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November 2015

Seniors get a pay cut in 2016

by Rona Birenbaum  |  2 Comments

Many Canadian seniors will be surprised when their RRIF payments decline by as much as 28% in 2016.  Seniors age 82-and-under will see a decrease of at least 20%*

Seniors that chose to receive the RRIF minimum payment will be most affected.  That minimum is determined by the market value of your plan assets as of the previous December 31st, multiplied by the CRA age factor.  But in the 2015 Federal budget, the RRIF minimum factor was significantly reduced (see table below).  And if your amount withdrawn exceeded your plan growth in 2015, your pay cut will be even deeper.

You're a senior and your financial advisor has not spoken with you about this?  Here are a few suggestions:

  • Up to now, if the minimum has been more than you needed, you might have manually or or automatically moved the excess to a TFSA or other account.  Consider adjusting that amount downward, or outright cancelling it when your RRIF payments decline next year.

  • If the minimum has been less than you needed, you may have been withdrawing additional funds from a TFSA or non-reigstered account.  If those withdrawals were automated, you may want to increase the withdrawal amount to offset your reduction in RRIF income.

  • You may have a one-time opportunity to re-deposit an excess amount to your RRIF to reduce your 2015 tax burden.  The deadline is February 29, 2016.

Today's longer lifespans are the reason for the change in the RRIF tables.  The federal government's concern (the concern of every senior and their advisor) is that the existing formula forced seniors to deplete their RRIFs too aggressively, and risk running out of money prematurely.

Let's say you're a Canadian senior.  Now is a particularly good time to re-assess whether your portfolio withdrawals (irrespective of the changing RRIF rules) are sustainable, keeping in mind ever-increasing life expectancy.  And don't be shy about reaching out on this tricky issue - it's mission-critical!


*The above table is based on CRA data found here.

This information of a general nature and should not be considered specific advice, as each reader's personal financial situation is unique and fact specific. Please contact your financial advisor or Caring for Clients prior to implementing or acting upon any of the information contained herein.


All about investing, Cash Flow Concerns, Retirement  


  Nov 03, 2015 12:37PM
Stephen Kurtz
This column is looking at the situation bass-ackwards.  Yes, the minimum withdrawal is less but the fact is that we won't be running out of money sooner and isn't that better than having a  faster diminishing asset?

  Nov 03, 2015 13:13PM
Rona Birenbaum
Hello Stephen,
I think that we agree that it was a good move by the government. I make that exact point in the last two paragraphs of the article albeit without profanity.

The point of writing this piece was to help seniors plan for this change and review their withdrawal levels to ensure that they don't run out of money prematurely.



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