RRIF Rules are Burning Money

If someone forced your family to take money from a bank machine and burn it on the sidewalk, would that be fair? …would it be legal?  But it’s happening today with laws that force seniors to pull money too soon from retirement savings and pay inflated levels of tax.  Is this hurting someone in your family today?  What will be the impact on your retirement savings if the laws don’t get changed.

Pic_ burning ATM _RRIFOver 5 Million Canadians are over the age of 65.   Each day 1,000 more Boomers add to our senior ranks.  Most own registered savings plans which must convert to a RRIF by age 70 and draw income by the next year.  What you don't know is that current RRIF rules are burning your money even after recent changes. 

UPDATE ... April 21/15 our federal finance minister, Joe Oliver reduced minimum income you're forced to take.  Now instead of age 70 having to draw 7.38% of your RRIF, your new minimum (if you don't need more) is 5.2%.  Gratefully this reduces by 30% the money you're forced to take into taxable income.  CHEERS!   Yet at age 95 the withdrawal rate remains at 20% ...so you're forced to draw that or more, and pay full tax on it whether you need it or not.  Might I say, the government fixed withdrawal rates for our 70s but did little to help sustain income to our 90s and beyond!

What if we’re not dead then?  

People who are healthy and destined to live well beyond the average, may live even 20 or 25 years beyond their parents' ages.  In times like these, how can retirement savings possibly last safely for our future needs and wellbeing?   Imagine here how the over-100 age group the fastest growing segment of our society!   Only followed by the over-85 age group!  But critically ....will their money last?  Or will they be forced to go hat-in-hand to ask their children for a monthly allowance (risking their kids' retirement savings)?

Story ....this can happen to YOU!

To see how urgent and unfair this is, here's a story we'll call "Pat" so you get the feel and taste of what’s wrong in this system.

Pat is winding down a successful career at age 78.  Never wanting to overpay taxes, Pat built a healthy sum in RRSPs until age 70.  Since then, federal laws have been squeezing more money out of the RRIF every year.  As this continues, Pat will be forced to take more income than can possibly be replaced by earnings.   And while continuing a business or career ...such income will likely be taxed at or near 46%.

Say Pat fully retires by age 80.  How is the RRIF money after a decade of forced income, all heavily taxed?  Pat will see, sadly, that government-mandated withdrawals have retarded her RRIF when it should have been growing to support the years ahead.  With longevity in this family (parents lived to mid/later 90s) Pat’s life expectancy is at least age 98!    That could be years longer than the money!  How can a RRIF last when laws will ultimately force 20% yearly withdrawals from age 95 onwards!

Deadly Embarrassment, Poverty at the End.

Even if Pat earns 6% or 8% (see Life Income Mandates) it's impossible to keep up with 10%, 15%, even 20% mandatory withdrawals.  Laws that force such a schedule lock today's seniors and aging boomers in a furnace of financial woe:

  • Risk of unsustainable income.
  • Risk of burned-out savings.
  • Risk of overpaying taxes.
  • Risk of unanticipated poverty.
  • Risk of chronic financial worry.
  • Risk to tapping into children’s savings.


We'd like to encourage our politicians (in view of upcoming elections?) to be aware of two solutions they could implement, helping to prevent RRIF rules from needlessly burning your money!

  • Eliminate or delay mandatory withdrawals.
    • Govt will still get tax money …just later.
  • Reduce required RRIF schedule to peak at 10%.
    • Govt still gets tax money …just later.

And this also means:

  • Give Canadians free choice to support their life-income.
    • They’ll live happier with less worry, better health.
  • Let Canadian seniors maintain their dignity to age 105 +.
    • Avoid begging from younger family members.

If you can't trust government to put this right let us introduce the magnificent power of Life Annuities to sustain life-income ...so you can personally overcome the financial catastrophe that's facing long-living seniors.  (See more at: Life Annuities ...and in the public media at GlobeAndMail).   I hope you can get involved, even share a comment or send this blog to your Member of Parliament;  they'll be grateful because even many of our MPs need a strong income intact for their senior years.  And would you be so kind --- share this blog with at least 3 friends who can gain a stronger retirement because YOU CHOOSE TO INCLUDE THEM IN THIS DISCUSSION.


Brian Weatherdon, MA CFP CLU CPCA CRC, MDRT.  905-637-3500 x 223
627 Guelph Line, Burlington, Ontario. L7R 3M7.   1-877-937-3500 FREE x 223
Ret.Coach SEALCertified Financial Planner.  Certified Retirement Coach.
Amazon: “A Lifetime Of Wealth — And How Not To Lose It.”
VIDEO ...to help Guarantee LIFE INCOME  (here)
Guaranteed Life Income:  intro at STICKY MONEY: LIFE INCOME.



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