Dr. Garth

What a day. Patients queued around the block, right down to Timmie’s. Nurse Jiggles is in the parking lot triaging folks who just received their mortgage renewal docs. The GenZs are suffering from Early Onset Envy and the wrinklies are bloviating again.

Welcome to the GreaterFool Trauma, Marital Advice, Judging & Vet Clinic. Yes, we take PayPal. And have free liver treats.

“You help has been invaluable through the years,” says Will, hoping for quick treatment. (It worked.)

“I am 72  and withdrawing from my rrifs Does it make sense to remove funds from my rrifs to make the yearly contribution to a tfsa. Paying the tax but giving me more control in future. I don’t receive enough yet to trigger any clawbacks.”

At age 71 an RRSP croaks. By the end of the year in which you turn that decrepit age the owner, Will, must cash it in (and pay a heap of tax), convert it to an annuity (bad idea unless interest rates romp again) or turn it into a RRIF. As a registered income fund, the account can hold exactly the same stuff it did as a retirement vehicle – stocks, ETFs, bonds, REITs etc – and all of the growth inside accumulates tax-free.

The only difference is a smallish amount must be withdrawn annually and added to taxable income. That minimum augments as you age. Here is the formula:

Age 71 – 5.18%
75 – 5.82%
80 – 6.82%
85 – 8.51%
90 – 11.92%
95+ – 20% (hell, spend it all)

In other words, if a RRIF holds a nice B&D mix of assets with taxless growth, it should throw off enough to cover all of the required withdrawals until you’re well into your 80s. So why be in a rush to haul money out, add that to income (possibly pushing you into a higher annual tax bracket), pay tax on the surplus, just to put it into a TFSA where contributions are not deductible? Huh?

The TFSA does not give you increased control. The tax-free aspect is the same as the RRIF. The assets held can be identical. The only advantages are tax-free withdrawals (because you already paid the tax when sourcing the funds from the RRIF) and the ability to replace money you took (but in retirement, with no employment income, that’s likely tough). Bad idea.

Now, here’s Chester with a query about real estate, realtor and fibbing:

“I’ve been following our local listings on Zolo which I believe gets its information from Realtor.Ca since my Mother put her house up and sold it. Something I notice is they list houses at a certain price and when they don’t sell they put them up at the new price with no mention  that they were previously listed at the higher price and didn’t sell. I’ve also noticed buildings listed as new when I know they are much older. This seems unethical. Is it illegal?”

Yes, legal. Ethical? Not so much. And it’s done all the time. Everywhere.

Sometimes an agent will terminate a listing (with the seller’s permission) and relist immediately in order to garner attention. New listings do that – they’re inherently more exciting and get noticed quickly. In the case of a price change, most realtors will also create a brand new listing for MLS, for the same reason. And as a listing expires (there is a time limit set when you enter into a contract to sell) the agent will list again – setting the DOM (days-on-market) meter back to zero.

Every time a listing or relisting occurs, the multiple listing service provider (local real estate board) will publish it as new. So, Chester, in most parts of the country potential buyers are blind to how long a property has been on the market. (In some areas, like NS, where Viewpoint is the go-to site, a full listing history is published.)

So, ask your agent to find out what the CDOM for a property is. That’s ‘cumulative days on market’. And the higher the number, maybe the lower your offer.

Finally, Allison needs some healing and help. Her partner died recently. She’s 58, and a bit lost.

“I am expecting a rrsp inheritance of $370,000. I am working full time. No pension. Own my own house but have a mortgage of $125,000. My house is worth $600,000. I do have other investments worth around $300,000.  My question is should I take the lump sum in cash and become debt free, or reinvest it into another rrsp.”

A sad time. So focus first on your mental health, then on the money. Assuming your man made you the beneficiary of his RRSP, this money flows to you automatically. No tax triggered. Hopefully the assets inside the account are well-chosen, growthy and performing reasonably. If so, leave them be. If not, get some help and change them.

But don’t cash it in. Doing so will of course make the money taxable. It will drive your income massively higher for the year which will benefit Chrystia, not you. If you pay down the mortgage with the after-tax proceeds there could be an early-termination penalty. Not good. Why not wait until the loan comes up for renewal?

In any case, your mortgage is relatively small and now that you’re single you may decide to move on to a smaller place. And what about retirement income? CPP, OAS, $300,000 and a paid-off house may not be enough. But $1.15 million might be (savings + his RRSP + equity if you sell). That would yield six grand a month (in a balanced portfolio) – plus your wrinkly pogey, close to a hundred grand a year. And you’d keep a million liquid until the finish line, to cover late-age needs.

So, stop worrying. You have options. You have security. And friends.

About the picture: “Hi Garth… Long time reader…going back to the Toronto Sun days,” writes a reader who wishes to be known as Anon. “Thanks for all you do. Here is a picture of Gromit (miniature schnauzer) as a puppy among the Gary Oaks and Arbutus on Vancouver Isle. Feel free to use it.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.