Seniors get reduced RRIF minimums, caregiver support and more in Budget 2015

There are 265,000 Canadians who are over 90 years old. The probability of reaching that age has doubled for women and tripled for men in the last two decades. The raw numbers of people living beyond 90 is expected to rise dramatically in the next few decades. Before Budget 2015, mandatory Registered Retirement Income Fund (RRIF) withdrawal rules forced seniors to draw down and pay tax on their retirement savings in increasing percentages until age 91, when their RRIF would be close to empty.

Seniors are left with reduced retirement funds when they have the greatest need. Given the increased longevity of Canadians, the old RRIF rules put ever more people at risk of outliving their savings. Budget 2015 offers a partial fix by reducing minimum withdrawal rates.

What a RRIF is and the issues with it

A RRIF is an arrangement between you and a carrier (an insurance company, a trust company or a bank) to which you transfer property to the carrier from an RRSP, a PRPP, an RPP, or an SPP to a RRIF, from which the carrier pays you. You must begin withdrawing a mandated minimum amount in the year following the year the RRIF is established.

When the original RRIF rules and withdrawal rates were introduced in 1978 and then increased in 1992, lifespans and time spent in retirement were much shorter than today. RRIF holders faced a considerable likelihood of running out of money in the late stages of retirement since they are designed to see the RRIF almost emptied by age 92.

Budget 2015 reduces RRIF withdrawal limits

The RRIF withdrawal limits have been reduced for RRIF holders at age 71 from 7.38% to 5.28% for 71 year olds. Seniors 95 and older still have a 20% minimum withdrawal rate. While this seems like a small decrease, over the span of over 20 years it saves seniors a significant amount of retirement savings.

Seniors will appreciate the specific commitments in Budget 2015 that will give Canadians more tax-free savings room in TFSAs and more control over their private retirement savings. Increased support for caregiver leave is a boost to people who have to leave work to provide care to older family members. Seniors will also benefit from the Home Accessibility Tax Credit that will be applied up to $10,000 of eligible home renovation expenditures per year, providing up to $1,500 in tax relief and allowing seniors to age in place in their homes.

View all of the changes from Budget 2015 on the Government of Canada’s website.