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.
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.
ReplyDeleteRESPs 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.
@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.
ReplyDeleteSeriously, 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?
M. James: "Curiously, the CRA guide for RRSPs, RRIFs, and RPPs was not helpful.."
ReplyDeleteCuriously?
@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.
ReplyDeleteWhy wouldn't a guide to RRIFs point to the withdrawal table at the part where it mentions that there are minimum withdrawals?
ReplyDeleteI can only assume it was a mistake.
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@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