Ready to Retire? Part 2, The RRIF Trap. 2015 $50 1 Troy oz. Gold Maple Leaf
Estate Taxes are done. I dreaded this responsibility since my Mom was a lifetime saver yet at the same time a poor tax planner. Against my better judgement she preferred to live off her public pension income and preserves her private Registered Retirement Income Fund. Sadly, that choice made the Tax man a major 'beneficiary' to her estate.
“Black birds tend to like shiny things.” ~ The Bloody Raven
The RRIF Trap horror story.
An all too frequent mistake made by Canadian retirees is called the RRIF Trap. When my late Mother passed away last summer, her Registered Retirement Income fund (RRIF) was liquidated under ‘Deemed disposition’ as if she sold her Retirement Assets before her death. The proceeds were lumped into her 2024 income as taxable income before distributing to her beneficiaries.
This placed her well into the top band of next Tax bracket incurring a large tax bill putting the Tax man a significant beneficiary.
Judging from her financial records her Bank’s financial planner wasn’t very good. It was arranged in a manner that would benefit the bank more than the customer's own interest. Large cash accounts earned less than 0.25% if nothing all. Mutual funds that drew sizable annual fees that where not in keeping with the mediocre performance of their family of funds. And most glaring of all, failing to warn her of this financial hazard.
I shook my head as I sent the funds to Canada Revenue Agency, about 2.8+ troy oz. in gold or slightly more than 0.11 BTC I had to kiss goodbye.
This RRIF trap is not going to happen to me.
The 2015 Canada $50 1 Troy oz. Gold Maple Leaf
2015 was my sophomore year of stacking precious metals. After a year of silver stacking I was ready to start putting some into gold to represent a more conservative side to my off grid portfolio, a steady growing and much less volatile precious metal to it’s shiny cousin.
That year I set my long ten year gold stacking goal and started with my first ¼ troy oz. gold coin, a 1984. At $1200 to $1300 USD spot, I didn’t have enough for a full One Troy oz. coin. Nothing fancy, just stick to my native recognizable Maple leaf bullion gold for the least hassle issues should I need to sell it.
The 2015 gold Maple leaf also the second year following the 2014 introduction new security features. The precision radiant lines, the tiny Privy-like maple leaf micro laser etched device and the Bullion DNA Anti-Counterfeiting Technology. The RCM doesn’t get into the fine details but it may be worth the read and video to be familiar with the authentication process.
The RRIF Trap horror story, continued.
My approach will be different than with what my Mom did.
With my comfortable $45,000 CAD/year base income as derived in Part 1. I have another $7,000 to $10,000 CAD more head room before touching the lowest band of the next Tax bracket, perhaps more depending on how I tweak my charitable donation credits and what form of investments I chose.
Let’s say that $8k extra spending cash is $5,000 net of taxes. I can use it for that week-long trip like the Caribbean E8 vacation. Any funds leftover that year will be tucked away into my Tax Free Savings Account (TFSA). If I maintain that steady withdrawal rate over the next 17 years my residual RRIF tax exposure will be only large enough to leave my Taxman a lunch tip while leaving my Kids a big fat TFSA to do as they wish.
Ladies and gentlemen, don’t take your bank’s financial advisor’s recommendation at face value. When it comes to their own In House investment products it may likely offered to maximize their fees and not necessarily maximize your income to your comfort level and within your risk expectations. So do some homework to be sure.
Or get a second, or even a third opinion.
The take away for me here is that I learned something new out of my Mom's case and that is a lesson I can put in my purse and not in the Tax man's pocket.
Have you begun to make retirement plans? 🌴
Stacking Precious metals and Crypto for those dark stormy days!
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References & Sources
My Retirement finances are base on Canadian Tax Laws.
RCM Mint Bullion DNA Anti-Counterfeiting Technology.
Photos are my own shot with an ancient 2018 Samsung SM-A530W or otherwise indicated.
P. Image under Pixabay
W. Wiki Commons
☠️🎃 Page Dividers by thekittygirl. ❄️🌞
Cameo Raven Brooch from The Black Wardrobe.
The 2024 Hive 0.999 Silver Round.
Physical precious metals bullion stacking is only a part of my personal overall financial strategy. Meanwhile, collecting numismatics are a different set of objectives and strategy. Unless you are a complete nutcase as I am please, do your research before deciding to buy into any bullion or numismatic products.
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Hmmm
Great lessons to learn from this experience you shared. I think we all need to be proactive about tax planning and not just rely on financial advisors. The approach you took to managing your RRIF is a smart move. Meanwhile I’ve not started making retirement plans 😏
I started a Registered Retirement Savings Plan putting in a modest amount each month, This plan allowed me to choose what I wanted to invest it, stocks, bonds, and mutual funds. And I can say I made some lucky guesses and did well. The earlier I started, the more options I have later on. Even if don't have any solid plan. The hard part is guessing how long you live to have an age target.
One thing for certain, I want to make sure the Tax Man get no more than I think he deserves.
Thanks for dropping in @babygirl888
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Nice moves
I bought some shares though but that was just an investment move and not really a plan… would have to come up with some more….@topcomment
What a shame that the tax man took that much of your mom's savings! An expensive lesson to pass on to your kids.
I have not been able to save for my retirement yet, nope. Life was pretty rough for more than a decade and now all focus goes to saving to buy property and take it from there.
Definitely not smart to only listen to a bank advisor as they probably want to get out of this situation the best themselves, as it seems to have happened here as well.
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I can understand at the surface why my Mom insisted in preserving her RRSP/RRIF since I know that she considers that savings as her security. Her Advisor was a bit self serving knowing that he would be earning account trailing fees the longer she keeps these funds in their Banks investment instruments.
In my plan, I will be drawing down my RRIF using my excess tax headroom and depositing into my Tax Free Savings Account (TFSA) as possible. I hope I don't need to draw from this account but only if something is urgent. Otherwise, I can hand this account over to my kids TAX FREE!
Buying a home for my kids to grow up was my first goal but I had to have a life makeover. I fast tracked graduated as a Nurse in under a year. Got a job before I graduated. Worked long hours, extra shifts, Overtime and holidays. My roommate looked after my boys. Accumulated a chunk of savings, borrowed from my RRSP, and my Mom gifted me enough cash to afford a conventional mortgage. I was real careful picking a home with the right location. etc, etc.
This can explain why I'm now sick so I'm retiring early. I'm so Burned out.
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I can only imagine sis, you worked really hard to secure things for you and the children but it came with a hefty fee :(
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I'm happy that you are still here even if you don't post at all.
You are still considered a member of #silvergoldstackers and deservedly so.
And our 'Go to' man on vintage bars.
Known for those memorable videos on making gold bars from broken jewelry.
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I once had a Retirement Account that I Cashed in, Paid the Penalties and Taxes and bought Silver and Gold... That was one of the Best Moves I ever made, since I was buying Gold for about 300 Fiat USD's per ounce... Silver was about what the premiums are going for today... I remember being thrilled when Gold went up to 400 per ounce...
I recall some YouTube stackers doing the very same thing. Taking it on the chin for withdrawing their IRAs and stacking total PMs ten years or so ago. Looking back it took some guts to do but it was the right move in hindsight, and faith in the math. I'm glad you and those fellows had the foresight to do that. I was a newbie stacker but still clung back in the fiat world.
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I never felt smart, but I sure did a lot of smart things, now that I look back...
Eleven years ago, part of my financial enlightenment was realizing that there is a big disadvantage in maximizing my RRSP contributions. So I stopped contributing and let it stand pat. Those RRSP contributions went into gold and silver.
My Stack is actually worth more than my RRSP Account.
Hold tight, no matter what... The Prices of Silver and Gold are so low right now, that it's causing a Delay on the Reset... All the Billions coming into the United States is in the form of Silver and Gold... Mostly Gold... The 5 Million Dollar Gold Cards, will be bought with Gold, and 5 Million in Fiat will be handed back to the Gold Card holders, and used for Dream Building... As time goes by, it will take less and less Gold for that Gold Card...
Sad that the tax man always wants his share!🙄
Down here ( in my State ) Precious metals are tax free, and treated like fiat/ cash. You can pass 100% on to your family!👍😊
Not all States have these rules…….🙄😇
As long as I trade silver and gold under Barter, I'm okay.
However, the laws in Socialist Canada can change on a dime.
I may need to make a break to the US if things get too dicey up here. For now I can work the rules to my advantage as best I can. I estimate using only half my RRIF and the unused funds can be deposited into my TFSA depending on the allowance that year.
Thanks for the comment @silvertop
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They definitely make the rules to their advantage!🙄
Glad you are on top of this!
Can you imagine how many people that don’t know how to deal with money at all😮
I came to that conclusion eleven years ago.
The rules around RRSP/RRIF accounts can change to their benefit.
That was the reason I stopped making my RRSP contribution and steered the monthly cash flow into my Stacking DCA Account.
My Stack is worth more than my RRSP/RRIF!
I'm gonna have a lot of hurting relatives and friends.
The same here, even my two married sons think dads crazy when it comes to stacking precious metals, and crypto!🙄
I just saw that you are the winner of last week’s Ladies of Hive, congratulations!🤗
Thank you.
My way and style of setting the bar on quality content.
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The taxman always gets theirs. Hope all the best for you K.
I'll make sure that they don't get more than they deserve. I have a list of favorite Charities that are far more efficient in providing social services and the funds will get to those who actually need it.
It's NOT the United Way.
I review it each year on a sliding scale.
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That is so sad (bad) that the government took too much...
Have you considered a trust for your assets?
Much !LUV sis!
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I'm working on that and I'm already half way there.
"Like minds." as the saying goes sis.
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I'm glad, sis. I live a corporate life, sis. It is much easier. Holding my job (W2 holder), it is just there. I don't go looking for job b and job c to increase my income. I don't own any assets, it is held in companies that are in trust. Hold your real estate in LLCs, sis.
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My family can use any advantage I can legally use, thanks Sis.
❤️
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It's a shame the tax man can actually get away with that! It ought to be illegal! However, it has given you an insight maybe you wouldn't have had otherwise. I've never put much stock into financial planners, be they employees of a bank, or one you specifically hire to help. Most of the time, they are looking out for the bottom line and it isn't yours!
As for retirement? Yes, we have a plan and it will do well by us. I'm looking forward to that day......
Thanks for sharing sis! Much love to you!🤗😘😍💜🌹 !LADY !LUV !DIY
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All the information is coming together now and my plan is sound. Early retirement will be the new life for me. I've already found ways to occupy my free time. I find that I can almost afford a trip to some sunny place each year. Or I may just spend it on gold and silver.
I need some grand kids to spoil.
Thanks for the support sis.
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It won't be long before you will wonder how you ever had time to work, lol! I'll DM you a secret in a bit. Take care my sis! !HOPE !INDEED🤗💟🌹
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Good advises, beautiful coins, great post!
All in one, dear.
Keep going and show us more!
"It's a trap!"
The government established private RRSP/RRIF accounts as the 'ideal' option of saving for our retirement that WE can control. Looking back more than ten years ago I realize that this is a cash cow scheme designed to generate a lot of tax revenue and make the banking industry a lot of cash in fees.
Most Canadians are financially illiterate or apathetic.
That is why I stopped contributing to my RRSP/RRIF and started buying gold and silver. As a result, my gold & Silver account has performed better than my RRSP/RRIF account to date.
!LADY
Sorry to hear about your mom getting ripped off by the bank, they always worry about themselves before anyone else. I think you're smart in you're retirement plan, and you have cash for a nice Caribbean getaway. Vacations are important, just don't got to Haiti!
Keep on stacking that silver and gold, and it's nice to get that income every year!
It's the nature of the Banking beast.
And why RRSP/RRIFs are designed to compliment a banks and the government's bottom line. I stopped putting my Retirement contributions into my RRSP and switched to Stacking eleven years ago. Today my stack is worth more than my RRSP account. It's not included in my retirement plan yet. It comes into play only when the Govt. pensions go broke.
Haiti, since the big earthquake, what happened to all the $billions in donations and help get the country back to it's feet go?
Into the pockets of all those NGOs I bet.
It's no wonder Haiti is the way it is.
God help these people.
I have a Passport to apply for. Thanks for the comment @thebighigg
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My votes a bit drained so here’s a bonus tip! 🖤
Thank you @geneeverett
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Well done, most folks go to the expense of hiring a Tax specialist rather than learning the system and making the effort to do the research themselves. When it comes to Taxes, knowledge is vital. Did you know that the CRA is recommending that they should be filling out our Tax forms for us? What do you think?
PD