In March, the government lowered the annual minimum withdrawal amount for RRIF’s by 25% for 2020. This measure was a result of many retirees experiencing a drastic drop in their investment portfolios as the pandemic created havoc in the investment markets.
If you have not taken out your full RRIF withdrawal for this year, should you take advantage of this new measure?
The answer, of course, depends on your circumstances. If your income decreased this year, there might be little incentive to reduce your withdrawal amount. You don’t want to move your income from a low tax year to a high tax year.
You also have to make sure that your income stays below $79,054, which is the clawback threshold for old age security (OAS). If you are anticipating that you will exceed the threshold, then you should opt for the reduction of the RRIF payment.
Remember that you cannot defer the tax on the RRIF forever. If the annuitant dies and has no surviving spouse, the RRIF will be fully taxable on the final tax return. If you have a high balance in the RRIF, it would mean a substantially higher tax, and a lot less for your beneficiaries.
