New RRIF Withdrawal Rates
Posted 26 May 2015 by Rick Irwin, CFP, CLU
A major change in the Federal budget, and one that has been lobbied for heavily by industry groups for some time, is a reduction in the mandatory amount that has to be withdrawn from Registered Retirement Income Funds (RRIFs) from age 72 on. The previous minimum withdrawal rate at 72 was 7.38 percent, and has been decreased to 5.28 percent.
The RRIF withdrawal tables, which require a specific, escalating, percentage (based on age) to be withdrawn and taxed from these plans, were devised almost 25 years ago. By reducing the annual mandatory withdrawal from these plans by almost 30 percent the government is acknowledging some of the concerns presented to them by the C.D. Howe institute and others (including us!). Specifically, the effect that lower expected investment returns and extended life expectancy from when the original tables were created can have on the long term sustainability of retirement funds.
Some investors may have already withdrawn the minimum for 2015, at the old rate. Those that have are able to reinvest the difference into their RRIF before February, 2016.
Remember: The announced budget contains proposals that may undergo revisions before becoming law.