Government called on to reduce mandatory withdrawal rules for registered accounts

The C.D. Howe Institute is drawing attention to the fact that the federal government, back in April 2025, said it would reduce mandatory withdrawals from Registered Retirement Income Funds (RRIFs) by 25 per cent in 2025.

“The idea was that RRIF holders should not be forced to sell assets at low prices in a down market. Since then, we have heard nothing. With equity markets so strong lately, officials in Ottawa must be debating whether to follow through on the pledge,” they write in the intelligence memo, Deliver on the RRIF withdrawal promises – and fix the underlying problem. “The federal government’s repeated, temporary reductions of RRIF minimums are an implicit admission that the rules are wrong.” 

Rules don’t reflect longer life expectancies 

They note that the rules, set decades ago, have not been adjusted to reflect longer life expectancies, meaning retirees must stretch their savings over much longer periods. “Current RRIF rules force holders to deplete their tax-deferred savings too quickly and certainly much faster than defined benefit pensioners.”

The memo also calls out the federal government for its repeated introduction of tax rules which never came to fruition. “The federal government has shown a problematic tendency in recent years to announce tax changes that it fails to follow up, creating confusion and often prompting taxpayers to make costly and unnecessary actions,” it continues, citing examples including the on-again, off-again “bare trust” rules and the announced increase in the capital gains inclusion rate.

In the first case many Canadians incurred unnecessary accounting charges, while in the second case, the announced change caused people to sell assets “to avoid a tax hike which never happened,” they write. “People drawing down their RRIFs are the latest to suffer from the federal government’s inability to execute cleanly on tax policy.” 

Reforms suggested include raising age limits, if not abolishing them, or scrapping mandatory withdrawals altogether, allowing retirees to pay tax on what they withdraw but at their own pace, not one dictated by Ottawa. “If that’s too radical, the government could lower the minimums permanently so that future downturns do not require emergency fixes.”