Reality

1
Reality

• One Million Canadians have maxed RSPs
• You can have too much money in your RSP
• Retirement needs differ from what you will have
• OAS Claw backs (60,806, fully clawed back at
  98,660)
• Fully taxable as retirement income (RIF)

2
The RSP Meltdown

• Stop Contributing
• RSP will be over funded
• Desired Income will mean OAS claw backs
• Start Withdrawing
• Determine over funded amount
• What can be withdrawn per year to get to desired
  RSP amount?
• Use Withdrawals to pay for Investment Loan
• Determine what size loan can be serviced with
  proceeds from RSP
• Try to match Interest Exp with RSP withdrawal

3
Things to Consider

• Converting Registered into Non Registered
• Slows down growth inside RSP
• Non reg not subject to minimums or maximums
• Allows more control of income stream
• Tax Advantaged
• Potentially better tax treatment (Cap Gains/Div
  Income)
• Complete Flexibility
• CI Corporate Class is a perfect solution

4
Things to Consider

• Assuming leverage on accumulated funds
• Leverage is NOT for everyone
• Borrow less than investor can afford
• Interest Only works best for this strategy
• Be conservative with Investments
• Make sure client has consistent, predictable cash
  flow
• Benchmark for leverage 30 - 50 of net worth

5
Things to Consider

• Tax Advantages
• Interest Income 100 inclusion
• Cap Gains 50 inclusion
• Interest exp on loan tax deductible
• Proceeds from RSP fully taxable
• Tax deduction from interest wipes out tax
  obligation of RSP witdrawl

6
Summary

• Great strategy when client has a lot of in
  RSP
• Small RSP investor assuming big leverage doesnt
  make sense
• Client must understand risks of leveraging
• Client must fit profile steady cash flow
• If loan is subject to margin calls client must
  have funds to cover it
• Home Equity line of credit may work best
• Borrow less than investor can afford
• Can create significantly more after tax dollars
  for investor
• A great idea to bring to clients establish a
  planning relationship