Once we turn 71 years old, all RRSP accounts held need to be transferred to RRIFs. Beginning the year after the RRIF is established, there are minimum amounts that all taxpayers need to withdraw on an annual basis.
In June 2015, new legislation was passed lowering the minimum RRIF withdrawal. This change was implemented in order to account for the current investment rates of return, rates of inflation and the fact that the population in general is living longer. The change will permit more funds to remain in the account and result in more income accumulation.
If you are a 71 year old RRIF annuitant and had a $100,000 in your account, under the old rules, you would be required to withdraw $7,380 or 7.38%. Under the new rules, you are now required to withdraw $5,280 or 5.28%. The withdraw rates for subsequent years are also reduced accordingly.
Keep in mind, the withdrawal amounts are only the minimum required and you could always opt to withdraw more.If you are an annuitant and withdrew your minimum RRIF amount for calendar 2015 earlier in the year and under the old requirements, CRA is permitting you to re-contribute the excess if you so choose.From an income tax perspective, you will receive a T4 RIF for the total amount withdrawn and an offsetting contribution slip that will both have to be filed on your 2015 tax return.
If you have any questions about these changes, please contact us.