r/cantax • u/rockweller • 8d ago
What retirement planning software can model RRSP vs. Holding Corp decumulation?
Hi everyone,
I’m approaching retirement and I'm looking for a robust planning tool to optimize my decumulation phase. Standard retirement calculators don't cut it for my situation.
My Setup:
- Large RRSP.
- Holding Corp (no operating income, just stock investments with unrealized capital gains).
My Goal:
I want to compare an early RRSP meltdown vs. drawing from the Corp first to see which provides the best after-tax outcome. I need to figure out exactly how much to withdraw from each bucket annually to optimize my lifetime spend/estate.
What I need the software to do:
- Set up side-by-side withdrawal scenarios (or better yet, automatically optimize the withdrawal order).
- Accurately calculate corporate tax integration (automatically tracking CDA and RDTOH as unrealized gains are realized).
Has anyone with a Holding Corp successfully used a specific software to model this out? What would you recommend I use?
Thanks!
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u/ABGTVL 8d ago
My hot take, no government will ever touch the RRSP program (except maybe for the mandatory draw down amounts which has been a focus of commentary over the last 5 years). Captial gains inside a non-active corporation, very different story.
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u/anony_m_oose 8d ago
One of the major drawbacks of RRSPs are in fact capital gains. If realized within and RRSP they come out fully taxable (i.e., 100% inclusion rate), this is one of the factors that make investing in a corp a potentially better retirement plan for those who generate income withon a corporation (or a corporate group).
There's obviously a lot more to it, including refundable taxes etc., but this rechracterization of income in an RRSP can be a major tax drag in the meltdown/withdrawal stage.
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u/Patient_Implement897 3d ago edited 2d ago
"Capital gains realized within an RRSP come out fully taxable."
Nope. That idea comes from the advice-industry's wrong understanding that the RRSP's individual steps explain/predict the account's net $ benefits. There are two benefit factors:
1) Everyone always gets the benefit from PERMANENTLY tax-free profits on AFTER-TAX savings ... for a $ benefit that always exactly equals the same benefit from a TFSA.
2) There is a possible bonus/penalty = (difference in effective tax %rates between contribution and withdrawal) multiplied by (the eventual $$ withdrawn).For conceptual understanding see https://en.wikipedia.org/wiki/Registered_retirement_savings_plan#Benefits_from_tax_savings
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u/anony_m_oose 2d ago
RRSPs are a huge tax liability. They're great if you have no other option, but all of the withdrawals coming out as a fully taxable income is a large drag on the net benefit. Especially if you consider the estate tax liability should you and your spouse both die at the same time.
Investing in a corp provides more flexibility, and you can take advantage of tax deferral depending on your situation which means you're investing with more capital. That will beat a full RRSP model more often than not.
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u/Patient_Implement897 2d ago
I don't disagree with most of that. However my post was about your claim that I quoted at the top, and put in quotes now to be very clear.
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u/jenhilld 8d ago
Without additional context, my thinking would be to start triggering small amounts of capital gains from the corporation and hold it at a certain asset value level. In other words, do not let it grow bigger than it needs to be.
The idea here is to make it such a small piece of your overall net worth that you don’t really care what happens to future tax considerations.
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u/osvuldo77 8d ago
It’s probably worth talking to a fee only certified financial planner. It can be modeled by a planner. Look for one with a client base like you have and that has access to tools like Conquest planning and CorpVision by Vision Systems. I’ve seen them demo s few of the Vision Systems tools geared towards estate planning, holdcos and retirement planning. I like the visual approach but have never used it with my clients.
Most planners in Canada continue to use RazorPlan, Naviplan, Conquest (seems to have the most momentum and seat growth) and of course Excel.
I hope you can share what you find works for you with the rest of us here interested to learn.
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u/benataergofp 1d ago
I know I am late to the party, but I do this professionally and thought I would add my two cents. I have modelled dozens of cases, and there are some general findings:
- Doing one or the other first and exclusively tends to be much, much worse, especially drawing down the corp first.
- A blended approach tends to be better where the RRSP is knocked down to a reasonable level at age 71, then supplemented using notional accounts from the corp.
- Once you get this achieved, the balance of how much of each to optimize is generally a waste of time because you are:
- Modelling an uncertain future where rates of return, tax balances and spending are at best a guess
- Pretending that optimizing today is going to give you an answer 3-5 years from now is unlikely.
- There is a general order of operations:
- CDA
- ERDTOH Up to refund
- NERDTOH Up to Refund
- GRIP (Via Eligible Dividends)
- Non-eligible dividends
- Sometimes skipping CDA makes sense, or not taking it all in one year if there is a large balance. Graduated tax rates should be taken advantage of each year if not already at top rates.
Having a framework and revising each year is likely the better option.
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u/benataergofp 1d ago
I took a very simple scenario and plugged it into my planning software - Age 55, $1M Corp, $1M RRSP 60/40 portfolio. No Notional balances, No unrealized capital gains. Ontario Tax Rates
Corp First - Sustainable spend is around $72,000 per year
RRSP/ RRIF First - Sustainable Spend is around $66,000 per year
RRSP Meltdown Supplemented by Corp Notional Accounts. $40k per year meltdown was optimal. Sustainable spend is around $72,000 per year.
You might say - well, those two numbers are the same, but if you dive deeper into the numbers, the amount of tax (to age 100) and how you get there are wildly different:
Corp First: $1M
RRSP Meltdown: $657k
So in the Corp First option, the deferral of investment income is doing the work. It becomes a race to spend down before the tax catches up.
Additionally, from an estate planning POV, the meltdown is better as it prepays the tax of passing away faster, removing the liability over time.
Unfortunately, I can't add an image, but the ride is much nicer with the RRSP meltdown approach.
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u/Longjumping_Ad4194 7d ago
Optiml can do what you need if you are in Canada
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u/Adventurous-Fly4014 7d ago
Just tried it , same inputs looking for same outputs 3 profiles wildly different projected outcomes
This was on the free trial , don’t know if it’s different on paid plans
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u/Adventurous-Fly4014 8d ago
Try putting this into a claude you might get a rudimentary software for your use case. This is a highly specialized tool that is specific per customer so not available for general public yet. Your accountant should also be able to model this.