CARP on Budget 2009: Limited Relief for Seniors


January 27, 2009

CARP members will welcome the broad based tax relief available to all lower and middle income Canadians, and the home improvement incentives, together with the $1,000 increase in the age credit. But beyond the re-announcement of the 25% reduction in mandated RRIF withdrawals, there is little in Budget 2009 to address the anxiety facing Canadians who have watched their retirement savings vaporize in the current market chaos.

No additional relief for RRIF holders

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”, said Susan Eng, Vice President Advocacy for CARP.

RRSP Losses carried back to year-of-death return

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.

General Tax Relief

Everybody benefits from the increased personal exemption to the tune of $33. From increasing the thresholds in the first 2 income brackets, a single senior with between $40,000 and $80,000 in total income [not including their OAS] will save $133 and in the upper tax brackets, taxpayers will save $284.

Age Credit – $150 value

In addition, the $1,000 increase to the age credit is worth an additional $150 but as with the existing age credit, the credit is eroded as total income increases. Seniors with up to $32,312 will receive the full benefit of the increased age credit. The credit is fully phased out at $75,032 of income.

“The help for low and middle income seniors will be welcome and targets those most likely to spend the savings but increases to Old Security and Guaranteed Income Supplements would have been even more helpful,” added Eng

Housing for Low Income Seniors

Budget 2009 will provide $400 million over two years to build housing for low income seniors to be delivered through the Affordable Housing Initiative to be cost-shared with the provinces. These cost sharing agreements already exist to provide low income housing but this should be money targeted at project for seniors.