Converting RRSP to RIFF for US Resident

[worryfreeinvestor]

I see: I can't imagine a scenario in which a taxable U.S. resident would try to put income in to an RRSP rather than an IRA, 401(k), or other U.S. tax-deferred vehicle.

[nelsona]

As i said, only in the spring after the year you move to US would it *maybe* make sense, to lwer one's final Cdn tax return below the 25% marginal rate.

[worryfreeinvestor]

This question is not really a cross-border issue. It would be relevant to a Canadian resident too.

CPP is adjusted for inflation but it's not clear to me whether the benefit from deferring until age 70 is also adjusted for inflation.

For example, suppose I log into Service Canada as I approach my 65th birthday and it tells me my monthly CPP will be $1,000 if I apply to receive it the month after my 65th birthday.

The benefit from deferring is 0.7% monthly (8.4% annually). If I defer for 5 years (age 70) the total increase is 42%. That is, $1,420.

So, if I defer 5 years and receive my first payment one month after my 70th birthday, will the payment be $1,420 in future (2018) dollars, or will it be adjusted by CPP? (If CPI increased at 2% annually, for example, the payment would be $1,568).

Now that we can also defer OAS (for a monthly increase of 0.6%), can anyone also clarify whether that benefit for deferral is real or nominal?

[nelsona]

The "bonus" will be calculated after CPI, in both cases. The bonus is not tied to inflation but rather to the actuarial effects of delaying payment and taking it over a shorter remaining lifespan.

The reason that this has been done is to encourage more people to wait, plain and simple, and to gamble on their longevity. Under the previous regime, it almost never made sense to wait, since the break-even point was into one's 80's.

I'm sure there have been some analysis doen has to what the new break-even point based on waiting, let us know what you find.