Some words of wisdom from The Bank of Canada about the global financial situation. They seem to thing short term pain for ling term gain. Let’s hope this is true.
If you’re buying a condo or townhouse in BC, it’s probably a strata. But, from fistfights and fines to a fence that divided a community, stratas have been marked by stories of disappointment and rage
— Read on www.capitaldaily.ca/news/your-home-is-not-your-castle-buying-into-a-strata-victoria-bc
This makes my issues small by comparison. I find strata ownership challenging. There are a lot of unknowns. It’s hard not to get emotional about it all. As this article suggests it’s a free for all. Better governance might improve the situation.
Its tax time and the weather is gloomy so lets do our financial planning.
RRSPs must be converted to a RIF by December in the year you turn 71. I describe the process I to make this happen. I’m not a financial professional so don’t take my experience as advice. Here is a summary of the process.
Step 1 Contact your bank to set up an RIF and request they transfer assets from RRSP to RIF
Step 2. Find out from the bank how much you must withdraw each year and how much additional money you can withdraw and how often.
Step 3 Find out from the bank when and how the withdrawals will occur.
Step 4. Calculate the amount you will get, how much gets deducted in taxes and what impact it will have on your income.
Registered Retirement Savings Plans transfer to RIF
I found the process to set up the account and organize the withdrawals to be quite confusing. This process took a lot of time and effort. The forms have a lot of details about rules and regulations and request a lot of information about your finances. It might be different for you depending on which bank holds your RRSP.
My bank has the forms posted online. I tried to fill out the forms online, print them out, scan them in and upload them, but the files were too big to upload to the bank’s system. So, I mailed the to Head Office in Toronto. I then went through multiple phone calls to the bank as found they had not set up the account. Finally, the account was set up and the bank transferred my assets from the RRSP to a RIF. Several months later the bank sent the forms to me in the mail. So, it appears you don’t need to be proactive, you can wait for the bank to contact you.
I was offered monthly/quarterly/semi-annual/annual options for the minimum withdrawal on the 10th or 24th of the month.
Minimum annual withdrawal from RIF
Once you have transferred your assets from the RRSP to a RIF, you must set up a minimum withdrawal. Income tax is not deducted from this minimum amount. You can transfer mutual funds or stocks to a TFSA or you can transfer out cash to a checking account or TFSA. The bank will automatically transfer cash from the RIF to your checking account or TFSA on the dates you have specified in your application. However, if you want to transfer stocks or mutual funds from your RIF to a TFSA you must call the bank before the withdrawal date to put in a request for a transfer of assets.
Transfers of amounts above the minimum payment.
If you withdraw more than the minimum amount you must pay a withholding tax. You could withdraw the full amount if it were not for tax implications.
10% on amounts up to $5,000
20% on amounts over $5,00
30% on amounts over $15,000
Oddly enough, the first year you withdraw or transfer assets from an RIF, you have to pay withholding tax on the whole amount you withdraw including the minimum amount, according to the Bank of Montreal as of April 4 2022.
There are a lot of different scenarios regarding the withdrawals and research is necessary to determine what is the best scenario for you.
Let’s say your minimum amount you can withdraw is $10,000 and you want to withdraw an additional $30,000. I call the bank a week before the minimum withdrawal, they tell me how much my minimum withdrawal is, I tell them what mutual fund I want to transfer to my RRSP, and they execute the transfer. Then I tell them how much more I want to transfer above the $10,000. They tell me how much withholding tax there will be which would be approximately $9,000 (30% of $ 30,000). I cash in some mutual funds to fund the tax withholding. Then I call the bank back to execute the transfer of the mutual funds to my RRSP. Then I am done for the year.
Transfer of LIRA to LIF
The LIRA is different from the RRSP/RIF in that the funds are locked in. The transfer process is similar to an RRSP to a RIF. There is a similar complex application process as discussed above. However, the withdrawal rules are different. There is a min/max annual withdrawal only, unless you have extreme hardship or shortened life expectancy. The bank is required to give you a statement in writing of the amount that is to be paid out each year. This appears on the statement I receive from the bank at the end of the year. One can start withdrawals after age 55 and it would be wise to do this.
The withdrawal min and max are calculated on the website below. The calculations for a 72-year-old person in 2022 were 5.4 % min and 8.71% Maximum.
When the balance is less than 40% of the YMPC (64,900 x 40%=25,960) you can withdraw the balance.
if you will earn less than $43,267 before taxes in the next 12 months, you are eligible to make small additional withdrawals. https://www.bcfsa.ca/media/1637/download
Other online resources about LIRAs/LIFS
There is a free booklet that has been posted by an investment company with more details about LIFs.
Old age security claw back
Be careful about withdrawals because they are treated as income and can result in your income exceeding $75,000 at which point the OAS is clawed back at an increasing percent as your total income increases.
Lessons from my experiences.
- Do your research before you start the process
- Give yourself several months to sort this out.
- Call your bank to walk you through the process.
- Ensure you understand the process.
- Ask a lot of questions if you don’t understand anything
- Take notes on what you do.
- The online websites are not very clear
- Try to transfer assets without cashing them out.
- Do your income tax for the next year using tax software using different amounts of withdrawals.
- Consider using a financial planner because there are a lot of details that I haven’t included here.
Whatever you’re interested in reading, we curated the best retirement blogs for you that’s created and run by retirees, for retirees.
— Read on 4retirees.com/the-33-best-retirement-blogs-on-the-planet/
In her latest book, out now, Oluo examines the cultural and political underpinnings of what she calls the “mediocre-white-man-industrial complex.”
The retirement downsizing myth: No, seniors aren’t moving in droves — and that will affect the housing market | Financial Post
— Read on financialpost.com/personal-finance/retirement/the-retirement-downsizing-myth-no-seniors-arent-moving-in-droves-and-that-will-affect-the-housing-market/wcm/ce0b13fa-50ab-43b2-a019-bd18e3e9df86/amp/
Now that many people are working from home.. there is an opportunity to downsize your wardrobe. I did this when I retired but it has some relevance for the quarantine wardrobe. It is tempting to hold on to work clothes, but it is at the expense of freeing up room in your closet. A lot of my work clothes were kind of dated anyway. Joe Fresh has almost everything you need for retirement. Yes I know their hiring practices in Bangladesh have been controversial but you can’t beat the prices and styling and there are no snooty ageist sales people. Ok no sales people. I have converted many of my friends to Joe Fresh who already shop at the Salvation Army. What is about baby boomers that draws them to the Salvation Army? The Tyee has written on the role of clothing in global warming. Most of my peers have had minimalist wardrobes most of their life.
Yes you need a two season wardrobe in Vancouver.. Winter/Spring/Fall and Summer. Don’t forget Junuary. Are you working part time? Ok let’s say you need business casual two days a week. Save something from your work wardrobe. Do laundry once every 2 weeks. If you do laundry once a week you can do with a smaller wardrobe.
2 days a week work wardrobe all year round.
- 1 pair black pants or tights
- 1 long black/grey/burgundy warm sweater
- 4 long sleeve t-shirts any colour. I suggest Patagonia if you want a good quality t-shirt that fits loosely. Or Joe Fresh but their stock varies from month to month.
- 4 short sleeve t shirts any colour
- 4 pairs black socks
- 1 pair shoes/runners depending on dress code
- 2 scarves – warm, fancy etc to dress up wardrobe and keep neck warm.
This takes care of 4/14 days all year round.
Winter/Spring/Fall in Vancouver
- Tights – 2 pairs black, 1 multicolor for fun
- 10 long sleeve t-shirts -various colours
- Rain coat with lining: Hely Hansen is my favourite because it has a zip up collar at the neck, a two way zipper and flannel lined pockets as well as a light weight lining
- Windproof shell you can wear over down or fleece jacket.
- I seldom wear wool sweaters in the winter in Vancouver.
- 1 Fleece Jacket
- Down coat, knee length. It can be very windy in Vancouver and the dampness goes right through you. Here is my favourite from Eddie Bauer. I am on my second one.. buy a dark colour!
- Short lighter weight down jacket with shell – Eddie Bauer and North Face have lots to choose from.
- And of course you need socks. I love socks that have padding! These are winter socks with lots of padding
Summer in Vancouver/Travelling south in the winter
- Knee length tights – 2 pairs, black and multicolour. Joe Fresh has a great selection. Very cute patterns.
- 2 pairs LLBean Comfort trail shorts because the waist is adjustable, quick dry, will last forever and good for travelling south. Black and khaki. $ 50.00 US.
- The Mountain Hardwear Women’s Dynama Capri cropped pants, they are stretchy and have pockets big enough for an iphone. The Mountain Hardwear Dynamo line come in shorts and long pants as well. I have replaced both shorts and knee length tights with the MH cropped pants.
- 10 short sleeve t-shirts various colours and styles.
- Two dresses with short sleeves. Can wear to work.
In Vancouver you will seldom need: Sundresses, tank tops, tops with spaghetti straps or bathing suits. Vancouver is pretty casual so the work wardrobe can work for upscale events. Layers are the best way to go as the weather changes hourly and from area to area in the city.
Now that we are in quarantine mode..you can shift to a more comfortable bra. I have been shopping around for the best sport bra/no wire and found it online at La Vie en Rose. Once you switch it will be hard to go back to a regular bra. I have found this style also reduces rashes under your breasts. I have recently discovered a similar model as Walmart.
Places to shop for masks.
One of the first priorities of the newly re-elected federal Liberal government is a $6 billion personal income tax cut. The Liberals and Conservatives campaigned on similar promises, but the Liberals claimed their cut was more progressive. No matter how you slice it, cutting taxes reduces the amount of money available to provide services, and this specific tax cut goes mostly to higher income earners. There’s nothing progressive about that.
— Read on cupe.ca/federal-tax-cut-hurts-services-helps-wealthy
Meet the budget’s new RRSP strategy that every retiree should know about – Financial Post
— Read on business.financialpost.com/personal-finance/retirement/meet-the-budgets-new-rrsp-decumulation-option-that-every-retiree-should-know-about/amp