3 Tax Mistakes Most Retirees Make (How To Avoid Them)

[@hydrogolfer]

Thanks Adam. Can you recommend one of your videos on RRSP withdrawal tips (i.e, frequency of withdrawals, how to minimize fees and taxes, etc)? RRSP meltdown is our strategy just looking to optimize things.

[@johnnyboyvan]

Wow Adam you are about to have 100 k subscribers. Impressive. You have made life so much better for me, thanks bud.

[@ParallelWealth]

It's crazy, all thanks to all of you that watch and support! We will have to do something fun for 100k - maybe a giveaway or something.

[@jean-marcfiliatrault266]

Hi Adam, as I mentioned before in one of your previous videos, if one drank the RRSP Kool-Aid when entering the job market, the wrong thing to do, mind you, one ends up with a 7-figure RRSP amount around 60 years of age, if not before. Hence, delaying the gratification of one’s RRSP benefit till 71 is like saving sex for old age. Not at all a good idea. Also, the no-go years can start way earlier than 85 as per my Mom and Dad’s situation. It started at age 80 for them, due to my Mom’s dementia. Soooo, start living early with your RRSP throve and enjoy life. Delay OAS and CPP/QPP for as long as you can. Then, you’ll do just fine when the no-go phase of life hits you as it will surely do…

[@derekcox6531]

Couldn’t agree more.

[@harveythompson6951]

I fail to see why starting up RRSP's right away is the wrong thing to do.If you can get 7 figures by 60, then fantastic! I wouldn't delay it until 71 for sure and I wouldn't certainly complain about the income tax. Earn big, pay big. I'd start melting it down at 60, delay OAS likely, and if it's all clawed back, great. I'm encouraging my girls, who are in post secondary, to open up self directed RSPs with something like RBC Direct Investing, like their TFSA's and I'll gift them their allowable up to date contribution to get started. Put it in an S&P500 ETF and let it go 40+ years.

[@jean-marcfiliatrault266]

@@harveythompson6951 Hi! Adam made at least one video giving you an answer about starting your RRSP early. Many others on YT have done the same. The premise behind an RRSP is that you will pay income tax at a lower marginal income tax rate in your retirement vs. when you contributed. Soooo, when you start contributing to an RRSP at 23 years of age, as I did, your marginal income tax rate was very small. Unfortunately, I don’t have the tax tables from 35 years ago. However, I started my career earning $18,000 per year. The combined fed/prov marginal income tax rate today is a tad less than 27%. My marginal income tax rate, if I look at today’s income (fed/prov combined) tax tables, assuming a $100,000 withdrawal (assuming I don’t have any additional income, which is not the case, BTW) is 41%!!! I would have done a lot better investing after tax in an S&P 500 index fund till about 30 some, when my salary really picked up. I would then not be in a hurry to meltdown my RRSP at a marginal income tax rate way higher than when I first started contributing…

[@jean-marcfiliatrault266]

@@harveythompson6951 For RRSP contributions to make sense, your marginal income tax rate at the time of said contributions should be higher than when you take the money out. When you start working in your early 20s, your marginal income tax rate is fairly low. After working 30 to 40 years, with a flush RRSP and a non-registered money pot invested along with your company pension (maybe), and your OAS (mine will be clawed back, whatever I do) and C/QPP, you’ll find out very quickly that your marginal income tax rate is at least 41%. Personally, I’m at the 44% to 47% level. Soooo, it would have been better for me to put off my surplus salary money in a VTI-type stock with minimal dividends with a CAGR of 9% for the first 10 years of my work life, at the very least. In my case, if I want to get my RRSP down to 0 at 86 years of age, I’m having to take out 100,000 per year from age 60 to age 70 to try to salvage some OAS, but still get the RRSP trove down to 0 at 86 years of age. A better planning with Adam in my 30s would have been a good idea… There is such a thing as too much in your RRSP…

[@jean-marcfiliatrault266]

@@harveythompson6951 For RRSP contributions to make sense, your marginal income tax rate at the time of said contribution much lower, much lower than when you take out the money… That will not be the case if you have a “big” RRSP when you retire when you starting contributing in your early 20s…

[@iczemi]

I am retired (62), I am happy with slow go from the very begining. Me and wife live below means. We run budgets every month. Zero debt.

[@MegsCarpentry-lovedogs]

Adam, reviewed the middle or 2nd mistake on your vid a few times. I see now what you are pointing out. If the CRA is holding on to your money and more than is due to the CRA, dip into the TFSA to keep the cash flow level, then with the refund, slip that into the TFSA. Ahhh! I love these Ah Ha moments! Another financial plan is added. Many thanks. Subscribed and always click the like :) Meg, Atlantic Canada, PEI

[@waffles1ca]

Thanks Adam, fantastic advice, my wife just finished year one of retirement, she pulled $48k from her RRSP (average tax rate 14%) which was more cash than needed, we took the surplus cash flow and put it in our two TFSA for future use, our TFSAs are producing just under $14k in dividends.

[@iany2448]

The problem with aggressive RRSP meltdown in go-go years is that could trigger OAS claw back. Delaying OAS for full 5 years may still not be sufficient time to do the meltdown. There is just no perfect solution.

[@ParallelWealth]

There is most often a perfect solution based on doing this thousands of times...just saying 😉

[@gruff4036]

We have a DB pension, RRIF, CPP and OAS. The forced tax with held from the pension and RRIF are enough that we turned off the tax with held from CPP and OAS. We still get a small refund each year. Fantastic video.

[@AMG-BENZ-1]

I can't speak for every scenario, but in my case, I control how much tax is witheld from my RRIF withdrawals by simply advising my investment firm by phone...

[@jdavid1707]

Interesting idea. Deplete your registered accounts by expected time of death.

[@garth217]

Great video once again. I'm changing my RRSPs to RIF this year. age 60. I'm not going to do an RRSP meltdown because I still have a bridge benefit for 5 more years. The RIF amount will be used to build up my TFSA as I still have room. I'm lucky because I don't need to spend that money now as my pension is very good. At age 63 my CPP amount will be the same amount as my bridge benefit. So I'll be income neutral. ( same taxes) .As Adam says you need to know what you have coming in and later what's going out ( taxes). It's very clear if you delay CPP until 70 you get more money. But you get more when you spend less..slow / no go years. I'm not a gambler. I'll take the lesser amount at 63 or 65 and hopefully take it a bit longer, the break even point is meaningless if you are no longer in your go go years. Slow and steady, I'm not waiting for a 42% that I may get for 5 years.

[@richardbartolo8754]

Everytime I watch these videos it reinforces my desire and push to retire in my early 60s. After 35+yrs of RRSP match that little bundle needs to be melted down.

[@Darksandor]

I've gone through a bunch of the Parallel Wealth videos and I can't find the right one for which asset types are best to hold in which type of account (some near misses though). Specifically, if you are maxed in RRSP and TFSA, what is the best asset type for non-registered accounts from a tax perspective? It seems like holding Canadian eligible dividend earning stocks could be good in non-registered when your income is less a certain threshold (85k?) Or is it better to focus on capital gains there? It seems like bonds, GIC and interest earning is bad in non-registered account because 100% of it becomes taxable in the same year it's earned. I think there could be a video for taxes on Canadian eligible dividends and what account type you should hold them in.

[@daviddean6032]

Thank you very much Adam. I subscribe to your channel and usually I get to listen to it as soon as it posted as I get notified. ❤

[@barrydowner7975]

you will soon hit 100K Subscribers! another great video!

[@satinderbank4607]

Good Video, full of sage advise, as always. planning is key. know what your sources and amount of income (& expenditures) will be in various stages of retirement and plan to have least in taxable buckets at all stages of retirement. draw down big on RRSP/RRIF as soon as you can.

[@danbarrett6387]

Great videos..direct and presented sincerely...

[@ParallelWealth]

I appreciate that!

[@paulayoung2387]

I agree with number three the challenge is that the generation that is currently going through that issue didn’t have access to the knowledge we have now about the repercussions

[@DC-nj8kv]

7:10 "if you do die when you're supposed to". 😆

[@youngus]

damn, I was about to say the same thing! XD

[@satinderbank4607]

🤣😛

[@ParallelWealth]

One of my favorite lines!!

[@bunkerhill4854]

When Adam does a tax plan, it is complete to the final detail.

[@currypablo]

Best to draw down shares from RIF, RLIF, LIF inkind. Withdraw to a non reg and then make a TFSA contribution if you have room in your retirement years.

[@davdride4850]

Thanks. With draw from liff Follow Yo with deposit to TFSA. I didn’t realize this to help taxes

[@murraytown4]

I prefer the refund. The amount is not substantial. Having a tax bill after paying taxes all year is like getting whacked twice. Besides, my budget is so finely tuned that taxes owing at year end, however small, would throw my budget out of whack. I’m melting down my RRIF in my early retirement years. By 70 it should be zero, when CPP kicks in.

[@MC-do4dw]

All true! Thank you for the reminder.

[@ParallelWealth]

You are so welcome

[@dougk1533]

Hi Adam. I always appreciate your videos, so thank you very much, and please keep bringing us great content. Can I make a comment about the Go-Go, Slow-Go, No-Go plan? I call my Go-Go Phase account my "Say YES" account. I'm trying to be like Jim Carrey in the movie "Yes Man" and just say "YES" when friends suggest an activity. Though I'll promise I will not do everything that Jim Carrey's character does in the movie!!! It is really nice when I can say yes knowing that a stash of cash is waiting there, just for these opportunities to come along.

[@rbenjamin1429]

Yet another great video...thank you! 🙃

[@ParallelWealth]

You are so welcome!

[@davidwegner9690]

Excellent tax strategies!

[@rossshears6726]

Tax’s then death , neither are truly avoidable . But the other significant factor lurking around a retirees future is health care ( doctors , drugs and procedures ) possibly 2 tier and the eventuality of long term care at the various levels if required . Nothing erodes one’s accumulated savings and cash flows faster than those mentioned individually or compounded . Joint or single . Tax’s aside an rrsp/RRIF is one’s last flexible payment option to cover the above . It’s what keeps me up at night and prevents me from “melting” my RRSP . For now I am treating as a personal insurance plan for medical and long term care purposes . Just a way of looking at it. RS.

[@PS1956PS]

Hi Adam. I have a question. If the Husband dies at age 54 and the wife is 59 can she apply for the CPP Survivors Pension? (love your channel, thanks for all the help)

[@huejanus5505]

I retired a year ago. I only get a db pension from work, for now. My wife is still working and we make more than enough right now. If i start taking money out of my own pension to avoid paying higher taxes later what do i do with it, where do i put it? Our tfsa’s still gets maxed out. Also, by taking unneeded money out of my pension i’m losing any growth that money would have gotten inside the pension account.

[@markbernier8434]

I'd be interested in how to decide, if not forced, to pay CRA quarterly.

[@dvdvno]

#1, if you're 65 or older, and you pay no income taxes, you will receive maximum GIS of $12,785.64 provided you took OAS.

[@haraldsolvberg2699]

There are cases where you might pay no taxes but not be eligible for GIS. For example, having a $15,000 pension income and $15,000 in eligible dividends ($20,700 taxable dividend). Your income would be $35,700 putting you well over the maximum to qualify for GIS and yet you'd owe no taxes.

[@ivyjo5165]

I have a question! I did not know there is contribution room for TFSA so I over contributed in TFSA account. but I knew this in Dec 28, 2023. so I withdrew the money I over contributed for 2023, on Dec 29, 2023 before 2024. so it should be okay right? Thank you!! I subscribed your channel!

[@mikesavage6420]

Think you left out leave Turdostan

[@rongrant3500]

I don't have children or other dependents, so if my estate pays extra tax when I'm dead, I'm pretty sure it won't bother me. The fact is, I've drawn extensively from the general tax coffers through my life, through no fault of my own. Although I've always lived a healthy lifestyle, I still ended up needing years of dialysis and other treatments, a transplant and then ongoing follow up care for the rest of my life. My wife also used the health care system extensively, with multiple bouts of cancer. So much for healthy eating & lots of activity! So I actually don't mind if I pay extra upon my death, I see it as payback to all the other taxpayers who funded my health care.

[@Moluccan56]

So, it’s wiser to draw from my RRSP amount as opposed to the Defined contribution portion of my retirement savings? I’m 67.5 and going to quit working (3d a week) this Spring.

[@liverpool3469]

I don't have 20 accounts, but I have TFSA, RRSP and LIRA. So my plan when I retire: 1) a RRSP meltdown; 2) LIRA maximum payments (6% or something), 3) don't touch TFSA. So I am thinking to put TFSA funds in 100% growth stocks, as I am not going to touch them until RRSP melts down to zero (at least 10 years). Then my plan is to start CPP and OAS, and continue adding LIRAs 6-7% payments to this pot (LIRA/LIF will start as I retire). Adam, may I ask you, please, what should I do with TFSA? as I am not going to touch it till all RRSP is gone and then CPP+OAS starts... Also my LIRA is 500k.

[@karensteel7642]

I just started my lira conversation to lif. I was able to move half of my lira (all retiree can I think ) So check this out with your financial institution. Lif has a max and rrsp / rif has no max withdrawal. So moving half to rrsp gives much better flexibility

[@willmallory9085]

So Roth instead of Traditional accounts during our earning years?

[@mylife8111]

How is the average early retirement tax 12% when the lowest federal income tax is 15% for an income of up to 55,867 and 20.5% with income greater than that.....

[@Seven.Heavenly.Sins.666]

There are 3 topics that I am not sure that I understand from this video: 1. Tax Free Saving Account allows an individual to contribute up to $95,000 as of 2024. The money earned from the TFSA is not taxable, regardless of whether it is interest income or capital gains from stocks, etc., 2. RRSP is meant for tax deferral purposes only. We still end up paying the taxes whenever we withdraw RRSP. First , we pay the withholding tax to the bank(s). Then, the whole amount has to be reported in the T1 tax return for the calendar year that the RRSP is withdrawn; and 3. Do we really care how much remaining taxes to pay after we die?

[@James_48]

1) correct 2) yes, you will pay income tax on your RSP/RIF withdrawals, however with some basic understanding and planning, in the majority of cases, the percentage of tax saved upon contribution will be greater than the percentage paid upon withdrawal. 3) if you have heirs, ithe amount of tax you / your estate pays at death will affect how much of your estate they will receive.

[@Seven.Heavenly.Sins.666]

@James_48 Thank you for your prompt response. If there is any remaining balance leftover in my estate, whoever is the heir can pay it out of the estate. I love your video so far👍

[@brentgraham1735]

Love your videos….but, “if you die when you’re supposed to.” That’s alone for the ages!!

[@willmallory9085]

3:57 plus your "refund" is counted as income the following year. 😮😢

[@ParallelWealth]

Not for taxes, just cashflow

[@dwaynejohnson6277]

What if US stocks are held in the RRIF/RRSP? Doesn't the IRA take 40% estate tax upon death also?

[@AMG-BENZ-1]

Not if your stocks are owned through an investment firm registered in Canada.

[@mgdubya27]

"If you die when you're supposed to" lol

[@ParallelWealth]

I really need to TM that phrase!