Making the most of the pension tax credit + MORE Nov 29th

Here’s a round-up of news for Canadian investors this week.

Barrick Mining

Alimentation Couche-Tard

Blue Ant Media

Brookfield

Featured RRSP Accounts

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EQ Bank

Build your retirement savings with 1.50% interest, tax-deferred contributions and zero fees.

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Registered GIC rate

Earn a guaranteed 2.75% in your RRSP when you lock in for 1 year.

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Best RRSP rates

See our ranking of the best RRSP accounts and rates available in Canada.

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In the last column, we looked at three recently published financial books, including one I had really looked forward to reading: William Bengen’s A Richer Retirement. It’s the American certified financial planner’s long-awaited follow-up to his ground-breaking book on the so-called 4% Rule.

I had originally planned to focus exclusively on that book but ended up on a related project on my own site, which involved asking more than a dozen financial advisors on both sides of the border what they think of the 4% Rule and the tweaks Bengen covers in his follow-up book. The survey was conducted via LinkedIn and Featured.com, which has long supplied content for my site. You can see the complete set of responses on my blog, but at over 5,000 words, it’s a tad long for the space normally assigned to this Retired Money column.

Here, I focus on the most insightful comments and add a few thoughts of my own. Let’s jump right in. 

Trusts and estates expert Andrew Izrailo, Senior Corporate and Fiduciary Manager for Astra Trust, recaps the basic thrust of the original 4% Rule:

“The 4% Rule, created by CFP Bill Bengen in the 1990s, remains one of the most referenced retirement withdrawal guidelines…

Ask MoneySense
I liked your coverage of RRIF taxation. I would like to see more information on LIF taxation. More precisely, on the following scenario: Individuals do not get the $2,000 tax credit for RRIF withdrawals before age 65. Did I read properly that for LIF withdrawals the $2,000 tax credit applies to anyone, irrespective of age? Meaning under 65? Should a LIRA be moved to a LIF when the expected minimum withdrawal would be under that threshold? Should LIF withdrawals be recommended for anyone under 65 as a tax strategy? Looking forward to reading your answer. 

—Sylvain Bussiere 

Hi Sylvain, unfortunately your interpretation is not correct. Converting your locked-in retirement account (LIRA) to a life income fund (LIF) before the year you turn 65 does not qualify you for the $2,000 pension tax credit. Even converting your LIF to an annuity doesn’t qualify you for the pension tax credit at age 65.

Having said that, this tax credit is not a big deal for most people, and in some cases, you will be better off not converting an RRSP or LIRA to a RRIF or LIF to qualify for the credit…