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And why you should keep your eye on calendars when trading foreign shares
In last week’s column on Canadian depositary receipts , I mentioned the risk of higher trading costs when trading CDRs on U.S. exchange holidays when the underlying shares aren’t trading.
Reader Paul Murphy wrote in with a reminder that selling foreign shares just ahead of a Canadian holiday can also cause complications. If you sell U.S. shares on a Canadian brokerage immediately before a Canadian holiday, the share trade may settle on the next day in the U.S., but the currency settlement may have to wait until the next business day in both countries. That may introduce some risk if the exchange rate moves against you in the meantime.
Your brokerage may also quote a less-than-ideal rate. It’s not a common problem, but a good reminder to be aware of holiday calendars on both sides in cross-border trades. I have been thinking about the most efficient way to draw down my RRIF account.
I don’t need the money for everyday expenses, but I’ve been considering withdrawing more than the minimum requirement and putting it in an investment account to avoid my estate having to pay tax on a large amount all at once. I don’t have a beneficiary. Withdrawing more than you need from your RRSP or RRIF and reinvesting it can be a reasonable course of action. You may have heard of it referred to as an RRSP or RRIF “meltdown” strategy.
Being single may make this approach even more attractive, as I’ll explain later. Chaz Legge, an advice-only planner at Gybe Financial in Waterloo, Ont. , said that melting down your RRIF can be an effective way to smooth out your tax rates, lower your lifetime tax bills and even maximize your after-tax estate. He cautioned that it’s impossible to perfectly optimize a meltdown without knowing your future tax rates, date of death and rates of return on your investments.
But especially with the help of financial planning software, it’s possible to make some reasonable assumptions about what is likely to serve you well. Mr. Legge said a meltdown strategy tends to work best earlier in your retirement years, before government benefits such as the Canada Pension Plan and Old Age Security kick in.
Withdrawing more from your retirement accounts can act as a bridge to these benefits and also lets you defer them, increasing your eventual monthly payments. Early withdrawals can be more attractive if you’re planning a big purchase, have a shortened life expectancy, or still have plenty of TFSA contribution room left to give your investments another tax-sheltered home, he said.
It also makes sense if your taxable income is low enough that making extra RRIF withdrawals won’t push you into OAS clawback territory. As a reminder, for every dollar of total income above $95,323 for the 2026 tax year, you’ll have to pay 15 cents in Old Age Security recovery tax, up to the total value of your benefits.
Particularly relevant to your situation, Mr. Legge said you may want to consider early withdrawal if you are single and have no opportunities to roll over your RRSP or RRIF on a tax-deferred basis. This last point is a frequent target of criticism among advocates for single seniors. On the death of a spouse or common-law partner, it’s possible to make a tax-deferred transfer of an RRSP or RRIF to the surviving spouse.
For a single senior, all proceeds are taxable as income in the year of death. Withdrawing more earlier may lower the final tax bill, but it can also saddle the single retiree with higher taxes in the meantime. An analysis by a group called Single Seniors for Tax Fairness, which has lobbied for revisions to the Income Tax Act, found that single seniors consistently pay more in taxes than couples with the same or even higher income.
While we wait for those revisions, you are left with the Income Tax Act as it is. Given this reality, Mr. Legge suggested another way forward: “If you want to minimize your estate tax, the best way to do that isn’t just to do an RRSP meltdown. It’s to start spending the money while you’re alive,” he said.
“Start giving it to people. Start doing things you wouldn’t do otherwise. Live your best life because your estate is not valuable to you if you have no beneficiary. ” Alternatively, name a charity as your beneficiary.
“If you have a charitable goal, having all the money in the RRIF at the end of your life is okay because you can deduct it,” Mr. Legge said. “You’re not going to face that huge tax bill at the end of your life. ” E-mail your questions to agalbraith@globeandmail.com . I’m not able to respond personally to e-mails, but I choose certain questions to answer in my column .
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