An imaginative RRIF strategy?

Question: I am 60 years old, still working, have a regular RRSP with unused room which I may not be able to maximize. I also have about $45,000 in a locked-in RRSP. Would it make sense to convert The locked-in plan to a LIF, take payments and contribute to The regular RRSP? I realize I would be taxed on withdrawals but I would save tax on contributions so The whole thing would be a wash tax-wise. This may give me more flexibility when converted to a RRIF. How is The maximum withdrawal calculated for a LIF?

Answer:

It’s hard to say whether this makes sense without knowing The exact numbers, but it probably doesn’t. Since you are working, The money coming out of The LIF would be taxed at a high rate – how high would depend on your other income and your province of residence but if your employment income is more than $30,000 a year you’re looking at a marginal tax rate at least in The 40% range. Yes, it’s true that under your strategy you could shelter some or all of The LIF income by making RRSP contributions. But you can do that anyway – your contribution limit will be based on your employment income, income from registered plans doesn’t count in The lculation. So you’re really adding to your tax bill no matter how you look at it. The extra flexibility you get from a RRIF vs. a LIF doesn’t appear to be worth The cost.