Surprising truths about your RRSP + MORE Feb 26th

(Steve Prezant/Getty Images)
Q: As I understand it, RRSPs have tax withheld at 30% and then you are taxed based on your income for that year, which could mean a return or more taxes assessed depending on your annual income. If you decide to do pension income splitting with your spouse, does your RRSP need to be converted to a RRIF before income splitting? Are there any other tax implications involved with income splitting? When income splitting, can you withdraw from one spouse’s RRIF and then split the income between husband and wife and continue every year after to help reduce taxes?—Ken
A: I’m always amazed at how much more information exists about contributing to RRSPs versus withdrawing from them. It’s no wonder, given that the vast majority of financial information floating around out there comes from the financial industry. They make money when you invest, not when you divest. But after all the hard work you put into amassing your retirement savings, you owe it to yourself to try to figure out the best way to draw down on your assets…

Tax has already been paid on contributions to TFSAs, editor-at-large Jonathan Chevreau points out. (Getty Images/stockstudioX)
No surprise that the Broadbent Institute, a newish left-leaning think tank that counterbalances the rightish Fraser Institute, has concluded in its report Double Trouble that only the “rich” would benefit from the promised near doubling of annual contribution limits for Tax-free Savings Accounts (TFSAs).
So far, the media coverage of the report, as well as the Parliamentary Budget Officers’s report on TFSAs also released Tuesday, has focused on about the billions it will “cost” the government in lost tax revenue. I look at it a bit differently, of course. Remember, the original name for TFSAs were TPSPs, as in Tax-Prepaid Savings Plans. Unlike RRSPs, where you pay the piper at the end of the retirement-savings process, you’ve already paid tax on TFSA contributions before you’re able to contribute what’s next to your nest egg.

I argued in this Financial Post article in 2011 that Canadians, rich or poor, really don’t understand that those contributing to TFSAs have already paid their fair share of tax when they earned the income to come up with the TFSA contribution…

It wasn’t that long ago that retirement planning seemed a lot more straightforward: open a Registered Retirement Savings Plan (RRSP), choose your asset allocation, make contributions and—hopefully—watch your money grow. But the simple truth is RRSPs haven’t always been right for everybody: they were just the most popular option for tax-sheltering some of your earnings.
Things radically changed in 2009, however, when Tax-Free Savings Accounts (TFSAs) appeared. In fact, for many Canadians a TFSA can be a better choice, particularly if your income is limited and you can afford to use only one of these tax-sheltered accounts. TFSA contribution room now sits at $36,500 for every Canadian who was at least 18 in 2009, or $73,000 for couples—a sizable amount of money.
Consider, too, that fewer people have employer-sponsored pensions to rely on in retirement. Old Age Security is also being phased in later, meaning future generations will receive less money from the government in their post-working years…

Klipfolio is turning out to be one of this region’s hottest software firms. The 14-year-old data intelligence company is expected Wednesday morning to reveal it has secured a $6.2-million equity investment led by OMERS Ventures — the venture capital arm of one of Canada’s largest pension funds. “The new funding will accelerate our growth rate and […]

(Tony Garcia/Getty Images)
I’m giving a talk tonight about how longevity changes everything. I’ll begin by showing the front cover of the latest Bloomberg Business magazine, which shows a woman celebrating her 173rd birthday. It’s hypothetical of course, but describes a “forever pill” and scientific anti-aging research being undertaken by giant pharma companies like Novartis.
Nobody is saying such breakthroughs will occur in time to benefit aging Baby Boomers but it’s also true that more of them, and certainly the generations coming after them, will live to celebrate their 100th birthdays.
As I mentioned in my recent blog on Sun Life Financial’s ”unretirement” survey, I don’t find the general media’s top-line finding that more Canadians expect to be working full-time at age 66 than retired to be all that tragic. To the contrary, when I ran my speech past a couple of colleagues, they said they felt “inspired” when I got to the part about age 50 being possibly only the “half way” mark of life…