Industry organizations are calling on the federal government to reduce or eliminate the RRIF mandatory minimum withdrawal requirements to help prevent Canadians from outliving their savings.<\/p>\n
Both the Conference for Advanced Life Underwriting (CALU) and the Investment Industry Association of Canada (IIAC) are asking Ottawa to raise the age at which RRSPs must be converted to RRIFs, and at which RRIF mandatory minimum withdrawals begin, to 75. Currently, RRSPs must be converted to RRIFs at age 71, and mandatory minimum withdrawals begin the year after a RRIF is opened.<\/p>\n
The recommendations were included in the groups\u2019 submissions to the Department of Finance\u2019s 2025 pre-budget consultation, which closed last month.<\/p>\n
Forcing retirees to withdraw money from their tax-deferred retirement accounts in their early retirement years, when they may not need the funds, could leave them vulnerable in their later years.<\/p>\n
\u201cYou may not be travelling as much [in later retirement], but health-care expenses become a paramount item that needs to be funded,\u201d said Kevin Wark, tax advisor with CALU, in an interview.<\/p>\n
In its submission, IIAC said, \u201cCanadians should not have to deplete their savings prematurely \u2014 they should have the freedom and flexibility to manage their savings according to their individual circumstances and in the most tax-efficient manner.\u201d<\/p>\n
CALU recommended the government reduce the minimum payment formula, allowing RRIF holders to keep more money in their plans, and establish a regular process for reviewing the factors used to calculate RRIF minimums.<\/p>\n
The group also recommended allowing RRIF holders to exclude up to $170,000, indexed, from the application of the RRIF minimum payment formula until the retiree reaches age 85.<\/p>\n
This change would align the RRIF minimum rules with those of the advanced life deferred annuity (ALDA), which allows Canadians to transfer 25%, up to a maximum of $170,000, from a registered account to an ALDA, the payments from which can be delayed until age 85.<\/p>\n
CALU also recommended that unused RRSP contribution room be indexed annually.<\/p>\n
The effects of inflation have left younger Canadians with less disposable income to make RRSP contributions, Wark said. Indexing unused RRSP contribution room would allow them to \u201cpotentially pick up more of their tax-deferred retirement savings\u201d later in life as their financial circumstances change.<\/p>\n
For its part, IIAC said the RRIF rules that compelled individuals to make mandatory minimum withdrawals did not reflect Canadians\u2019 longer life expectancies and had become outdated.<\/p>\n
Reducing or abolishing the mandatory minimums would allow Canadians to manage longevity risk at relatively little cost to the government, the group said.<\/p>\n
\u201cEliminating the annual minimum withdrawals entirely would simply delay the government\u2019s receipt of tax revenue \u2014 since RRIF withdrawals are considered taxable income \u2014 to either when the RRIF holder voluntarily takes out savings, or when the individual dies,\u201d IIAC said.<\/p>\n
CALU and IIAC are not the only groups to ask Ottawa to consider changes to the RRIF mandatory minimum withdrawal regime.<\/p>\n
In its 2025 pre-budget submission, the Canadian Association of Retired Persons (CARP) recommended the government eliminate the mandatory RRIF minimum as part of a host of recommendations meant to address financial security.<\/p>\n
\u201cKey reforms are needed to provide Canadians with a secure and robust means of saving for retirement and ensuring their financial stability,\u201d CARP said.<\/p>\n
In an April 2023 report, William Robson and Alexandre Laurin of the C.D. Howe Institute argued that \u201cages at which [RRSP] saving must stop and [RRIF] withdrawals must start and accelerate should be higher.\u201d<\/p>\n
In addition, the government should consider eliminating mandatory withdrawals.<\/p>\n
\u201cGovernment impatience for revenue should not force holders of RRIFs and similar tax-deferred vehicles to deplete their nest eggs prematurely,\u201d the report’s authors said.<\/p>\n
Last year the Department of Finance tabled a report on RRIFs to the House of Commons in response to a motion passed by the chamber in 2022<\/a>\u00a0asking it to study whether the mandatory minimum withdrawal rates continue to meet Canadians\u2019 retirement income needs.<\/p>\n The report examined the age at which RRSPs must be converted to RRIFs, and whether the assumptions underlying the minimum withdrawal rates \u2014 an age expectancy of 100, 3% annual real return on an investment portfolio and 2% inflation \u2014 were still appropriate.<\/p>\n The report didn\u2019t offer recommendations, but stated that \u201cseniors deserve a dignified retirement free from worry.\u201d<\/p>\n The government did not address RRIF minimums in either the 2023 fall economic statement or the 2024 federal budget.<\/p>\n However, as announced in this year\u2019s budget, the government did launch a consultation about simplifying and modernizing the definition of \u201cqualified investments,\u201d<\/a> which are those allowed in RRSPs, RRIFs and other registered plans.<\/p>\n