I've been trying to take money from my RRIF with no withholding taxes. It really artificially inflates your gross income for the year and impacts all benefits. Leave it to the individual. Not everyone has to be held by the hand.
I agree for many people but the average person generally does need to be held by the hand with this stuff unfortunately… But if there’s going to be a withholding tax system, at least make the system make sense. If the withholding tax amounts were increased with inflation, the gross withdrawals required would be much lower for most people. This could keep more money invested inside the plan instead of waiting for it to come back at tax time
If the thresholds of withholding tax increased with inflation, there would be less withholding tax payable upfront. More of your withdrawal would fall into the lower withholding tax brackets.
It's not quite that simple unfortunately because of the provincial taxes that might be applicable and the age amount credit is calculated at the lowest federal tax bracket (and each province has different age amounts that may or may not be applicable) buuuuuut if you have $25k of income over 65 and some of that income is coming from a "pension" (DB pension or RRIF are most common), you're not going to pay a whole lot of tax that's for sure.
Always great to learn things not known before - Thanks. Any thoughts who we can lobby to convince govt' to update some of those >25 year old tax rated benefits (i.e., CPP death benefit, RESP grant, etc.)? 😊
Hey thanks for watching! Glad it was valuable. Finding the right person willing to move those heavy rocks is the real million dollar question! Perhaps an enterprising opposition MP who likes to make political noise :)
Is it true that if my only income is eligible Canadian dividends in retirement, I can get up to about $50,000 and pay zero income tax? That was my plan. Thanks.
While Canadian dividends will have some favourable tax treatment, the tax calculation is quite complicated. If you receive $50,000 in eligible dividends you will pay taxes on $69,000 of income due to the "gross up" rule and then get a credit for some of it back (just over 15%). But all of this is irrelevant if your money is in an RRSP. And you'd be far better off using an RRSP with a diversified portfolio than building a non-registered portfolio of only Canadian dividend payers. Also, assuming you had earned income throughout your life, you'll have CPP which is taxable. And OAS if you've lived in Canada most of your life. It's important to not let the (tax) tail wag the dog with retirement income. Too many people try to avoid taxes at all costs and miss out on having more money at the same time.
@@canadianmoneyroadmap Thank you for the reply, great info. My TFSA and RRSP is maxed every year with global index funds, now im just trying to figure out how to optimize my taxable accounts while being in a high-income bracket (before early retirement), cheers.
Simple answer is no but the full answer is a bit more complicated. Ontario is one of the provinces that uses the local provincial CPI (instead of the federal CPI) to calculate their indexing. For 2025, it has now been confirmed at 2.8%. BUT it gets worse... Ontario is the only province (I think...) that has indexed brackets AND fixed brackets. The two highest brackets in ON are fixed but the lower ones are indexed. The fixed brackets are from $150k - $220k (12.16%) and over $220k (13.16%). There are many different versions of provincial indexing so I left the details out of the video. Thanks for the comment and for watching!
@canadianmoneyroadmap do you know if Canadian rules on the subject are different? I live in Canada. Thank you for educating people on such and important subject.
Great summary Evan. Thanks for the heads up!
Glad it was helpful! Thanks for watching
I've been trying to take money from my RRIF with no withholding taxes. It really artificially inflates your gross income for the year and impacts all benefits. Leave it to the individual. Not everyone has to be held by the hand.
I agree for many people but the average person generally does need to be held by the hand with this stuff unfortunately…
But if there’s going to be a withholding tax system, at least make the system make sense.
If the withholding tax amounts were increased with inflation, the gross withdrawals required would be much lower for most people. This could keep more money invested inside the plan instead of waiting for it to come back at tax time
@@canadianmoneyroadmap In your last paragraph, you give the reasons for the withholding taxes to be lowered, not "increased with inflation".
If the thresholds of withholding tax increased with inflation, there would be less withholding tax payable upfront. More of your withdrawal would fall into the lower withholding tax brackets.
So if you are 65 you get a tax credit of $25k ($16k + $9k)? Does this mean you owe $0 in taxes if total revenue is < $25k?
It's not quite that simple unfortunately because of the provincial taxes that might be applicable and the age amount credit is calculated at the lowest federal tax bracket (and each province has different age amounts that may or may not be applicable) buuuuuut if you have $25k of income over 65 and some of that income is coming from a "pension" (DB pension or RRIF are most common), you're not going to pay a whole lot of tax that's for sure.
Thanks for the update!
Cheers! Thanks for watching
Point is we pay too much
Always great to learn things not known before - Thanks. Any thoughts who we can lobby to convince govt' to update some of those >25 year old tax rated benefits (i.e., CPP death benefit, RESP grant, etc.)? 😊
Hey thanks for watching! Glad it was valuable. Finding the right person willing to move those heavy rocks is the real million dollar question! Perhaps an enterprising opposition MP who likes to make political noise :)
Is it true that if my only income is eligible Canadian dividends in retirement, I can get up to about $50,000 and pay zero income tax? That was my plan. Thanks.
While Canadian dividends will have some favourable tax treatment, the tax calculation is quite complicated. If you receive $50,000 in eligible dividends you will pay taxes on $69,000 of income due to the "gross up" rule and then get a credit for some of it back (just over 15%).
But all of this is irrelevant if your money is in an RRSP. And you'd be far better off using an RRSP with a diversified portfolio than building a non-registered portfolio of only Canadian dividend payers.
Also, assuming you had earned income throughout your life, you'll have CPP which is taxable. And OAS if you've lived in Canada most of your life.
It's important to not let the (tax) tail wag the dog with retirement income. Too many people try to avoid taxes at all costs and miss out on having more money at the same time.
@@canadianmoneyroadmap Thank you for the reply, great info. My TFSA and RRSP is maxed every year with global index funds, now im just trying to figure out how to optimize my taxable accounts while being in a high-income bracket (before early retirement), cheers.
is 2.7% also apply to ontario brackets?
Simple answer is no but the full answer is a bit more complicated.
Ontario is one of the provinces that uses the local provincial CPI (instead of the federal CPI) to calculate their indexing. For 2025, it has now been confirmed at 2.8%. BUT it gets worse...
Ontario is the only province (I think...) that has indexed brackets AND fixed brackets. The two highest brackets in ON are fixed but the lower ones are indexed. The fixed brackets are from $150k - $220k (12.16%) and over $220k (13.16%).
There are many different versions of provincial indexing so I left the details out of the video.
Thanks for the comment and for watching!
My goodness! My head is spinning trying to understand this information. Can you please, please explain this to me as I'm 10yo?
Yup! Start here: ruclips.net/video/md3xxQEigrU/видео.htmlsi=aZAZBSAjQFUByFRz
@canadianmoneyroadmap do you know if Canadian rules on the subject are different? I live in Canada. Thank you for educating people on such and important subject.
Everything I talk about on my channel is specific to Canadians