Tax implications of making transfers between registered accounts + MORE Dec 21st

Not sure how to make a retirement plan? Read on…
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Financial hardship withdrawal exceptions and increasing income in retirement + MORE Apr 4th

Ask MoneySense I am in B.C., Canada. I moved my LIRA into a LIF two years ago. I have taken the maximum annual withdrawals for each year. I thought it’d be smart to start taking it. How can I get more out of it? I need the funds to help deal with bill payments. All my monthly i.... More »
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How to save (and invest) your first $100,000 + MORE Mar 28th

A popular milestone goal for young adults just starting out is to save $100,000 cash. YouTube and TikTok are buzzing with videos on this very topic, and it makes sense—$100,000 is enough to give you financial breathing room and life-changing options, like making a down payment on a condo or house,.... More »
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Planning for retirement with little or no savings to draw on + MORE Mar 21st

Despite their best intentions, some Canadians, facing a variety of financial challenges throughout their working lives, are not able to save much towards retirement. It can be difficult to know how to manage in these circumstances, especially when so much of the financial planning advice that gets s.... More »
 retirement savings

How to change a past tax return Apr 11th

Ask MoneySense I have non-registered investment management fees from 2021 and 2022 that were not claimed on my returns for those years. Can they be deducted on my 2023 return? If not, is there another way to utilize those deductions now? —Ian How to change a tax filing to claim investment m.... More »
 retirement planning

When are TFSAs and RRSPs actually taxable? + MORE Feb 29th

Ask MoneySense I saw your blog online; thank you so much for the wonderful job that you are doing—it was very informative! That motivated me to start investing too, but now I have a couple of questions. I understand that there is tax on U.S. dividends in TFSA. Do we pay tax as well when we sell: .... More »
Tax implications of making transfers between registered accountsAsk MoneySense
I had a locked-in pension, which I converted to a life income fund (LIF). I also took advantage of the ability to unlock up to 50% of the LIF within 60 days and put $120,000 into an RRSP. I did not receive any funds—so I was shocked when I received a T4RIF for $120,000, which means I have to claim that as income. I also received an RRSP receipt for $120,000.

I didn’t receive any money, so I’m not sure why I’m being taxed now, as I will also be taxed when I start to withdraw the funds. Did the bank incorrectly issue the T4RIF?

—Suzanne

Transferring money from a LIRA into a LIF

Locked-in retirement accounts (LIRAs) come from pension plans—either pensions that are defined contribution (DC) or defined benefit (DB) pensions—that are transferred to you from your employer when you leave a job. In some provinces or territories, these accounts are referred to as locked-in registered retirement savings plans (RRSPs).

They’re locked in because they are intended to provide income throughout your retirement, so you are limited in how much you can withdraw each year from a resulting LIRA, subject to annual maximums based on your age…

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U.S. withholding tax in an RRSP for CanadiansAskMoneySense
I have EPD stock in my RRSP for their dividend payments (about 7%). What a surprise I had—even when in an RRSP—I had to pay about 30% tax on these dividends. EPD is registered in Louisiana. 

—Wanda

How much is withholding tax on U.S. dividends?

I am going to provide a brief summary of U.S. withholding tax on investments, Wanda, before addressing Enterprise Products Partners (EPD) specifically.

First, U.S. stocks are generally subject to 30% withholding tax on dividends for non-residents. It does not matter where the firm is located that offers and holds the brokerage account. Foreign withholding tax is determined based on residency of the payor and the recipient.

Many countries, including Canada, have tax treaties with the U.S. to ensure a reduced rate of withholding tax. For qualifying Canadian residents, the tax can be reduced to 15%. In a registered retirement savings plan (RRSP), the tax may be reduced to 0%. 

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Inflation a scourge for retirees? Ottawa’s silver lining(s)While inflation and taxes are both major scourges for retirees, there’s a silver lining in how the two interact. That’s because the federal government builds in a degree of inflation-indexing to tax brackets, retirement vehicle contribution room and major retirement programs like the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

As CIBC Private Wealth’s Jamie Golombek recently wrote for the Financial Post, come 2024, all five federal income tax brackets are indexed to inflation using the rate of 4.7%. The new brackets are 15% for income between $0 to $55,867; 20.5% between $55,867 and $111,733; 26% between $111,733 and $173,205; 29% between $173,205 and $246,752, and 33% beyond that. Most provincial income tax brackets are also indexed to inflation. 

The basic personal amount (BPA) for 2024 is $15,705. That means most people will pay no tax on the first $15,705 of income.

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