It seems like ages ago, but the stock markets had a brutal time of it in early April as the trade war raged.
The level of anxiety about the market declines was such that the federal Liberals made a promise aimed squarely at seniors worried about their retirement savings. For 2025 only, there would be a 25-per-cent reduction in mandatory withdrawals from registered retirement income funds, or RRIFs.
The stock markets have rebounded with force since then, largely because investors feel confident the trade war will be settled with minimal economic damage. This may explain why the Department of Finance was vague when asked for an update on the RRIF promise.“
The government has a mandate to bring down costs for Canadians,” a department official said in an e-mailed response to questions. “It has already tabled legislation to cut taxes for the middle class and first-time home buyers. The government will have more to say on additional measures to make life more affordable for Canadians in due course.”
Seniors who have not made a RRIF withdrawal and who don’t need the money immediately should probably wait until more definitive word comes from the government on its RRIF policy. But, really, there is no point in going ahead with reduction in the mandatory RRIF withdrawal amount, other than to keep a promise and not antagonize seniors.
The middle-class tax cut and the removal or reduction of GST when first-time buyers purchase homes priced up to $1.5-million were announced in the throne speech in May. The federal budget expected in the fall would be another opportunity for the government to announce the RRIF measure, but that’s getting late in the year for seniors trying to plan their retirement finances.
There is a precedent for modestly reducing the amount people must withdraw from RRIFs in economically volatile times – it happened during the global financial crisis in 2008 and in the early pandemic phase in 2020. In the 2020 example, people who made a RRIF withdrawal before the announcement were not allowed to recontribute their excess amount.
The best plan for seniors worried about how falling stocks will affect their RRIFs: Keep at least two years’ worth of money for mandatory withdrawals in cash. If stocks plunge, you can give them time to recover by drawing from your cash. Returns of around 2.5 per cent on investment products designed to safely hold cash, enough to keep you ahead of inflation.