Tuesday, November 8, 2011

Getting the RSP money out

The recent bear market has given retirees, like me, an excellent opportunity to set the stage for removing some funds from our RSPs. I figure now is the time to buy additional stocks or units of investments that I already have in my RSP portfolio, but I will buy these outside my RSP and inside my TFSA instead.

For instance, I own Royal Bank inside my RSP. Recently it has been selling at levels lower than my book price. Result: I'm buying more RY but this time I'm buying it inside my TFSA. When RY climbs, possibly as much as ten dollars or more, I'll sell an amount of RY inside my RSP equal to what I own outside my RSP. This will bring my portfolio allotment back in line.

I end up with a lot of cash in my RSP to be removed in order to live. Numerically, I retain all the shares of Royal Bank I started with, but some shares are now outside of my RSP, my overall book price has dropped, and my allotment is dead-on. All  dividends are still available for covering living expenses but they are no longer all being taxed. Nice.

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