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TFSA Increases and RRIF Minimum Changes – Two Advantages for many of you

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coupleAs most of you are now aware, last month’s budget brought two important personal finance changes.

The first is that TFSA annual contribution limits are now up to $10,000 annually, and the second is that if you have a RRIF, the minimum that you are able to withdraw has been lowered for all ages up to 94.

The TFSA changes will be important for many Canadians, especially younger ones who have years to build up TFSA room.

Asher Tward and Ted Rechtshaffen wrote a couple of articles on this topic in the National Post, showing how a middle class and upper middle class family could save over $1 million in their lifetime with the TFSA vs. the world without TFSAs:

A world with TFSAs vs without: Guess which can help a middle-class couple save $1.1M?
and
A world with TFSAs vs without, Part II: Which helps a family with a modest income save an extra $1.5M?

TFSA Action Item – You now have $4,500 in new contribution room for 2015. We will be discussing this contribution space with clients over the next few weeks.

On the RRIF, the chart below shows the change to RRIF Minimum Withdrawals. For example, at age 71, you had to withdraw 7.38% of your beginning year RRIF balance. Now it has been lowered to 5.28%.

RRIF Action Item – In many cases, this won’t have an effect on you. If, however, you are currently taking out the minimum RRIF balance, your Wealth Advisor will connect with you on whether you want to lower the withdrawal amount to the new lower minimum or not.

New Withdrawal Old Withdrawal
Age Minimums Minimums
71 5.28% 7.38%
72 5.40% 7.48%
73 5.53% 7.59%
74 5.67% 7.71%
75 5.82% 7.85%
76 5.98% 7.99%
77 6.17% 8.15%
78 6.36% 8.33%
79 6.58% 8.53%
80 6.82% 8.75%
81 7.08% 8.99%
82 7.38% 9.27%
83 7.71% 9.58%
84 8.08% 9.93%
85 8.51% 10.33%
86 8.99% 10.79%
87 9.55% 11.33%
88 10.21% 11.96%
89 10.99% 12.71%
90 11.92% 13.62%
91 13.06% 14.73%
92 14.49% 16.12%
93 16.34% 17.92%
94 18.79% 20.00%
95 20.00% 20.00%
Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221
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