A Question about RRIF Minimum Withdrawals

In a discussion about RRIF minimum withdrawals, the following question came up: what is the exact value used for portfolio size? RRIF owners must withdraw a percentage each year, but a percentage of what value? The value of a portfolio can vary minute-by-minute. I found the answer surprisingly hard to find.

Curiously, the CRA guide for RRSPs, RRIFs, and RPPs was not helpful. This guide didn’t even contain the table of RRIF percentage withdrawals by age. I actually found the answer in a CRA guide intended for RRSP and RRIF plan administrators. Appendix D contains the table of percentages of minimum RRIF withdrawals at each age along with the following text:

“As the carrier of a RRIF, you have to pay a minimum amount to the annuitant every year after the year in which the RRIF is set up. You calculate this amount by multiplying the FMV of the property held in the RRIF at the start of the year by a prescribed factor.”

So, it’s the value of the RRIF contents at the start of the year that matters. Generally, I prefer to get answers to questions like this from the horse’s mouth (CRA in this case). Other sources might give clearer explanations and better insight, but it’s a good idea to confirm information with actual CRA documents.

Many posts on this subject reproduce the table of RRIF withdrawal percentages for each age, but I’ll avoid this just in case it changes with today’s federal budget.

Comments

  1. Mike HolmanMarch 22, 2011 at 9:37 PM

    Correct me if I'm wrong, but you did find the answer on a CRA website. It just wasn't in the guide you were expecting.

    RESPs are the same way - the canlearn.ca pages are great for basic rules, but the resp provider guide is the one with the real info.

    ReplyDelete
  2. Michael JamesMarch 22, 2011 at 11:05 PM

    @Mike: Yup, the information was on the CRA site. It was right there at the 15th search result on the 7th search string I tried.

    Seriously, though, I didn't have any particular expectation of where to find the information. Searching the site was frustrating. Why wouldn't a guide to RRIFs point to the withdrawal table at the part where it mentions that there are minimum withdrawals?

    ReplyDelete
  3. AnonymousMarch 23, 2011 at 2:20 AM

    M. James: "Curiously, the CRA guide for RRSPs, RRIFs, and RPPs was not helpful.."

    Curiously?

    ReplyDelete
  4. Michael JamesMarch 23, 2011 at 9:14 AM

    @Anonymous: Some parts of the CRA web site are well-constructed. So, I actually did expect this guide to be useful. I did find it curious that it doesn't point to other relevant parts of the site.

    ReplyDelete
  5. Mike HolmanMarch 23, 2011 at 10:17 AM

    Why wouldn't a guide to RRIFs point to the withdrawal table at the part where it mentions that there are minimum withdrawals?


    I can only assume it was a mistake.

    ReplyDelete
  6. geneMarch 23, 2011 at 7:02 PM

    Nice sleuthing, Michael. That will be useful information for a lot of people. You didn't post the minimum withdrawals, as you mentioned, but I was impressed they didn't force an agressive collapse of the RRIF until an account holder approaches their mid-90s. I guess it's true senior citizens hold the most political power, since they actually turn out to vote.

    ReplyDelete
  7. Michael JamesMarch 23, 2011 at 7:08 PM

    @Gene: There is something to be said for belonging to a cohort that shows up to vote. Overall, though, I'd prefer to be young :-)

    ReplyDelete

Post a Comment

Popular posts from this blog

Short Takes: InvestorLine’s HISAs, 24-Hour Trading, and more

I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds.  Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like).  However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying.  A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.”  I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting.  I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Read more

My Asset Allocation

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...
Read more

Updated Currency Exchange Method at BMO InvestorLine

There is now a more recent update of the method I use for exchanging currency at BMO OnvestorLine . I recently changed the procedure I use to convert large sums between Canadian and U.S. dollars at BMO InvestorLine. The method I use saves a lot of money compared to using the InvestorLine foreign exchange system. The latest change I made eliminated an annoying interest charge that I had to ask to be reversed. Most people don’t realize how expensive it can be to exchange currency. The extra charge banks and brokerages add gets hidden in the exchange rate. To see this extra charge, start by taking a sum in Canadian dollars, say C$10,000, and finding out how many U.S. dollars you can get. Then see what this U.S. amount would get going back to Canadian dollars. Many people might guess they’d get their original C$10,000 back, but they’d be wrong. In a recent test I did at BMO InvestorLine, I’d get back C$9754, for a loss of C$246 in two currency exchanges. That’s $123 per excha...
Read more

Archive

Show more