Advertisement 1

Federal Budget 2015: Government relaxes withdrawal requirement for RRIFs

Ottawa is reducing the withdrawal rules for how much seniors must take out of registered retired income funds, a move that comes after extensive lobbying

Article content

OTTAWA — Ottawa is reducing the withdrawal rules for how much seniors must take out of registered retired income funds, a move that comes after extensive lobbying.

The existing RRIF rules, in place since 1992, require someone who turned 71 in 2014 to withdraw 7.38% of the Jan. 1, 2015 market value of their assets this year. Under the new rules that same person would have to withdraw 5.28 per cent. By age 94, they would be forced to withdraw 18.70 per cent.

Advertisement 2
Story continues below
Article content

“[The changes] reflect more recent long-term historical real rates of return and expected inflation,” the government said in its budget release.

Article content

Gabe Hayos, spokesperson for the chartered professional accountants, said the government was addressing concerns of some seniors that they were liquidating their RRIFs much too quickly.

RRIF

“I think the bottom line is it allows seniors to manage their assets for a longer period of time so they are not paying tax early and get a return for a longer period of time,” said Hayos. “It’s a positive thing for seniors.”

The percentage that seniors will be required to withdraw at age 95 will stay capped at 20%.

“By permitting more capital preservation, the new factors will help reduce the risk of outliving one’s savings,” the government said, adding by age 90 the new rules will allow almost 50 per cent more capital to be preserved by age 90 compared to existing rules.

Recommended from Editorial
  1. Fotolia
    Federal Budget 2015: Small business comes out the big winner
  2. None
    Federal Budget 2015: Ottawa boosts TFSA account limits by 82% to $10,000 a year

Clay Gillespie, a Vancouver-based certified financial planner with Rogers Financial, said he thinks there should be rules that require withdrawal but the percentages needed to be decreased.

Advertisement 3
Story continues below
Article content

“You have to remember when they first redesigned the RRIF in 1992, interest rates were at 8.5 per cent. That means I wasn’t digging much into RRIF until mid 80s,” said Gillespie. “[Withdrawing 7.3 per cent], you are really digging into it unless you’ve taken some significant risks you shouldn’t be taking in your RRIF [to get a higher return].”

The RRIF rules were included in a number of budget measures announced Tuesday aimed at the elderly.

The Tories have also proposed a new home accessibility tax credit. The 15 per cent non-refundable tax credit would apply on up to $10,000 of eligible home renovations expenses per year, good for up to $1,500 in tax relief.

Expenses eligible are for improvements for seniors to live safely in their homes and can be used by anybody claiming the disability tax credit.

The budget plan:

Article content
Comments
You must be logged in to join the discussion or read more comments.
Join the Conversation

Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.

This Week in Flyers