Article content

This week, Prime Minister Mark Carney confirmed that François-Philippe Champagne will remain as finance minister. While many had expected that one of his first orders of business would be tabling a federal budget, on Wednesday Champagne suggested that he would not be presenting a spring budget when the House of Commons resumes sitting at the end of the month. Instead, he announced that the government’s top three priorities would be: tabling a motion to cut the bottom income tax bracket by one per cent; presenting a speech to the throne on May 27; and then publishing an economic update in the fall.

Article content

Article content

Article content

With no budget on the horizon, some seniors may be in a bit of a pickle when planning their 2025 retirement income. That’s because, to date, we haven’t been given any details on how or when the Liberals will fulfil their pre-election promise to “protect retirement savings” by reducing the minimum amount that must be withdrawn from a registered retirement income fund (RRIF) by 25 per cent for one year. This measure was designed to “allow Canadian seniors more flexibility in choosing when to draw from their retirement savings.”

Article content

Article content

A RRIF is the most common successor of a registered retirement savings plan (RRSP), the other being the purchase of a registered annuity. A RRIF allows you to keep the same investments as you had in your RRSP and continue to defer taxes on the invested funds, with the notable exception that you must withdraw at least a required minimum amount annually, starting in the year after you set up the RRIF. You must close out your RRSP by the end of the year in which you turn 71.

Article content

The requirement to withdraw a minimum annual amount, whether you need it or not, is one of the biggest concerns voiced by some seniors when it comes to retirement planning since it effectively forces them to pay tax on their retirement assets before they need to spend them. The minimum amount is based on a percentage factor, often referred to as the “RRIF factor,” multiplied by the fair market value of your RRIF assets on Jan. 1 each year.

Article content

Article content

For example, if you converted your RRSP to a RRIF in 2024 when you turned 71, and the balance of your RRIF was $100,000 on Jan. 1, 2025, then you must withdraw 5.28 per cent, or $5,280, this year. The RRIF factor increases each year until age 95, when the percentage is capped at 20 per cent annually thereafter.

Article content

Article content

The RRIF rules haven’t kept up with recent demographic and economic trends, something that was the subject of a 2023 C.D. Howe Institute report entitled Live Long and Prosper? Mandatory RRIF Drawdowns Raise the Risk of Outliving Tax-Deferred Saving, in which co-authors William Robson and Alexandre Laurin called for a “revamping” of the RRIF withdrawal rules. In that report, they noted that longer lives and lower returns increase the likelihood that current mandatory minimum withdrawals “will leave seniors with negligible income from their tax-deferred saving in their later years.”

Article content

They wrote that “government impatience” to collect tax revenue on RRIF withdrawals should not force fund holders to prematurely deplete their nest eggs. Instead, minimum withdrawals should be adjusted to reflect updated demographic and economic realities. The Institute’s 2025 Shadow Budget, released last month, recommended an immediate one percentage point reduction of minimum withdrawals from RRIFs mandated for each age, beginning with this year.