Situation - A couple has about US$900k in RRSPs and DC Pension - and cost has been reset before moving to the US and has since appreciated by US$100k. (Understand withdrawals can't happen in DC and need to be converted to LIRA and then unlocked.)
US income - MFJ - ~$400k.
1. Is there any withdrawal strategy at all that will result in total taxes paid (across Canada, Fed, State) to be less 25% of the RRSP+DC Balance
a) Because I am thinking that if taking the FTC route (1116) - the maximum FTC credit will be marginal rate * Gains - which will be far less than what is paid to CRA (Can the remaining portion be carried over?) or
b) if taking itemized deduction route - then standard deductions will be lost (assume there are no other itemized deductions). or will this strategy work if all withdrawals are done in 1 year maximizing the deductions (AMT will prevail?) Or
c) Or should all of it be converted to RRIF and drawn 10% YOY
2) If there is no practical way to get the tax-rate down on the withdrawal, i.e. at best we can only hope for a reduced tax-rate vis-a-vis what a Canadian resident on withdrawal will pay, why then the rush to withdraw from RRSP (or RRIF)? Can the withdrawal not be deferred until up to the point the tax-payer chooses to return back to Canada as a tax-resident or when the US income is low?
3) What are the advantages of doing a withdrawal now - paying close to 31-35% - in total taxes when a future non-residential withdrawal will also come close to this tax rate. Understand there may be marginal benefits for residents of states which taxes RRSP/RRIF income
My apologies if this was answered before in this group, but all I could find was individual cases and specific solutions. I am looking for a framework to think about this problem.
Optimal Strategy to withdraw from large RRSPs as Non-Residents.
Moderator: Mark T Serbinski CA CPA
Re: Optimal Strategy to withdraw from large RRSPs as Non-Residents.
Your 25% tax (or 15%) from RRIF will never be lower if you move back to Canada, no matter how slowly you withdraw the funds, unless that is your only source of low income, which, by judging from your current income, is very unlikely.
Converting to a RRIF gives you the lowest Cdn tax, and will likely meld much better with the US tax you will owe on the growth, as a credit. The deduction route could work, but you will need to determine this year by year (your US income is high bracket) so there will be US tax incurred.
If only one of you is working, they could withdraw some of their RRSP using a 217 election (about 15K a year) and pay no CDn tax.
Converting to a RRIF gives you the lowest Cdn tax, and will likely meld much better with the US tax you will owe on the growth, as a credit. The deduction route could work, but you will need to determine this year by year (your US income is high bracket) so there will be US tax incurred.
If only one of you is working, they could withdraw some of their RRSP using a 217 election (about 15K a year) and pay no CDn tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Re: Optimal Strategy to withdraw from large RRSPs as Non-Residents.
Thank you @nelsona for your quick response.
I did understand that best tax outcome can only be achieved by withdrawing as a non-resident, I was only looking at the timing of it. Now vs. gradual vs. just before becoming a Canadian tax resident again (may not happen as well)
From your response, I see that the optimal tax outcome with lowest uncertainty is by doing it gradually over time through RRIF.
I did understand that best tax outcome can only be achieved by withdrawing as a non-resident, I was only looking at the timing of it. Now vs. gradual vs. just before becoming a Canadian tax resident again (may not happen as well)
From your response, I see that the optimal tax outcome with lowest uncertainty is by doing it gradually over time through RRIF.