RRIF withdrawal rules for retirees need to be updated

financialpost.com:

The government and the financial industry both take for granted that savers know what to do with their retirement accounts once they need to take withdrawals, but so much attention is focused on the need to save for retirement that the rules and strategies for decumulation tend to be overlooked.

For example, registered retirement savings plans (RRSPs) are commonly converted to registered retirement income funds (RRIFs) by no later than age 71, with minimum withdrawals required thereafter that rising with age. Account holders have until Dec. 31 of the year they turn 71 to convert their account. Until 2007, the conversion age was the end of the year the RRSP annuitant turned 69.

The minimum withdrawal for a 71-year-old who converts to a RRIF is 5.28 per cent in the following year when they turn 72. That rises to 6.58 per cent in the year they turn 80 and 8.08 per cent in the year they turn 85. The percentage is applied to the account value on Dec. 31 of the previous year. Withdrawals can be taken monthly, quarterly, annually or otherwise, as long as the total withdrawals are at least equal to the minimum required withdrawal for the account holder’s age. Withdrawals are taxable.

There are no maximum withdrawals for a RRIF account. But if the funds are locked-in registered savings from a pension plan transfer, there may be an age-based maximum percentage based on the province or territory where the pension originated.

RRIFs are the most common conversion option for retirees, but an alternative is to purchase an annuity from an insurance company. This is essentially a monthly pension payment in exchange for an RRSP balance. Higher interest rates should lead to renewed interest in annuities.

The C.D. Howe Institute just