From: Canuck57@nospam.com   
      
   On 25/02/2014 4:39 AM, Alan Baggett wrote:   
   > Three Smart Ways To Tap Into Your RRSP : CRA SOTW   
   >   
   > Article by Samantha Prasad   
   > Minden Gross LLP   
   >   
   > We all know the cardinal rule relating to RRSP withdrawals before maturity:   
   DON'T DO IT! The tax hit on withdrawals from your RRSP has always been a huge   
   obstacle for using it as a source of cash.   
      
   WRONG.  If you have low to no income years, take money out and don't let   
   the unused low tax room go unused.   But granted, how many people plan   
   on having years of low to no income?   
      
   RRSPs for 95%+ of people out there are tax traps if the RRSP is say over   
   $80k.  Reality for most is they will pay more taxes on the way out than   
   they deferred on the way in.   
      
   And if you need say $100k to buy a cottage, boat, the tax bump is a killer.   
      
   Did you know a RRSP is 100% taxable at full rates on death?  Even after   
   death, a $500,000 RRSP will send over $200,000 of taxes to Ottawa as its   
   taxed in one year! Pushes your tax bracket to the max.   
      
   Do TFSA, as TFSA comes without inflation taxes, and with taxes prepaid,   
   if taxes go up, you avoid the RRSP tax trap.   
      
      
      
   > However, there are three strategies that effectively allow your RRSP to make   
   a "loan" to you, rather than an actual with- drawal: the Home Buyers' Plan,   
   the Lifelong Learning Plan and the RRSP mortgage.   
      
   Taking loans on the RRSP is economic suicide.  Say you have $200,000 for   
   your mortgage on a $500,000 RRSP....   
      
   Now you want to retire.  Lets see how this unwinds.  To pay a $200,000   
   RRSP debt you need to withdraw at least $333,000 as $133,000 for taxes   
   and $200,000 to go back into RRSP to get more taxes when you pull out   
   the $200,000 later.   
      
   Be careful with this tactic, it can easy land you into RRSP tax trap   
   territory.   
      
   > These strategies may not always make sense; however, com- pared to an   
   out-and-out withdraw- al, they usually do, since you have a chance to restore   
   the withdrawal to your RRSP without penalties.   
      
   You think you will get RRSP money out without taxes?  Who is smoking crack?   
      
   You get CPP+OAS then you are int he 25% tax bracket.  Add in other   
   income and like me, any RRSP withdrawals incur 33% to 435 tax rates even   
   though I retired early and do not have earned income.   
      
   Just another way people can get tax trapped in RRSPs.  TFSA and cash   
   accounts outperform RRSPs on the tax+inflation front.   
      
      
   TFSA is for everyone. Forget RRSP unles syou have a solid, compete and   
   rational plan to assure you pay a lower tax rate out than you deferred   
   in.  It is easily for most people more economical to pay taxes now than   
   it is to defer them.  Remember, if NDP get in and taxes go up, TFSA   
   doesn't get the inflation+tax futures RRSP gets.   
      
   TFSA is even for stay at home spouses as TFSA earnings don't impact   
   spousal deductions.   
      
   RRSP is only for 2 reasons and will not apply to most people:   
      
   1) You plan on having years of low to no income and withdraw on it for a   
   lower tax rate out than you deferred in.   
      
   2) If you are near death, only a few years to go and need elderly care   
   home with nurse and kick out $60,000/year for it, you can get 15 of it   
   as tax credits to reduce but not eliminate taxes on it.   
      
   For most people, RRSP now shoudl take back seat to TFSA.  TFSA is more   
   flexible, no inflation taxes, if taxes go up its immune, and if you want   
   the money for a 101 day retirement cruise, no tax bumps.   
   --   
   Socialist-statism corruption is a great idea so long as the credit is   
   good and other people pay for it. When the credit runs out and those   
   that pay for it leave, they can all share having nothing but   
   unemployment, debt and discontentment.   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)