One of the provisions in the federal government’s aid package is a 25% reduction in the minimum amount (MAP) that must be withdrawn from a Registered Retirement Income Fund (RRIF) in 2020.  This is welcome relief for retirees who may have seen a decline in the value of their RRIFs since December 31, 2019, which is when the MAP is calculated.

Example:

Your 2020 MAP is originally $12,000, paid out monthly ($1,000 a month), and you have received 4 x $1,000 payments thus far.  You can request that the remainder of your 2020 payments be paid on a reduced MAP payout of $9,000 (75% of $12,000).  With 8 payments left in the year, and factoring in the $4,000 you already received, the balance of your 2020 payments will be $5,000 / 8 = $625 a month.

The result is less taxable income incurred in 2020, and more money preserved in your portfolio that can recover from the COVID-19 market decline.

The clients that should consider this option are:

• Those who take out their MAP because they must, not because they need the funds.
• Those who draw from a combination of accounts (RRIF + non-registered).

If you draw from a mix of RRIF + non-registered accounts, you could reduce your taxable RRIF payments and increase your more tax efficient non-registered payments accordingly.  Or you could simply reduce your RRIF MAP if you believe you can budget on a reduced income for the rest of the year.

Even if you currently draw more than the MAP, you should reassess your cash flow needs for the year.   The amount you draw each month was likely based on a budget that includes travel and other expenses that may not apply anymore this year.

We have begun contacting households that may benefit from this, but we kindly ask you to get in touch with us if you want to take advantage of the MAP reduction.