Le Lézard
Classified in: Business
Subjects: SVY, LEG, ECO, AVO

New RRIF Rules Reduce Risk of Outliving Savings, but More Help Needed - C.D. Howe Institute

TORONTO, July 2, 2015 /CNW/ - The 2015 federal budget's reduction of the mandatory minimum withdrawals from registered retirement income funds (RRIFs) and similar tax-deferred accounts will reduce the risk that many Canadians will outlive their savings. Yet with yields on safe investments so low, and longevity continuing to increase, the risk is still material, according to a new C.D. Howe Institute report. In "Drawing Down Our Savings: The Prospects for RRIF Holders Following the 2015 Federal Budget," authors William B.P. Robson and Alexandre Laurin commend the government's recent change to RRIF rules but urge them to go further.

"The old drawdown rules established in 1992 had become badly outdated," states Robson. "The new rules are better. The challenge going forward, however, is to keep these rules better aligned with returns and longevity. If more regular adjustments are impractical, eliminating minimum withdrawals entirely may be the way to help retirees enjoy the lifelong security they are striving to achieve."

According to the authors, the recent changes requiring smaller minimums still present a risk to retirees. If the 2015 Budget's assumed real investment returns of 3 percent prove realistic, the projections suggest relatively constant minimum RRIF drawdowns up to age 94, and a lower risk of living to see a badly depleted RRIF account balance. However, real returns on safe investments are currently negative. Re-running the projections with zero real returns suggests that seniors, especially women, still face a material risk of outliving their tax-deferred savings.

Laurin concludes, "If real yields on the types of securities a prudent retiree should hold do not rebound considerably, and if life expectancy continues to rise, the risk of outliving tax-deferred savings will continue to be material. The 2015 changes should therefore be a downpayment on further liberalization."

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada's trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada's most influential think tank.

For the report go to: http://www.cdhowe.org/?p=29849

SOURCE C.D. Howe Institute

These press releases may also interest you

at 11:51
Lionsgate /Roadside Attractions' release of the Erwin Brothers faith-based family drama I Can Only Imagine shattered pre-weekend tracking expectations to become #3 at the box-office this weekend and the #1 faith-based movie of 2018. The film took in...

at 10:00
Lowestcarinsuranceratesonline.com (http://www.lowestcarinsuranceratesonline.com/) offers free car insurance quotes for finding the right policy in spring. Clients can find great auto insurance offers at anytime during the year, but this spring...

at 08:54
Total contributes AED 5.3 billion participation fees for stakes in Umm Shaif and Nasr, and Lower Zakum concessions   Oil and gas major will play a critical role in supporting the development of Umm Shaif's giant gas cap, as ADNOC drives a more...

at 08:00
CNA understands that trustworthy, dependable employees are crucial to small business' success. While we want to believe that all our employees are honest and respectful, it's also important to guard against any problems that can be posed by those who...

at 03:50
The digital economy has experienced some problems, including high secondary market risk, lack of investment scene (essays and secondary markets), large digital asset value-added difficulties and other problems led to the digital currency only invest...

17 mar 2018
The Atlantic beef industry is a powerful economic driver for Canada with over $100 million in farm cash receipts and over $25 million in exports. As the sector continues to grow, the Government of Canada is committed to working with beef and cattle...

News published on 2 july 2015 at 10:00 and distributed by: