Look above the date at the top left of each of my money blog posts and you will see this link: My latest crack at a "Retirement Portfolio". Click on the link to see a retirement portfolio created at the end of June in 2023. If this were a real, functioning, million dollar retirement portfolio, a total of $13,333.32 would have already been removed to provide the mythological retiree with a monthly income of $3,333.33. The first payment was made in early August and will be increased annually to meet RIF withdrawal rules.
Note, 30% of each withdrawal is withheld to meet future tax demands. The retiree only sees 70% of the withdrawal for meeting living expenses. Although, one could argue that 100% of the withdrawal goes to living expenses as taxes are certainly a living expense.
At the age of 65 the government mandates 4% of the a RIF or LIF portfolio must be withdrawn. This mandated percentage jumps to 4.17% in the year one turns 66. It continues to jump each year until one reaches the age of 95. At 95 the withdrawal rate hits 20% and remains there. The goal of the government is clearly to bleed the retirement portfolio dry. For more info on the withdrawal rules, click this link.
If you come back in the new year, you will find that I make my mandated withdrawals in-kind. This is the way I operate in reality and I am going do the same online with this test account. I will transfer stock from my imaginary RIF to an imaginary TFSA.
The cumulative maximum contribution space in a new 2024 TFSA is $95,000. This means all the dividend income from this year's withdrawal can be protected and not only for this year. Dividends earned in a TFSA are sheltered from the ravages of income tax. It is called a tax free savings account, after all.
Although I will not have to pay tax immediately on the transferred amount, I will have to pay the tax next year. To avoid the future shock of a spring income tax bill, I will withhold 30% from each monthly payment to cover future tax costs.
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