Friday, April 24, 2015

The 2015 Budget: Registered Retirement Income Funds

On reaching age 71, many Canadians convert their registered retirement savings plans (RRSP’s) into Registered Retirement Income Funds (RRIF’s).  While this prevents immediate taxation of the amount in the RRSP, a portion of the RRIF must be withdrawn each year.  The amount withdrawn from the RRIF is brought into income and is subject to income tax.

Effective for 2015, the new federal Budget reduces the minimum amount that must be withdrawn each year for individuals between the ages of 71 and 94.  This will allow for more capital to remain in the RRIF for the purpose of generating tax-deferred income inside the plan.

The actual amount of the reduction will depend on various factors, including the amount in the RRIF and the age of the person in question.

If you have already withdrawn an amount from your RRIF and the amount exceeds the new lower minimum requirement, you will be able to re-contribute that excess withdrawal as long as you do so before February 29, 2016.

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The above article provides general commentary of an educational nature. It does not constitute advice for any specific person or any specific set of circumstances. Because circumstances vary, readers should consult professional advisers in order to obtain advice that is applicable to their specific circumstances.