Equitable Life Insurance is reminding clients that the federal government has cut the mandatory minimum withdrawal from registered retirement income funds (RRIF) by 25% for the year 2020. The feds made this announcement on March 18, 2020.
The government has provided this relief in response “to the COVID-19 pandemic and retirees concerned about withdrawing from their portfolios during the market sell-off,” the insurer explains.
Equitable Life adds that this reduction applies only to funds that have not yet been withdrawn. For example, RRIF holders who reached age 65 at the time that the federal measure took effect can withdraw as little as 3% from their registered retirement instrument rather than 4%. A person age 85 can withdraw 6.38% instead of the prescribed minimum of 8.51%.
How RRIFs work
MD, a national financial services firm dedicated to Canadian physicians, explains how this federally registered vehicle works. Generally used by retired RRSP holders to withdraw amounts accumulated during their working years, RRSPs can be converted into RRIFs at any time. There is only one condition: the conversion must occur before December 31 of the year in which the RRSP holder reaches age 71.
“In the calendar year after you open a RRIF, you have to start withdrawing money from it. The minimum amount is based on your age and a percentage of the value of your RRIF on January 1,” MD says.
