What To Do With Retired US Dollar RRSPs?

Some retirees convert part of their RRSP to an RRIF because of the tax benefits. With the Retirement Income Amount Tax Credit, withdrawals from an RRIF of at least $2,000 are tax free (or nearly so) and the majority of your RRSP funds can remain intact.

As you noticed Liz, given your age you will soon need to convert your RRSP account to an RRIF. The new RRIF and your existing RRIF do not need to be combined. If your broker allows you to have a US dollar RRSP account, they likely offer US dollar RRIF accounts as well.

RRIF Payout Rules

RRIFs have an annual minimum withdrawal requirement. It is a pre-determined percentage of your account balance as of December 31 of the previous year and increases each year as you age. If you convert your RRSP to an RRIF at 71, the minimum subsequent year payout is 5.28% of account value. RRIF minimums are calculated individually for each account. So you can no longer withdraw from one account to withdraw less than the minimum amount from another.

There are no maximum withdrawals for RRSPs or RRIFs. However, in practice it is not generally advisable to redeem the entire account as withdrawals are fully taxable.

The same rules that apply to maintaining separate accounts and taking minimum withdrawals also apply to other registered retirement accounts, such as: B. Restricted RRSPs, Lic. The only two limitations are that tied RRSPs must be converted into a Lifetime Income Fund (LIF) or similar account (depending on the province) and there are maximum withdrawals each year in addition to the annual minimum withdrawals, which are also age dependent.

The Benefits of a US Dollar RRSP or RRIF

The advantage of having a US dollar RRSP or RRIF is that you can buy US investments at lower transaction costs than with a Canadian dollar account. This is because you can hold US dollar cash and avoid the need to convert Canadian dollars to US dollars to buy a US dollar investment; You can also avoid having to convert US dollar proceeds to Canadian dollars upon sale. US dividends that are not reinvested may be accumulated in US dollars instead of Canadian dollars. You can also withdraw in US dollars, which can be useful when traveling to the US

With a broker, forex fees can be as high as 1% to 2%. Buying or selling US dollars in a US dollar RRSP or RRIF eliminates these fees, Liz.

Another option: Canadian Depository Receipts

If you can’t open a US dollar account, one option for your existing RRIF is to consider Canadian Depositary Receipts (CDRs). CDRs allow you to buy foreign companies that trade in Canadian dollars on a Canadian exchange.