Required Minimum Withdrawal for RRIFs Reduced for 2008
On November 27, 2008, the Finance Minister
released the mid-year fiscal update that included
a change for Registered Retirement Income Fund
(RRIF) holders and individuals receiving variable
benefit payments under a money purchase
Registered Pension Plan.
In recognition of recent exceptional market
conditions and their effect on retirees’ savings, the
government has proposed to reduce the required
minimum withdrawal amount for RRIFs by 25% for
2008. The problem with RRIFs is the fact that the
required withdrawal for a given year is based on
the value of the RRIF at the beginning of the year,
and for retirees holding a significant amount of
their savings in equities, their RRIF value will have
declined substantially since then.
As a RRIF holder, this means that you may keep
more of your savings in your RRIF. If you have
withdrawn more than the reduced 2008 minimum
amount, you will be allowed to re-contribute
the excess (up to the amount of the reduction
provided by this proposal) to your RRIF until
the later of March 2, 2009 and 30 days after this
proposal is enacted into law by the government.
These re-contributions will be deductible on your
2008 tax return. This change will apply to all RRIF
holders regardless of age.
Similar rules will apply if you are receiving variable
benefit payments under a money purchase
Registered Pension Plan.
The Canada Revenue Agency (CRA) has indicated
that they will permit you to take advantage of this
proposal before it is passed into law as it is the
CRA’s longstanding practice to allow taxpayers to
act upon proposed tax measures. Note that if the
proposed measure is not passed into law, the CRA
will not penalize you for acting on the proposal,
but you may be required to withdraw the ineligible
amount from your RRIF.
If you have questions about how this change may impact
you, consult with your BDO advisor.
Next Section: Income Split by Taking Advantage of Low Interest Rates
Download this issue of the Tax Factor
