Eliminate mandatory RRIF withdrawals which put Canadians at risk of outliving their money: CARP paper


December 5, 2014


Toronto, ON: CARP is calling on the federal finance minister to eliminate mandatory RRIF withdrawals which force seniors to draw down and pay tax on their retirement savings in increasing percentages until age 91 when their RRIF would be close to empty. People are left with much reduced funds just when they have the greatest needs and given today’s increased longevity, the RRIF rules put ever more people at risk of outliving their savings. [click here for the full policy paper]

There are 265,000 Canadians 90-plus today. The probability of reaching that age has doubled for women and tripled for men in the last two decades and together with the baby boom generation reaching these ages, the raw numbers of people living beyond 90 is expected to rise dramatically. By 2021, just 7 years from now, there is projected to be 355,000 Canadians 90-plus [including 80,000 over 95].

The RRIF rules are designed to reduce deferred savings room to almost zero at age 91. The withdrawn funds are taxed and the tax deferral room is lost (even with the modest TFSA option to reinvest $5,500 of it tax free) making it more difficult to grow retirement savings.

“Canadians have few enough options to save and invest for their retirement as it is and the government should not be making it more difficult by forcing people to erode their savings and taxing them just when they should be trying to grow their savings for their later years when they could face serious expenses for medical care and other challenges.

“RRIF withdrawals might have been good public policy in the 90s to deal with a government deficit and when longevity rates were lower, and investment returns much higher. Things have changed and it is no longer good policy with low returns, increased longevity and a projected government surplus. Used as directed, RRIF rules pose a material risk of Canadians outliving their savings and should be eliminated”, said Susan Eng, VP, Advocacy for CARP

The counterproductive nature of the RRIF rules was shown in high relief during the market crash of 2008. RRIF withdrawals are calculated based on the asset value in January and most people would not withdraw until December, by which time share values had plunged by as much as 50% in 2008. Seniors then had to take out twice as many shares, thereby depleting their deferral room at an even faster pace, especially if they also needed to redeem additional shares to pay the tax. CARP members called for relief and were granted a 25% discount in the withdrawals required for 2008 only.

Canadians are not saving enough for their own retirement and there is growing concern that many will face considerable income insecurity in retirement.[i] Current rules mandating minimum yearly withdrawals from Registered Retirement Income Funds (RRIFs) compound the problem[ii] since Canadians who have retirement savings in Registered Retirement Savings Plans (RRSPs) are compelled under the current rules to draw down their savings starting at age 71 – when RRSPs must be converted to Registered Retirement Income Funds (RRIFs). These rules are designed to virtually empty out the RRIF by age 92, thereby placing many Canadians at risk of outliving their retirement savings given today’s longevity rates.

RRIF rules have not kept pace with increasing lifespans and time spent in retirement, declines in personal savings rates and reduced access to workplace pension plans. When the original RRIF rules and withdrawal rates were introduced in 1978 and then increased in 1992, lifespans and time spent in retirement were much shorter than today and Canadians on average spent less time in retirement. RRIF holders now face considerable likelihood of running out of money in late stages of retirement.

CARP is a national, non-partisan, non-profit organization committed to advocating for a New Vision of Aging for Canada, social change that will bring financial security, equitable access to health care and freedom from discrimination. CARP seeks to ensure that the marketplace serves the needs and expectations of our generation and provides value-added benefits, products and services to our members. Through our network of chapters across Canada, CARP is dedicated to building a sense of community and shared values among our members in support of CARP’s mission.


For further information, please contact:


Sarah Park   416.607.2471
Director, Communications
[email protected]

Michael Nicin   416.607.2479
Director of Policy
[email protected]

Anna Sotnykova  416.607.2475
Media & Communications Coordinator
[email protected]