Q: A person diligently saves and invests, and is now in retirement. He has a diversified portfolio. He has maxed out TFSA contributions every year. He has a few hundred thousand in an RRSP, which holds good solid US dividend paying stocks. He also has a few hundred thousand in a non-registered account containing a diversified mix of good Canadian dividend paying stocks. He doesn't have a company pension. He does receive CPP and OAS.
He decides to open a RRIF account early (before age 71) and begin taking at least the minimum annual RRIF withdrawals. He wants to take the withdrawals as "in kind" transfers. (He may sell some stocks to raise the cash to pay the withholding tax, if necessary.) He doesn't need the withdrawal amounts as cash to live on so he wants to keep the withdrawal amounts invested in the stock market, hence the in-kind transfers.
The question is: what to do with the terrific US companies in the RRSP that will be converted to a RRIF, and will slowly need to be withdrawn? To transfer the US stocks in-kind to the non-registered account, means that the US dividend income will now be classified as ordinary income, which will be taxed at a higher rate, and there will be a US withholding tax of 15% on the US dividend income. Is one of the options to keep only low or no dividend paying growth stocks in the non-registered account?
It doesn’t seem to entirely make sense to sell the US stocks and start buying more Canadian stocks. If this were done, eventually the portfolio would become too concentrated in Canadian stocks.
What is the best and most tax efficient strategy for this senior?
He decides to open a RRIF account early (before age 71) and begin taking at least the minimum annual RRIF withdrawals. He wants to take the withdrawals as "in kind" transfers. (He may sell some stocks to raise the cash to pay the withholding tax, if necessary.) He doesn't need the withdrawal amounts as cash to live on so he wants to keep the withdrawal amounts invested in the stock market, hence the in-kind transfers.
The question is: what to do with the terrific US companies in the RRSP that will be converted to a RRIF, and will slowly need to be withdrawn? To transfer the US stocks in-kind to the non-registered account, means that the US dividend income will now be classified as ordinary income, which will be taxed at a higher rate, and there will be a US withholding tax of 15% on the US dividend income. Is one of the options to keep only low or no dividend paying growth stocks in the non-registered account?
It doesn’t seem to entirely make sense to sell the US stocks and start buying more Canadian stocks. If this were done, eventually the portfolio would become too concentrated in Canadian stocks.
What is the best and most tax efficient strategy for this senior?
