RRIF Withdrawals – 25% reduction stays

The confirmation of the 25% reduction in mandated RRIF withdrawals announced in the November Economic Statement has to be taken as a small nod to the widespread clamor for a two year moratorium on the mandatory withdrawals but it is a far cry from what is needed. And even this little measure caused no end of frustration as people were unable to apply the discount in making their year-end withdrawals. The financial institutions were either not able to program their computers or were unwilling to take the chance that the proposal would not be enacted.

This has to be a disappointment for those who had hoped that the government would help those who had acted responsibility to provide for their own retirement and got hit with circumstances beyond their control. The moratorium would have deferred tax revenues but if people were allowed to keep their savings in the tax deferred RRIFs until the market recovered, there could be higher tax revenues from the later withdrawals.

For those who manage to hang onto a substantial part of their RRSP/RRIF portfolio until their death, there’s an important measure that will benefit their beneficiaries. Any losses accruing after the annuitant’s death and before the investments are distributed to their beneficiaries may be carried back and applied against the RRSP/RRIF amounts included in the year-of-death tax return.