RRSP Meltdown: Near-Retirees Must Know

RRSPs aren’t a “set it and forget it” retirement plan.

In this podcast clip, Adam Bornn ( @ParallelWealth ) explains the RRSP Meltdown strategy—how drawing from your registered accounts early, and delaying CPP, could dramatically lower your long-term tax bill.

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 One of the big things is the RRSP meltdown and trying to gain access to some of your registered money before you normally would by doing the RIF transfer and taking out the minimum.

Can you walk us through in general what that is?

The RRSP meltdown is really how do we draw down your RRSP or registered accounts. Could be a Lira, RRSP, whatever it is, convert it to A RIF or, or a LIF. How do we draw down those accounts as quickly and as tax efficiently as possible? And that’s the idea. And again, this is, this is not a standalone process.

This typically will tie into delaying your Canadian pension plan. So if we delay your Canadian pension plan, now we have more time. We don’t have income. Right? And a lot of people enter retirement and they say, well, I have a TFSA, or I got a bunch of cash or severance from work. I’m good for a year or two. I’m gonna live off the cash.

And they paid zero amount of tax. And in theory on paper you think, well, paying zero tax sounds like a great thing, but when you actually build it out into a retirement plan over many years, it’s actually not to your benefit. You will actually end up typically paying more taxes. So RRSP meltdown, again, you have to look at everything together, but it’s really drawing down that, that RRSP registered accounts, more aggressively before you start, say your CPP or old age security.