Customer Comments: CARP Member Writes MP to Call for Elimination of Mandatory RRIF Withdrawals

Editor’s Note: Recently, a CARP member wrote to his MP describing the difficulties and financial inflexibility posed by forcing retirees to withdraw from savings regardless of need.

The letter echoes the concerns raised by CARP and many CARP members. Mandated withdrawals from Registered Retirement Income Funds (RRIFs) limit retirees’ ability to plan and manage savings for retirement. Many Canadians are in danger of outliving their savings as a result of current RRIF rules. Increases in lifespans, reduced savings rates, low investments returns, precarious late career employment, and fewer occupational pension plans increase the likelihood of outliving savings.

CARP is on the record calling for an elimination of mandatory RRIF withdrawals.
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Dear Mr. Mathew Kellway, MP, Beaches – East York

Probably you saw this past Saturday’s (July 5) editorial in the Globe and Mail concerning RRIFs. I strongly agree with the points made, and would like to explain why.

On Dec. 15 this year I turn 71. Although I do not want to, I am forced at that time to convert my RRSP into a RRIF (Registered Retirement Income Fund), and my LIRA (Locke-in Retirement Account) into a LIF (Locked-in Fund). In January 2015 I am forced to begin withdrawing substantial amounts from both, even if I do not want and do not need to. Like many other `younger` seniors, I am really afraid of running out of money before I die, and coincidentally leaving little to my family (niece and nephew). My mother lived to 90.5, my father to 83, and one great-grandmother to 96.

Simultaneously, I have found out after a great deal of phoning and reading, that I am FORCED to begin receiving my Ontario Teachers’ Pension fund payments as of Dec. 31, 2014. Please note that I am NOT a `contract` teacher; in adult-ed, as you may know, we are paid only hourly, and have no benefits apart from a few sick days a year, and paying into the pension fund. As I have been teaching in this manner only since 2001, my pension will be very modest.

Since I turned 60, I have been receiving my CPP, and since I turned 65, my OAS (some of it clawed back), With four hours teaching a day, plus (quite legal) EI during the summer when I am jobless, I have been managing quite well without touching my RRSP, for many years. I would like to continue on this basis, though cutting down to two hours a day as my energy level is lowering with age. However, the (Ontario) law says that I am limited to 50 days of teaching per school year once I retire` (start receiving the pension) at the end of December. (Please note that I do not regard this as retirement, just cutting back.)

This means that I will be able to teach 3/4 of the year, and only half of the time I have been teaching. This results in a substantial loss of income. Even so, what I would like to do is as follows:

1. Postpone at my discretion receiving pension payments by a year or even several. Apparently the Income Tax Act does not allow this.

2. Withdraw only small amounts, if any, from my RRIF, at my discretion, rather than being forced to withdraw large amounts ( starting at 71+) whether I need to or not.

But I am caught in a web of legislation at federal and provincial levels, which force me to take large amounts of income and pay tax on them, regardless of actual need.

I regard this as unfair, and, more to the point, I am (born in 1943) merely in the vanguard of baby boomers who will be living longer and longer, and becoming an ever heavier burden to the labour force. I would think it would be in the interest of the government to encourage people to live independently, on their own means, for as long as possible.

Probably you are already aware of these general issues, which may indeed be facing your own family and will face you one day. I would appreciate it if you could draw this to the attention of the NDP Labour critic, and maybe even raise it in the House of Commons. Thank you very much for your kind attention.

Sincerely,

CARP Member