The federal government has announced changes to Retirement Income Fund withdrawals due to COVID-19. Sandra Bussey, High Net Worth Planner, TD Wealth, and Georgia Swan, Tax and Estate Planner, TD Wealth, answer this and other commonly asked questions for seniors and those nearing retirement.
Print Transcript
[MUSIC PLAYING]
- In January of every year, if you happen to have a RRIF, you would have been notified by the institution that you hold that RRIF with what your minimum annual payment is for 2020. And that's the amount that you are required to withdraw out of the plan and pay tax on.
So what this measure is doing, it's reducing that minimum required payment by 25%. And so individuals have the opportunity to decide whether or not they want to get their payments monthly, quarterly, or annually. They might want to get it at the beginning of the year, they might want to get it at the end of the year. And that's something that people have to take a look at in terms of whether or not they're going to be able to take advantage of this reduction.
So if you are somebody who has already taken your minimum amount out for 2020, there doesn't appear to be anything that has been announced that would allow you to contribute back into your RRIF that 25% reduction. And interestingly, this isn't the first time that the federal government has reduced the minimum payment by 25%. If you think back to 2008, there was a significant market correction then there in the fall. And in November, the government announced at that time that they were going to reduce the minimum payment again by 25%.
But at the same time, because they realized that a lot of people, by that time of the year, may have already taken out their minimum payment, they allowed them to re-contribute that 25% reduction back into their RRIF as a special contribution and get a deduction on their tax return so they didn't have to pay tax on the full RRIF payment. They were able to put 25% back in. Haven't heard anything yet in terms of whether or not the government is going to bring that type of measure back for people who have already taken out the minimum in 2020.
[MUSIC PLAYING]
- In January of every year, if you happen to have a RRIF, you would have been notified by the institution that you hold that RRIF with what your minimum annual payment is for 2020. And that's the amount that you are required to withdraw out of the plan and pay tax on.
So what this measure is doing, it's reducing that minimum required payment by 25%. And so individuals have the opportunity to decide whether or not they want to get their payments monthly, quarterly, or annually. They might want to get it at the beginning of the year, they might want to get it at the end of the year. And that's something that people have to take a look at in terms of whether or not they're going to be able to take advantage of this reduction.
So if you are somebody who has already taken your minimum amount out for 2020, there doesn't appear to be anything that has been announced that would allow you to contribute back into your RRIF that 25% reduction. And interestingly, this isn't the first time that the federal government has reduced the minimum payment by 25%. If you think back to 2008, there was a significant market correction then there in the fall. And in November, the government announced at that time that they were going to reduce the minimum payment again by 25%.
But at the same time, because they realized that a lot of people, by that time of the year, may have already taken out their minimum payment, they allowed them to re-contribute that 25% reduction back into their RRIF as a special contribution and get a deduction on their tax return so they didn't have to pay tax on the full RRIF payment. They were able to put 25% back in. Haven't heard anything yet in terms of whether or not the government is going to bring that type of measure back for people who have already taken out the minimum in 2020.
[MUSIC PLAYING]
