2021, 08:39:55 PM »
I am starting to look into my withdraw plans. Part of my FIRE plan is to draw down my RRSP in the first 5 years before my pension money starts rolling in. Drawing down my RRSP while my income is low seem like a smart move. Currently my RRSP is holding VTI in US$ and I started to wondering if I could withdraw that in kind and transfer to a taxable account or something. Saving the currency conversion fees and still be able to hold VTI in US$. 

I found some info here https://www.taxtips.ca/rrsp/inkindwithdrawals.htm
Quote
The Minister of Finance issued a press release on November 20, 2008 indicating that he was expecting all financial institutions to accommodate in kind transfers from a RRIF, at no cost to clients, or offer another solution that achieved the same result.


I would still have to pay tax on the value of my VTI the day it was transferred and the new ACB would be based on that days price going into to my taxable account. 

I still have to find out if it is allow and if it can be done at no cost. Just because a Finance minister said it 12+ years ago doesn't mean the banks did anything about it.

Does this sounds like a wacky plan? I could just liquidate the VTI and move cash. The benefits of holding VTI in a taxable account would not be the same as when it was in my RRSP (no longer protected by the tax treaty).  I still have a few years to figure this out ,but would like any comments or thoughts.



Mighty Eyebrows

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Re: Withdraw in kind out of an RRSP
« Reply #1 on: April 18, 2021, 10:19:24 PM »
I still have to find out if it is allow and if it can be done at no cost.

There is also a difference between transfers from an RRSP vs RRIF. I suspect that the RRSP would not be shielded from fees, but you could ask your brokerage. You may want to move some of it into a RRIF first.

Some other thoughts have been discussed here, although in the context of in-kind transfers from RRSP/RRIF to TFSA:
https://www.financialwisdomforum.org/forum/viewtopic.php?f=32&t=118302

techwiz

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Re: Withdraw in kind out of an RRSP
« Reply #2 on: April 19, 2021, 06:56:01 AM »
There is also a difference between transfers from an RRSP vs RRIF. I suspect that the RRSP would not be shielded from fees, but you could ask your brokerage. You may want to move some of it into a RRIF first.

Some other thoughts have been discussed here, although in the context of in-kind transfers from RRSP/RRIF to TFSA:
https://www.financialwisdomforum.org/forum/viewtopic.php?f=32&t=118302

Good point about moving it to RRIF as a first step.  (transfer in kind to a RRIF from my RRSP)

I dug into that link and it sheds some light on the topic. Very important that I find out the rules/fees at my institution. Then depending on all the hoops and rules it might end up being easier to liquidate and move cash instead.

My added twist with my investment being in US$ doesn't make it any easier to figure out the true costs and transaction fees.  If during the process the institution forces a currency exchange it could really impact the costs involved.  It is very ironic that just last week I got a letter informing me that my institution was found liable in a class action suit dealing with foreign exchange fees in registered accounts. 

K-ice

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Re: Withdraw in kind out of an RRSP
« Reply #3 on: April 25, 2021, 10:49:52 AM »
Interesting question.

I donít know who your broker is but I plan to sell my VTI to US$ within my RRSP account when the time comes. Iíll then transfer the US$ out of the RRSP into a US$ checking account. I then plan to spend that money in the US.

I plan to never pay currency transaction fees. Just withholding tax & minimal $10 sale fees. I am currently able to do the reverse & assume similar rules will be in place when itís time to drawdown. (But who knows exactly what future brokerage fees will be.)

If I wanted to drain my RRSP before actually needing the cash I would consider an in-kind VTI transfer from RRSP to brokerage account. Iíd expect withholding tax but no fees for this phone call. Iíve done an in-kind stock to TFSA call once for no fee.

If you need the proceeds from VTI to fund your Canadian lifestyle I see no way around converting the money but a Norbertís Gambit will help keep costs low. Iíd do all this within the RRSP so Iím just removing Canadian cash to simplify withholding tax.

Regardless of what form I want the final amount Iíd want to be sure I control how the money is converted to pay the withholding tax. I may even need to liquidate an appropriate amount of CAD ETFs, or sell & NG a portion of the VTI within my account at that time so they withhold that.