FOR IMMEDIATE RELEASE
December 8, 2008
TORONTO, ON: CARP is calling on the Minister of Finance to inform all financial institutions that they should allow holders of Registered Retirement Income funds [RRIFs] to reduce their 2008 mandatory withdrawals by 25% as proposed in the Economic Statement on November 27, 2008.
The 25% reduction in mandated RRIF withdrawals was proposed in the Economic Statement and was accompanied by a Ways and Means Motion. According to Gordon Pape, Financial Advisor and columnist in Zoomer magazine, the Canada Revenue Agency will honour the provisions and the Ministry of Finance had planned to alert the financial institutions.
“Time is of the essence. People need to act immediately to take advantage of the limited relief being offered to RRIF holders. They should not have to draw down their tax deferred savings any more than they must,” said Gordon Pape.
Mr. Pape has been in contact with the Canada Revenue Agency and the Minister of Finance because he was getting calls from people unable to arrange the lower withdrawal amounts with their financial institutions.
“The 25% reduction was a small but important step in the right direction to provide some immediate relief for people hard pressed to maintain as much of their RRIF accounts intact as possible. The Minister should act immediately to ensure that this bit of relief is actually available to people before the year ends,” said Susan Eng, Vice President, Advocacy of CARP.
“The current situation just reinforces why it is important for there to be a moratorium or elimination of mandated RRIF withdrawals altogether. The mandatory depletion of tax deferred savings and the paying of taxes on those withdrawals is adding unnecessary anxiety to people already hard hit by the current economic crisis,” added Eng.
Current tax rules require people to withdraw fixed amounts from their RRIFs after reaching age 71 and many must sell their stocks to fund the tax payable on such withdrawals if they do not have other cash, even if they do not have to sell the stocks in order to make the withdrawals.
The situation is made worse by the precipitous drop in stock values and the fact that the amount to be withdrawn is calculated on January 1. So, not only are the savings depleted by the mandatory withdrawals, but with the reduced value, many more units must be withdrawn to meet the minimum withdrawal requirements and the retirement savings would be depleted at alarming rates.
The changes to the RRIF rules would have little impact on tax revenues in the greater scheme of things but would bring welcome relief to those hardest hit.
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.