Contribution and Withdrawal Strategies

Although the spreadsheet allows you to specify RRSP contributions and withdrawals for each year, in practice this is cumbersome to do. Mark's Spreadsheet allows you to select from a number of strategies for RRSP contributions and withdrawals. You only need to select a strategy and suggest an amount for the first year and the spreadsheet calculates the rest.

RRSP Contribution Strategies

Contribution strategies apply while you are still working and use the amount you suggest subject to contribution limits. The following contribution strategies are available:

Fixed: The suggested amount is contributed each year.

COLA: The suggested amount is contributed in the first year, then increased by inflation for each subsequent year.

Smooth Taxes: The suggested amount is contributed in the first year, then adjusted in subsequent years so that your taxes increase by inflation by making use of the RRSP contribution tax credit. See also the Hybrid method.

As Available: Contributes up to your RRSP limit using any surplus and funds from your non-registered and TFSA accounts. If you are a couple, this strategy should be selected for both partners as funds are contributed to each person's RRSP in proportion to their contribution limits. The suggested contribution amount is ignored.

Hybrid: Uses the lesser of the Smooth Taxes and As Available methods. Use this method if your RRSP contributions are causing a draw from your emergency fund or overdraft account. This strategy is selected automatically by the basic optimizers.

RRSP/RRIF Withdrawal Strategies

Withdrawal strategies apply when you are retired and use the amount you suggest subject to your RRSP/RRIF/LIF account balance and RRIF/LIF minimum withdrawals as required by law. From the ages 65 to 70, the Spreadsheet assumes that you put enough money in a RRIF to withdraw $2,000 per year to make use of the federal pension tax credit. The suggested withdrawal amount in current year dollars and is in addition to any required RRIF and LIF withdrawal. If you are not yet retired, the suggested withdrawal amount is increased by inflation for each year until the first year you are retired. The following withdrawal strategies are available:

Fixed: The suggested amount is withdrawn each year.

COLA: The suggested amount is withdrawn in the first year, then increased by inflation for each subsequent year.

Smooth Taxes: The suggested amount is withdrawn in the first year, then adjusted in subsequent years so that your taxes increase by inflation. This is generally the best strategy for minimizing taxes. See also the Hybrid method.

Minimum: Only the required RRIF and LIF minimums are withdrawn. The suggested withdrawal amount is ignored.

As Needed: Withdraws sufficient funds from the RRSP and LIF to meet expenses and maintain your emergency fund BEFORE withdrawing from the non-registered and TFSA accounts. If you are a couple, this strategy should be selected for both partners as funds are withdrawn from each person's RRSP in proportion to their balances. The suggested withdrawal amount is ignored.

Last Resort: Withdraws sufficient funds from the RRSP and LIF to meet expenses and maintain your emergency fund AFTER withdrawing from the non-registered and TFSA accounts. If you are a couple, this strategy should be selected for both partners as funds are withdrawn from each person's RRSP in proportion to their balances. The suggested withdrawal amount is ignored.

Hybrid: Uses the Smooth Taxes method unless this would require withdrawing from your emergency fund, otherwise uses the Last Resort method. Use this method if you have sufficient funds in your RRSP/RRIF/LIF but money is drawn from your overdraft account.

LIRA/LIFs

If you have a life income fund (LIF) there are minimum and maximum withdrawals required by law based on your age. The Spreadsheet withdraws RRIF and LIF minimum amounts first, then the suggested withdrawal is drawn from your LIF first (up to the maximum) and then the remainder from your RRSP/RRIF. When LIRA/LIF funds become unlocked, they are moved to your RRSP for more flexibility in withdrawing.