PETER DOLEZAL: Federal budget offers more than just an election boost

Finally, after years of public lobbying, and much debate, the government has announced long-overdue, but very welcome changes.

Over the past several decades since the federal government last established the withdrawal minimums on RRIFS (Registered Retirement Income Funds), the longevity of retirees has increased substantially.

The result? High mandatory minimum withdrawal rates have caused anxiety among many retirees, worried that their savings could be prematurely exhausted.

Finally, after years of public lobbying, and much debate, the government has announced long-overdue, but very welcome changes.

The recent federal budget established new RRIF rules, which become effective immediately.

The minimum draw requirement at age 71 has been reduced from the previous 7.38% of the RRIF value, to 5.28% — a dramatic change for the better. Although the withdrawal percentage continues to increase with age, it now takes an additional 11 years, before the previous 7.38% minimum withdrawal level is reached — at age 82.

Draws from an RRIF may, as before, commence any time after age 55. Nor is there a change in the requirement that conversion to an RRIF must occur no later than age 71, and that draws must commence no later than the calendar year in which the RRIF holder reaches age 72.

However, the new minimum draw, now mandated at age 72, has been reduced to 5.4% of RRIF value, from the previous 7.48%.

For those planning to convert their RRSP to a RRIF before age 71, the minimum-draw percentages remain at their previous levels, which were always much more reasonable.

Based on the pre-2015 budget rules, some of you may already have withdrawn the full 2015 lump-sum from your RRIF. If you wish to take advantage of the new lower withdrawal rate, you may re-contribute the 2015 excess you withdrew — as long as you do so by February 29, 2016.

These major RRIF changes have two main benefits for the retiree.

First, he/she is no longer forced to withdraw more from the RRIF than is required to maintain a desired standard of living — thereby allowing greater savings to grow and compound, tax-free, for future years.

Second, for those retirees fortunate enough to have achieved a considerable taxable income, the previous, higher withdrawal percentages often triggered a partial claw-back of OAS benefits.

This claw-back begins at taxable incomes of approximately $72,000 annually. Now, by reducing RRIF draws to the new minimums, taxable income decreases; as a result, at least some of the OAS claw-back should be reduced.

There is no question that the federal budget’s new RRIF rules, and the simultaneous enhancement of TFSA eligibility to $10,000 annually are both of great benefit, not only to retirees but to all Canadians.

Although this may have been designed as a voter-friendly budget in an election year, it is also a balanced one, which makes these welcome changes affordable.

Most of us will benefit, either immediately, or in the future. We should be very pleased.

 

A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his most recent, The Smart Canadian Wealth-Builder.

Just Posted

‘Crazy 8’s,’ Panthers win again

Game kicked off with an on-ice ceremony featuring 98-year-old WWII veteran Commander Peter Chance

‘Spread love’: UVic Pride replaces white supremacy posters in Victoria

Around 50 people walked through downtown on Nov. 12 to share posters of love

Victoria libraries choose quirky books to keep everyone entertained

Comics, spoofs, and off-beat hobbies among popular selections

Grumpy Taxpayer$ offer Saanich News reporter inaugural media award

Black Press journalist wrote on permissive tax exemptions

Who was Chris Bloomfield, the Mill Bay man shot by police?

A troubled man with a voracious appetite for illicit drugs and a non-conventional lifestyle

VIDEO: Amazon to split second HQ between New York, Virginia

Official decision expected later Tuesday to end competition between North American cities to win bid and its promise of 50,000 jobs

Around the BCHL: Surrey Eagles sliding and Cassidy Bowes flows

Around the BCHL is a look at what’s happening in the league and around the junior A world.

Pit bull cross, chihuahua owners must split costs for dogfight damage, judge rules

Eac side responsible for $577.43 towards injuries in Comox Valley incident

Most fatal overdose victims did not have recent police contact: Stats Canada

11 per cent of those who fatally overdosed in B.C. had four or more contacts with the police

Tragic conclusion to search for overdue hiker west of Campbell River

An overdue hiker was found deceased on the shore of Lower Campbell… Continue reading

Calgarians head to the polls to declare ‘yea’ or ‘nay’ on Winter Games

The question “are you for or are you against hosting the 2026 Olympic and Paralympic Winter Games?” was to be posed to them Tuesday in a plebiscite to help determine whether the city should move ahead with a bid.

Heir’s big birthday: 70 candles lined up for Prince Charles

Prince Charles turns 70 Wednesday, Nov. 14, 2018, still serving in the heir to the throne role he has filled since he was a young child.

Trudeau lays down challenge to companies in bid to boost trade with Asia

“Building the relationships, building the connections, building the facility and also changing mindsets — getting Canadian companies to see the opportunities we have around the world to partner and invest.”

CNN sues Trump, demanding return of Acosta to White House

CNN is asking for an immediate restraining order to return Acosta to the White House.

Most Read