Michel A. Saleh

Financial security advisor   *
Mutual funds representative   **
514 282-3276 1 866 665-0500, 23276

My financial chronicle

Withdrawing your investments wisely…

There are certain ways to minimize the amount of taxes you pay when you withdraw your investments after retirement. Let's look at the best withdrawal strategies from a financial and tax standpoint.

When is the best time to start cashing in your RRSPs? When you need the money! This answer may seem simplistic, but it's good to remember.

Indeed, many retirees hesitate to withdraw their registered investments for a number of reasons, the first being that they find it difficult to shift from “save” mode to “withdraw” mode. This is a psychological adjustment. You've saved for your entire life, and now you're suddenly supposed to switch directions. But isn't that precisely why you saved the money in the first place?

Another reason why some people hesitate to withdraw from their RRSPs is the desire to save these investments for their children's inheritance. This is a personal decision, and it is certainly necessary to respect everyone's wishes on the matter. But there's still one thing to consider: How old will these kids be upon the death of both parents? Fifty-five? Sixty? Will they really need this inheritance at that age? What difference will it make to them then?

There are other reasons for hesitating to make RRSP withdrawals, including the simple fear of “not having enough” later. Still, it is relatively easy to project your future income and make sure it will be enough to allow you to maintain your lifestyle, taking into account inflation and expected RRSP returns.

Whatever the case may be, if you have registered investments (RRSPs, URCs, or RRIFs) and nonregistered investments, it is best to withdraw the nonregistered ones first. This way, your registered investments can continue generating tax-free returns.

The only exception to this rule is if you believe that you may be eligible at 65 for the guaranteed income supplement under the federal Old Age Security pension. In this case, you may face considerable penalties for making RRSP withdrawals after age 65. Still, it is almost certain that you will not be eligible for this additional benefit if you contribute to a private pension plan (RREGOP, RRPE, etc.), since your income will be too high.

What's important to remember is that it is rarely wise to withdraw registered investments hastily in an attempt to save on taxes. Unless you can make RRSP withdrawals completely tax free, it is always better to pay tax later rather than sooner.

A good strategy for preparing for retirement with a smile is to plan the financial aspect as soon as possible. Come meet with me at your convenience, and we'll build the best financial strategy for you so that your retirement will be all it can be!

I look forward to meeting with you!