Estate Taxes are done. I dreaded this responsibility since my Mom was a lifetime saver yet at the same time a poor tax planner. Against my better judgement she preferred to live off her public pension income and preserves her private Registered Retirement Income Fund. Sadly, that choice made the Tax man a major 'beneficiary' to her estate.
“Black birds tend to like shiny things.” ~ The Bloody Raven
The RRIF Trap horror story.
An all too frequent mistake made by Canadian retirees is called the RRIF Trap. When my late Mother passed away last summer, her Registered Retirement Income fund (RRIF) was liquidated under ‘Deemed disposition’ as if she sold her Retirement Assets before her death. The proceeds were lumped into her 2024 income as taxable income before distributing to her beneficiaries.
This placed her well into the top band of next Tax bracket incurring a large tax bill putting the Tax man a significant beneficiary.
Judging from her financial records her Bank’s financial planner wasn’t very good. It was arranged in a manner that would benefit the bank more than the customer's own interest. Large cash accounts earned less than 0.25% if nothing all. Mutual funds that drew sizable annual fees that where not in keeping with the mediocre performance of their family of funds. And most glaring of all, failing to warn her of this financial hazard.
I shook my head as I sent the funds to Canada Revenue Agency, about 2.8+ troy oz. in gold or slightly more than 0.11 BTC I had to kiss goodbye.
This RRIF trap is not going to happen to me.
The 2015 Canada $50 1 Troy oz. Gold Maple Leaf
2015 was my sophomore year of stacking precious metals. After a year of silver stacking I was ready to start putting some into gold to represent a more conservative side to my off grid portfolio, a steady growing and much less volatile precious metal to it’s shiny cousin.
That year I set my long ten year gold stacking goal and started with my first ¼ troy oz. gold coin, a 1984. At $1200 to $1300 USD spot, I didn’t have enough for a full One Troy oz. coin. Nothing fancy, just stick to my native recognizable Maple leaf bullion gold for the least hassle issues should I need to sell it.
The 2015 gold Maple leaf also the second year following the 2014 introduction new security features. The precision radiant lines, the tiny Privy-like maple leaf micro laser etched device and the Bullion DNA Anti-Counterfeiting Technology. The RCM doesn’t get into the fine details but it may be worth the read and video to be familiar with the authentication process.
The RRIF Trap horror story, continued.
My approach will be different than with what my Mom did.
With my comfortable $45,000 CAD/year base income as derived in Part 1. I have another $7,000 to $10,000 CAD more head room before touching the lowest band of the next Tax bracket, perhaps more depending on how I tweak my charitable donation credits and what form of investments I chose.
Let’s say that $8k extra spending cash is $5,000 net of taxes. I can use it for that week-long trip like the Caribbean E8 vacation. Any funds leftover that year will be tucked away into my Tax Free Savings Account (TFSA). If I maintain that steady withdrawal rate over the next 17 years my residual RRIF tax exposure will be only large enough to leave my Taxman a lunch tip while leaving my Kids a big fat TFSA to do as they wish.
Ladies and gentlemen, don’t take your bank’s financial advisor’s recommendation at face value. When it comes to their own In House investment products it may likely offered to maximize their fees and not necessarily maximize your income to your comfort level and within your risk expectations. So do some homework to be sure.
Or get a second, or even a third opinion.
The take away for me here is that I learned something new out of my Mom's case and that is a lesson I can put in my purse and not in the Tax man's pocket.
Have you begun to make retirement plans? 🌴
Stacking Precious metals and Crypto for those dark stormy days!
The #piratesunday tag is the scurvy scheme of Captain @stokjockey for #silvergoldstackers pirates to proudly showcase their shiny booty and plunder for all to see. Landlubbers arrrh… welcomed to participate and be a Pirate at heart so open yer treasure chests an’ show us what booty yea got!
References & Sources
My Retirement finances are base on Canadian Tax Laws.
RCM Mint Bullion DNA Anti-Counterfeiting Technology.
Photos are my own shot with an ancient 2018 Samsung SM-A530W or otherwise indicated.
P. Image under Pixabay
W. Wiki Commons
☠️🎃 Page Dividers by thekittygirl. ❄️🌞
Cameo Raven Brooch from The Black Wardrobe.
The 2024 Hive 0.999 Silver Round.
Physical precious metals bullion stacking is only a part of my personal overall financial strategy. Meanwhile, collecting numismatics are a different set of objectives and strategy. Unless you are a complete nutcase as I am please, do your research before deciding to buy into any bullion or numismatic products.