Ghostwriter – Author – Journalist

Will You Outlive Your RRIF?

By on February 9, 2019 in Articles with 0 Comments

Canadians are living longer.
 Is 85 really the new 70? Or to be more precise, the new 71, the year you can’t put it off and have to convert your RRSP into a registered retirement income fund (RRIF) and start taking payments from the money you’ve saved.

There are three-quarters of a million Canadians over the age of 85, according to the 2016 census. That is 13 per cent of the population over the age of 65, and it is only going to keep growing, both in numbers and as a percentage of people over retirement age.

The federal government gave people tax write-offs when RRSP contributions were made; it wants that money back, starting in the year after your 71st birthday. There are percentages of the total that have to be taken out every year, starting at 5.28 per cent of all the assets in your RRIF, rising every year to reach a maximum of 20 per cent by the time you are 95.

Our hypothetical 85-year-old will have to withdraw 8.51 per cent. It used to be worse. Before changes were made to the withdrawal rates in 2016, the withdrawal rate started at 7.38 per cent and was 10.33 by age 85. Now you have to live to 88 to almost reach that level.

There are people who would prefer not to take anything out in the earlier years; they could have other savings or still be working. One 82-year-old retired television producer has never stopped working since he left his day job almost 20 years ago. He doesn’t like being forced to take money out of his RRIF.

Rona Birnbaum has no sympathy. She is a financial planner at her Toronto-based firm, Caring for Clients. She says there is nothing you can do to avoid taking the RRIF payments, and it is doubtful the government is going to make any further changes.

“Suck it up and pay the tax and put the rest into a tax-free savings account or a non-registered account,” says Birnbaum. “People need to keep planning and adjusting their financial goals as they get older.” She points out that it is inevitable that a RRIF is going to shrink.
“It is not a pension or an annuity.”

The good news in all this is that you are probably going to live longer. The takeaway is – to make sure you have enough for a long life, put the maximum into a TFSA and make a plan for what could be the longer term.

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About the Author

About the Author: Fred has had a full career as a CBC TV host and reporter. He has written countless articles for many renowned publications such as The Economist, The Globe and Mail, BusinessWeek and many more, as well as more than 2000 obituaries. He is also a successfully published author and ghostwriter. His current projects include writing and co-authoring books, as well as lending his talents as a speaker and interviewer for webcasts. .


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