The pension rules in Canada have failed to cope up with long life expectancies, and impose Registered Retirement Income Fund (RRIF) holders to operate tax-deferred assets down rapidly. Federal tax rules need those with tax-deferred savings to either transfer their assets into RRIFs or similar vehicles or purchase annuities. In respect of an age-related formula, the Income Tax Act obliges RRIF holders to withdraw minimum amounts that increases each year, until it is 20%.
According to the Canada statistics, the average life expectancy of a 71 year old man at 14.4 years and that of a 71 year old woman at 16.9 years. The Institute assumes that the real value of their tax-deferred nest egg will drop below CAD50,000 by the end of 2023, when he or she turns 80, whereas a 71 year old with CAD100,000 (USD99,450) in an RRIF withdraws the minimum mandatory amounts. Their RRIF balance will fall below CAD25, 000 when they are 87. Their balance will be less than CAD10, 000 if they reach 94. The Institute is calling on the Government to extend the age limits at which minimum drawdowns must start and to deduce the drawdown amounts.
