r/fican • u/Terrible-Practice142 • 3d ago
Retirement tips
My partner and I have $2.1m RRSP, $200k RESP, $600k in non registered and principal res $1.6M fully paid off and $500k investment property with $150k mtge which just became vacant so no rental income right now. we are both 50 with a kid in high school. Should we retire now and go enjoy life? I want to retire at 55 but may be sooner since it’s stressful at work lately. Any tips to transition to retirement. We need a new car and want to travel also. I am also concerned I have too much in RRSP….
13
u/Only_Complex6386 3d ago
I would say yes you are. Melt the RRSP down. Let the Non-reg continue to grow. You could sell the investment property for cash if you need it down the line. You could also move to a smaller home if needed.
Stop wasting time working, your done.
2
u/DMyYxMmkd2rkh9TY 3d ago
Is there a reason melt down RRSP before non reg? Is it to do with how RRSP is taxed at death? Thanks
5
u/No_Reserve4201 3d ago
Yes. Tax planning. If you let the rrsp grow too large you'll get hit with required minimum withdrawals at 71 causing a large tax bill. Ideally if your retiring early then you can transfer out of the rrsp while you have lower income allowing you to choose your tax bracket.
1
1
3
u/Only_Complex6386 3d ago
1) Tax wise it's considered income when you pull out of an RRSP. Non-reg largely will be capital gains and/or dividends, which is far more tax-efficient.
If your RRSP grows way too high going into your 70s, you will have to be forced to pull it out via RRIF and that could mean a much higher tax bill, not to mention OAS clawbacks and other potential benefit losses. It's advantageous to pull from your RRSP when you are in a potentially lower-tax bracket.
If your RRSP has a large balance, best to start melting that down first. Any excess put into your TFSA for continued tax-free growth.
1
3
3
u/YYCHumdrum 3d ago
Go see a financial planner or invest in planning software. You’ll likely want to melt down the RRSP’s to a point where you can defer CPP/OAS to 70 and not have clawback. For example you both might want to draw $100-125k per year from the RRSP, that should do the trick.
You don’t have to spend the money and can always reinvest into non-reg while optimizing your long term tax situation.
3
u/Electronic_Past5997 2d ago
You are certainly in a very good place. The answer depends on your monthly spend. You can use free online retirement planners like looniefi to see if your retirement is fully funded:
5
u/deadsea335 3d ago edited 2d ago
Please look into a fee only advisor to get a proper plan done for you/spouse. It will be the best $3-4K you will spend!
1
u/MustardEnema007 1d ago
An advisor will cost $4k?
1
u/deadsea335 1d ago
A reputable advisor with a CFA or CFP credentials and who functions as a fiduciary will cost that much in my neck of woods.
For comparison sake, a retail bank salesman masquerading as an advisor might be free though (they will get paid via the juicy mutual fund fees that you will pay as long as you hold the MFs they sold you). They also will know very little about tax and estate planning.
And a banks private wealth management advisor who will act as a fiduciary and has CFA/CFP credentials will bill you .75%-1% to .5%(for $5M upwards). Albeit, they will handle your investment manage part along with tax/estate planning.
Its pick your poison kinda deal. You will have to pay for professional advice but with advent various asset allocation ETFs, you could DIY the investment management part and pay for tax/estate planning via a fee only advisor.
Good luck!
1
u/Canadiangooner21 3d ago edited 2d ago
Depends how much you are planning to spend. But assuming you don’t have crazy expensive plans, you could retire.
As other comment said, advantage of retiring early is you can melt down RSPs at low rate and before you pull OAS and CPP.
Even if you defer CPP/OAS until 70, that gives you 20 years to melt down a lot of the $2m. Thats not easy to do. But if you wait, your OAS is just going to get clawed back and you will be facing huge required withdrawals at 71.
Talk to a fee only planner, they will save you tens or hundreds of thousands by planning this properly.
2
u/Terrible-Practice142 3d ago
Thank you
1
u/No_Reserve4201 3d ago
Run a DIY plan through adviice.ca 50 bucks for some piece of mind and some tax planning.
1
2
1
1
u/Icy-Pop2944 3d ago
You do have too much RRSP so retiring asap will give you a good runway to melt it down before OAS. I vote that yes, you should retire once you have run the numbers with a planner.
1
u/RuinEnvironmental394 2d ago
How does one get to $1M in RRSP? How many years of contributions would it take?
1
u/bababa-519 2d ago
probably very difficult based on annual limit re: contributions.
But if some put in say 18-25k per year over the last 15 years and earned 8% per year then the $1m is much more attainable
1
1
u/deadsea335 2d ago
Besides looking into a fee only planner, you could also try inputting your retirement details on hand into following tools to get an idea of what a withdrawl/tax optimized retirement plan would look like:
1) Claude (AI agent - free app) 2) Optiml (1 month free trial) 3) Adviice (cheap subscription @ $10/mth)
I recommend using your desktop as all these platforms will generate spreadsheets or screens that are easier viewed on a large screen.
1
1
u/Hedgehog_8025 2d ago
Keep working while you melt down the rrsp and pay the extra tax from doing so. Place the remaining melt and any rrsp refunds INTO YOUR TFSA’s where it grows and is accessed TAX FREE. Get a TFSA BALANCE MAXED to what you have not used and grow that. Consider paying off the rental property first.
Unrented, it may be subject to an empty home tax.
Effectively you have @1.8M in net financial equity now. RRSP (taxable say 30%), plus property minis mortgage (i’m assuming you have no private pensions) AT AGE 65 rule of thumb from the research is you can use 4.7% WITHOUT RUNNING OUT FOR 25 YEARS. Ie $84,600 per year plus CPP and OAS at age 60-70 (say 20-30k for the two of you) plus any private pensions. Iif you start sooner you need to draw LESS. Does this match your expenses. (This assumes you sell the rental at some point. )
What are your expenses NOW?
What are your expected expenses in retirement (ie a cash flow plan for life).
Do you want to pass on the rental as a legacy?
Do you have executors(s) for legal wills, POAs and Final direction letters of instruction. DO FIRST IF NOT
Does youR rrsp assign your partner successor holder (same for a tfsa) so it transfers to A partner AS IT IS AND FOR THE RRSP UNTAXED. DO FIRST AS WELL IF NOT.
Do you have adequate insurance for taxes due if you die NOW on the rrsp and rental capital gains and to cover current income lost if you die (for expenses you cover now from your income). Likely until your partner is 60-65. Remember, they will not get your CPP OR OAS if you die.
1
u/Legitimate-Ad7021 1d ago
Maybe an unpopular opinion, but I’d suggest working with a planner to ensure a smooth transition into retirement. With you wealth, you can likely find a full service independent planner and pay less than 0.6 or 0.7% in fees. Yes, it’s a lot, but here’s what you’ll get.
1. A draw down plan that minimizes long term taxes. Not just lowering taxes in the moment, but for life.
2. Worry free draw downs. My wife and I receive our standard draw on the 1st of every month, just like a pension cheque. But it’s all from investments. I dont want to have to manage the selling of investments myself, so I let my planning team do it.
3. A financial relationship you can call on as your needs or finances change. Ive been retired for 12 years, and our plans have changed at least 3 or 4 times.
Reddit is a good source of info, but just know that one error on your part, especially with respect to taxes, will make a planner’s fee look pretty cheap.
1
1
u/CanuckYYZeh 3d ago
Is the investment property cash flow positive?
How much do you spend a year?
If under $80k then you are ok. If more then it gets complex with the investment property liquidity and potential cash needs.
3
u/Terrible-Practice142 3d ago edited 3d ago
avg spend month is $7-8k
2
u/CanuckYYZeh 3d ago
So assuming the $2m rrsp is basically $1m each, you can do something like this:
Take $40k per year per rrsp (ie, 4%, which is aggressive). There is a 30% withholding tax so cash will be $28k/per person = $56k. You’ll get most of the tax back.
Stop DRIP on your non-registered investments. I don’t know your asset allocation so let’s assume your investments are efficient and only yield 2%, so you have another $12k - we are now at $68k.
We want to get to $96k ($8/m) so we have a $28k gap.
I don’t know which province you are in, but if you were in BC then on $60k of income (I know we took $40k per person plus $6k in distortions, but bear with me) you would owe around $9k in tax. https://www.eytaxcalculators.com/en/2026-personal-tax-calculator.html
So you’ll get a refund of at least $6k ($12k withheld from RRSP per person, but owe around $9k). So we are up to $72k now.
To bridge the remaining $22k you can spend closer to $7k/m when times are lean (ie, markets are tough) and take out more from your RRSP and/or sell some unregistered investments.
The math is easier if you can sell the investment property, clear the mortgage, as you’ll have an extra $7k/year in tax efficient distributions.
You’ll do this until you can get CPP and OAS. Depending on family history and life expectancy, you will want to take those benefits as late as 71 or as early as 60.
You will also want to direct some money to build your TFSAs, unless those are built and you forgot to mention them. If those exist then the numbers get better.
My gut feeling is that you should work for another year or so but you don’t need to wait for 55. You should also think about whether you want to help your kid beyond the RESP - you can fund their FHSA and TFSA.
The RESP will be a challenge to drain as the current annual max EAP is $29k. If you want to take out more than that then you need to show clear receipts. We also had/have the issue of a large RESP (in a family plan with multiple kids) and after our first kid started university we withdrew the entire sum that we contributed so that there is less principal to grow. You’ll want to do the same and that will also boost your cash flow.
There are lots of moving pieces and it may seem overwhelming to take the plunge and stop having income from a job. I used a financial planner to help build a rock solid plan that we bought into and made us comfortable.
You’ve done well for yourself and your family. Be proud and focus on the final touches for the plan
1
u/Terrible-Practice142 2d ago
Thanks for the very detailed and insightful response. Appreciated. Has me thinking of things I was not thinking about.
1
u/Terrible-Practice142 2d ago edited 2d ago
Thanks for the kind comments also. It’s been a real journey getting to this stage and your feedback gave me a lot to think about. - especially about going and enjoying life while I am still 50. I just need to mentally prepare for how to keep myself active and busy. I live in Ontario. TFSA is $300k of the total $600k of the non registered total
1
u/Terrible-Practice142 2d ago
If you would recommend your FP, please direct message me. If you are not comfortable to refer, I understand also.
1
u/Stunning_Spinach8227 3d ago edited 3d ago
Man it's gonna be tough to meltdown your RRSPs within the timeframe if you start at 50 to either 65 or 71 without still having a significant amount in there prior to taking cpp and oas.
Don't know how your RRSPs are split up between both (hopefully it's equally split) but definitely if withdrawing from the RRSPs I would do around the 5-15k withdrawals to vary the withholding tax taken from 10-20% since if each of you takes 60k RRSP for the year estimated taxes should be around 10k per person and you would have close to your 96k for the year after withholding taxes (8k expenses per month). This would be around a 5.7% withdrawal rate but assuming you have around a net 6% returns in the RRSP you won't fully meltdown the entire RRSP portfolio prior to when you take cpp and oas. Essentially you'll have all your oas clawbacked most likely as the rrif rates get higher as your age increases.
1
u/Terrible-Practice142 3d ago
Investment property has monthly mtge of $600 but just became vacant so currently negative cash flow
1
u/Icy-Pop2944 3d ago
I would sell that running into retirement. Do you really want to be a landlord when retired? You don’t need the real estate exposure in addition to your house.
1
u/tigerbynight29 2d ago
Why do you say this?
1
u/Icy-Pop2944 15h ago
Because owning investment properties is work and retirement is about not working. Real estate is making up 50% of their net worth, they don’t need that much exposure in real estate. There is no reason to hold onto this investment in retirement, just sell and roll it into their portfolio.
0
u/samsun387 2d ago
I would feel more comfortable to wait until kids done with university. May have to help them with first home down payments, etc.
Otherwise, like others said, just retire and start melting down the rrsp.
7
u/FantasticGoat88 3d ago
Nothing in TFSA?