7 Things to Know About the Lower RRIF Minimum Withdrawal for 2020

To help weather the economic challenges of the COVID-19 pandemic, the Government of Canada is giving Canadian seniors the option to lower the minimum amount they are required to withdraw from their Registered Retirement Income Funds (RRIFs) this year by 25 per cent.

The reduction recognizes recent volatility in global financial markets caused by the health crisis, which in turn may be impacting many seniors' retirement savings. It's meant to help investors avoid selling assets unnecessarily when market conditions are not ideal.

"This will provide flexibility to seniors that are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements," the government announced.

The 25 per cent reduction means that if your minimum withdrawal amount this year was $10,000, the reduced amount would be $7,500. For RRIF accounts opened as of Dec. 31, 2019, your minimum withdrawal amount for calendar 2020 would have been provided to you. The 25 per cent reduction applies to that original minimum amount.

To determine what the change means for you, here are seven common questions about the government's RRIF relief measure.

1) Will the reduction apply to future years?

The 25 per cent reduction is a temporary measure for 2020 only. The regular RRIF withdrawal factors will apply again beginning in 2021.

2) I already withdrew my original minimum requirement for 2020. Can I re-contribute?

Unlike when the government made a similar move during the 2008 financial crisis, if you have withdrawn more than the reduced minimum for 2020, re-contributing the difference between the original minimum and the reduced minimum is not permitted.

3) Am I required to lower my minimum withdrawal?

No. Reducing your minimum withdrawal by up to 25 per cent is optional and must be requested. The change allows RRIF holders (annuitants) who don't want to take their full original minimum to keep the extra funds invested on a tax-deferred basis.

4) Does the change apply to Life Income Funds (LIFs) and other locked-in RRIFs?

The temporary change for 2020 applies to all types of RRIFs, including LIFs and other locked-in RRIFs.

5) What about withholding taxes for Canadian residents?

Under the temporary provisions, withholding taxes – basically a pre-payment of your income tax – are calculated based on your unreduced minimum amount. (Withholding taxes normally apply to withdrawals of cash and/or in-kind securities that exceed your annual minimum amount.)

6) How does the change affect income attribution to my spouse?

For Spousal RRIFs, the original unreduced minimum will continue to be used when deciding who will pay the tax on the withdrawal. This avoids unfairly increasing the amount attributed back to the contributor.

7) How do I request a change?

If you haven't already received an amount up to your reduced RRIF minimum withdrawal and want to make a change, you can send instructions through a secure message by logging in to your account online or by calling and speaking with a representative directly.* Requests for the reduction must be made by Dec. 31, 2020 – or before your minimum withdrawal is scheduled.

For RBC Direct Investing Clients

If you have not already withdrawn the minimum amount for 2020 and want to take advantage of the reduction, you must contact us, either by calling 1-800-769-2560 or by logging in to your account and sending us an email from your secure Message Centre.* (Please select "Other Inquiries" from the drop-down menu.)

If you have previously instructed RBC Direct Investing to withdraw the minimum amount on your RRIF payment instruction form, we will not automatically convert this amount to the adjusted minimum amount for 2020.

*Please note that we are experiencing a high volume of client inquiries by phone and secure message. We are working hard to respond as quickly as possible. Thank you for your patience and we apologize for the delay.

Find out more about RRIFs in 5 Things to Know About RRIF Withdrawals.