Thousands of Canadians are worried about outliving their RRIFs and rules that require withdrawals starting in the year they reach 72
My neighbour, Jack, turned 72 last weekend. He still has a ton of energy, and still works. “Retirement at 65 is crazy” Jack said. “When I was 65, I still had pimples” he joked, quoting the late George Burns. Truth be told, Jack still needs to work to make sure he doesn’t run out of money before running out of retirement years.
The report tabled by the government in response falls short of making specific recommendations about changes to the RRIF rules but does highlight proposals by stakeholders around the country – which I’ll get to in a minute.Our current rules say that the life of an RRSP must come to an end by Dec. 31 of the year you reach age 71. The most common strategy is to convert the RRSP to a RRIF by that date, with mandatory withdrawals from the RRIF starting the following year.
What the report fails to address is the impact of portfolio volatility on the psychological well-being of seniors. The more equities they hold in a portfolio, the more nervous some get, particularly as they get older. I’ve met many seniors who would not be comfortable with having as much as 30 per cent in equities at age 80. This issue has been entirely ignored when commenting on the equity percentages required to achieve the assumed 3-per-cent real return.
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