Changes to the Registered Retirement Income Funds (RRIF) required Annual Minimum Withdrawal Amount
One of the economic measures announced by the Federal Government to assist Canadians with the impact of COVID-19 is reducing the minimum amount that must be withdrawn from RRIFs by 25% for 2020. For example, if a RRIF accountholder’s annual minimum withdrawal for 2020 would have been $10,000, the 25%-reduced minimum amount will be $7,500. The goal of this temporary change is to help RRIF accountholders protect retirement funds so that these savings are not depleted unnecessarily as a result of minimum payment rules.
The legislation containing these measures received Royal Assent on March 25, 2020 and is now law. Canada Revenue Agency (CRA) has published questions and answers to help financial institutions and RRIF annuitants understand the changes.
Key things to know:
- These changes apply for 2020 only and apply to all types of RRIFs (including Life Income Funds and other locked-in RRIFs).
- Tax is only withheld if a customer withdraws more than their unreduced minimum amount for 2020.
- If an individual has already withdrawn more than the reduced 2020 minimum amount, they are not permitted to re-contribute to their RRIFs an amount up to the 25% reduction. Payments received prior to March 25, 2020 are not eligible for any reductions.
- This measure also applies to individuals receiving variable benefit payments from a defined contribution registered pension plan (RPP) and a pooled registered pension plan (PRPP). Therefore, in this notice, all references to a RRIF includes variable benefit payments from a defined contribution RPP or a PRPP.
- These changes are optional, and customers are not required to reduce the minimum amount that must be withdrawn from their RRIF for 2020.
Here are your next Steps:
If you wish to reduce your RRIF annual minimum withdrawal or would like to discuss how these changes may apply to your financial situation, please speak to your BMO investment professional or call the BMO Investment Centre at 1-800-665-7700.
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