Transferring RRSPS to RIFs for Canadians.

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.

Example

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.

https://www.bmoinvestorline.com/selfDirected/pdfs/BritishColumbia_LIRA.pdf

https://www.bmoinvestorline.com/selfDirected/pdfs/BritishColumbia_LIF.pdf

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.

https://lifeannuities.com/articles/2021/2021-lif-withdrawal-rates.html

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

https://www.bcfsa.ca/public-resources/pensions/liras-and-lifs

https://mpp.pensionsbc.ca/what-is-the-years-maximum-pensionable-earnings

There is a free booklet that has been posted by an investment company with more details about LIFs.

https://lifeannuities.com/2022-LIF-Withdrawal-Rules-Tables.pdf

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.

  1. Do your research before you start the process
  2. Give yourself several months to sort this out.
  3. Call your bank to walk you through the process.
  4. Ensure you understand the process.
  5. Ask a lot of questions if you don’t understand anything
  6. Take notes on what you do.
  7. The online websites are not very clear
  8. Try to transfer assets without cashing them out.
  9. Do your income tax for the next year using tax software using different amounts of withdrawals.
  10. Consider using a financial planner because there are a lot of details that I haven’t included here.

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Love #grassroots

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Walktober 2019: Finding beauty wherever you go

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https://breezesatdawn.wordpress.com/2019/11/03/walktober-2019-finding-beauty-wherever-you-go/
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This is a virtual meet up of bloggers. It is so touching to hear and see everyone’s walks. And the bloggers is a gifted writer.

Pioneer Annie

When I decided to stay on Hornby for the winter I had no idea what challenges were ahead of me.

I was having lunch with another blogger a few weeks ago telling her my Hornby story. She said “ you should write a book, you have such an interesting story and you tell it so well. I wish I had such an interesting life” and I said to her.. “ I wish I had you stable life. I don’t want all this moving around”.   She told me about a  mommy blogger who wrote a book.   I am not aspiring to write a book so in the meantime I will update my retirement blog. Mommy bloggers are a bird of another feather.

It’s been a rough winter with about five 24 hour power failures since November due to wind storms and f trees falling on power lines. BC Hydro has been pretty diligent in sending over crews on the first ferry in the morning and fixing things by the evening.   I had two nights in the dark, one with a friend who kept me company and one on the sofa in front of the wood stove. Fortunately by the time the first power failure had occurred I had mastered the wood stove and was able to keep a fire going and make cowboy coffee in the morning. That is thanks to Hornby friends who gave me several demos on how to build a fire and instructions on cowboy coffee… “boil water on the wood stove and add some coffee”. It was pretty good. Morning without coffee is not a pleasant experience. Shortly after my landlady left for Mexico for 2 months, the basement flooded, and despite the attempts of her son to adjust the sump pump ( what ever that is) it remained flooded for most of the next two months.   My landlady had promised someone would come by to put some Plexiglas over the sky lights but that did not happen until she came back 2 months later when she had someone install the Plexiglass, fix the sump pumb, reinstall the propane tank I had incorrectly connected and fix the leak in the dryer hose. Turns out the propane stove was not working and still isn’t fixed as of Feb 28 and one of my space heaters was loaned to a neighbour while I was away.  And over all this time the Satellite TV was down because the wind storms changed the positioning of the satellite.  I had already developed a bad cold and decided to rent a condo of a friend in Courteny while he was travelling around the world. Then I discovered I had pneumonia but the clinic on Hornby had given me antibiotics so all I had to do was lie low in Courtenay and fight the side effects of the antibiotics. While I was lying low on a massage table in Courtney my massage therapist had a similar story about her new house outside of Qualicum Beach.   The week before when the snow had hit she could not get her 100 ft driveway plowed. Her neighbour came to her aid. And she was without power for 5 days!!! This was her first year on Vancouver Island and she said she has had a pretty steep learning curve.

Two of my Toronto families on Hornby were hit but the snowmageddon without snow tires or four wheel drive and also had to rely on the kindness of friends. It’s been a rough winter all the way around on Vancouver Island. Next year I think it will be Mexico for me. 

I had another pioneer experience while teaching my 7 year old student online in Shanghai. The lesson was on Wild Horses in the US and I followed that up with a lesson about Annie Oakley. I felt the material was quite foreign to her but it made me think about my pioneer experience on Hornby Island. I was pretty naïve about what to expect but my friends have come to my aid as needed. I will go back next week and hope the snow and the power failures are over for this year. This wasn’t my retirement plan but my friends keep telling me they are enjoying hearing about my adventures even if I am not enjoying experiencing them.  Apparently while I was away there was a septic tank blockage due to toilet paper and now I have to my bag toilet paper and take it to the dump. I guess this is material for my next comedy routine.

My new favourite place is the The Second Page used book store in Courtenay. This is a rare Main Coon Cat who seems interested in Quincy Jones.  He reminds me of a Cheshire Cat from Alice and Wonderland. 

My other Courtenay Favourites

Acreview Dental- thorough, courteous

FYIdoctors -opticians- thorough, courteous

Walmart Medical Clinic- max about 30 mn wait and very knowledgeable doctors

The new hospital-

The Atlas Café

Mudshark Café

Union Street Grill

Fabricland.

And the Trumpeter Swans of Courtenay

Condos that have passed by-laws against short term rentals… What can you do if you want to rent your condo out on a short term basis?

Background

In the fall of 2017 the property management company for my condo passed a bylaw to ban rentals of less than one year.  The property management company seemed to think there has been complaints about disruption of residents’ peace and quiet due to short term rentals.   The ban includes rentals, home exchanges and rentals to home stay students. Most owners in the building are in their 40’s and I am one of the few seniors in the building. The controversy around housing in Vancouver and Airbnb has been ongoing for several years and the clamp down on Airbnb rentals is collateral damage.

Municipal policy and regulations

“City of Vancouver Short-Term Residential Rental Policy 2018  implemented new regulations concerning the operation of short-term rentals through services such as Airbnb and VRBO, with the objective of protecting Vancouver’s long-term rental supply, encouraging neighbourhood fit, enabling supplemental income for operators, supporting the tourism industry, ensuring health and safety, promoting tax and regulatory equity, and encouraging regulatory compliance”.

The city wants more short term rentals and has made an arrangement with Airbnb to monitor the licensing, supply and safety of accommodation. The City of Vancouver has specifically set up the licensing program to support short term rentals in Vancouver.  This involves buying a business license for $100 which is required when creating a listing on Airbnb. You are not eligible to buy a business license if your strata council does not permit short term rentals.  Thus the bylaw passed by the strata council is contrary to the direction in the City of Vancouver.

The city has a list of requirements for the business licenseBefore you apply for a license:

Strata properties   Make sure your building’s strata bylaws allow for short-term rentals.

Building and fire safety   Confirm your home is a legal dwelling unit.   Provide 24-7 contact information.   Post a fire plan at all entrances and exits.   Have interconnected smoke alarms on every floor and in every bedroom.   Have a working and accessible fire extinguisher on every floor.   Have carbon monoxide detectors on every floor if there are gas appliances.   Have a fire alarm in the building if it has more than three dwelling units or 10 occupants.   By January 1, 2023, have an automated sprinkler system or fire separation between units with at least a 45 minute fire-resistance rating, unless a higher resistance rating is required for the building type by the Building Bylaw or Fire Bylaw, if your short-term rental accommodation is attached to another dwelling unit.   Inspect, test annually, and keep related records for smoke alarms, fire extinguishers, and carbon monoxide detectors.   Review your insurance policies and cover any costs or damages that come from operating your short-term rental business.

How widespread is this problem of strata councils banning short term rentals? Where did it all start? What is the perceived vs actual risk.

  • New South Wales has banned restrictions on strata councils restricting short term rentals and found no evidence of negative impact of short term rentals.
  • In Queensland, it is written into the act that strata bylaws can’t be passed which restrict the lawful use of a property (so if council zoning allows something, then nothing strata can do about it).

Here is what I have done to try to get around the problem and resolve the issue.

I have submitted a letter to my strata council to exempt me from the regulations.

In accordance with the requirements of the Strata Property Act, please accept this letter as my application for an exemption from our rental restriction bylaw # 2.12 on the grounds of  financial hardship and I believe I am exempt from the rental bylaws as I purchased my unit prior to Oct 31 2005.  I also believe that a 5 week rental will have minimal impact on anyone and that a short term rental is keeping with the policy adopted by the City of Vancouver re: short term rentals. Furthermore the Strata Council Act grants a one year exemption to a bylaw that prohibits or limits rentals. As per the Strata Property Act, I am requesting a hearing with the strata council to discuss this matter should you feel the grounds for exemption are not adequate. I understand that an exemption granted by the strata corporation may be for a limited time and that the strata corporation may not unreasonably refuse to grant an exemption

So what processes are in place to fix this problem?

  1. The strata council can rescind or revise the bylaw.
  2. The strata council can grandfather in my suite so that the by-law will not apply to my suite as long as I am the owner
  3. I can apply for a waiver of the by-law based on financial hardship as suggested by the Civil Disputes Resolution.  The Civil Disputes resolution site has a place where you can make a complaint about anything to do with the strata council and they said that a strata council cannot limit your rentals if you have a case for financial hardship.
  4. I can make a complaint to the City of Vancouver about the strata council limiting short term rentals as this is contrary to the policy of the City of Vancouver. See The VanConnect app.
  5. There is a one year exemption from the date of passing of Rental Bylaws according to the Strata Property Act.

Have you had any success keeping your condo open to short term rentals?   What have you done?

 

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