Deliver on RRIF Withdrawal Promises – and Fix the Underlying Problem

From: William B.P. Robson and Alexandre Laurin
To: The Honourable François-Philippe Champagne, Minister of Finance
Date: October 29, 2025
Re: Deliver on RRIF Withdrawal Promises – and Fix the Underlying Problem

Back in April, the federal government said it would reduce mandatory withdrawals from Registered Retirement Income Funds (RRIFs) by 25 percent for 2025. The idea was that RRIF holders should not be forced to sell assets at low prices in a down market. Since then, we have heard nothing.

With equity markets so strong lately, officials in Ottawa must be debating whether to follow through on the pledge. But the circumstances that prompted the April announcement highlight deeper flaws in the current RRIF rules. Set decades ago, they have not adjusted to longer life expectancies, and returns on high-quality, low-volatility assets have declined, meaning retirees must stretch their savings over much longer periods.

As a result, current RRIF rules force holders to deplete their tax-deferred savings too quickly, and certainly much faster than defined-benefit pensioners. Some seniors may view the minimum withdrawal as an appropriate guide to plan their long-term annual income, unaware that their real purchasing power value will decline steadily over the years. Or limited financial literacy may prevent them from reinvesting surplus funds effectively, perhaps leaving them with insufficient funds later in life for needs such as long-term care.

For many retirees, the minimum withdrawals are constraining: Two-thirds of people 72 and over withdraw only the required amount and no more.

Pressure to reduce mandatory withdrawals happens when markets slump. The government reduced the amounts for 2008, then for 2020, and promised to do so again this year. Now, with next Tuesday’s budget approaching, RRIF annuitants aged 72 and older who withdraw no more than the minimum amounts – more than 1.3 million Canadians – are wondering what to do. Can they take less out of their RRIFs? Should they withdraw investments now, or wait?

The federal government has shown a problematic tendency in recent years to announce tax changes that it fails to follow up, creating confusion and often prompting taxpayers to make costly and unnecessary actions.

The “bare trust” rules, for example, which were introduced in 2023 and obliged many Canadians with joint bank accounts to file trust returns, were rescinded literally days before the deadline for tax filing. Many Canadians had scrambled to get filings together, often incurring accounting fees which turned out to be entirely unnecessary.

Then there was the announced increase in the capital gains inclusion rate that caused people to sell assets to avoid a tax hike that never happened. People drawing down their RRIFs are the latest to suffer from the federal government’s inability to execute cleanly on tax policy.

As we showed in our 2023 C.D. Howe Institute study, the minimum withdrawals force a steady decline in the purchasing power of RRIF withdrawals over time. Under current formulas and market returns, the inflation-adjusted value of the minimum withdrawal loses almost half its real worth by the time the holder reaches 94 – an age that one in eight 71-year-old men and one in five 71-year-old women can expect to reach. Worse, the minimum withdrawals rise steeply after age 94, rapidly depleting the tax-deferred savings of the most elderly.

The contrast with federal employees’ pensions is stark. Public-sector pensions are indexed to inflation, preserving purchasing power for life. Rather than letting those who saved privately and would presumably prefer the same stability in their retirement incomes arrange their affairs to get it, the federal government forces them to withdraw assets most would prefer to keep in their accounts.

Behind the mandatory withdrawals lies the government’s impatience for tax revenue. RRIFs, like the RRSPs in which RRIF holders saved for retirement, let Canadians defer tax on retirement savings until the money is withdrawn. The withdrawal schedule ensures Ottawa gets its share sooner rather than later.

But the time horizon of governments is much longer than that of seniors worried about outliving their savings. No wonder the government periodically responds to pressure for relief. But why not tackle the problem directly? The simplest reform would be to scrap mandatory withdrawals altogether. Retirees would still pay tax on what they withdraw, but they – not Ottawa – would decide the pace.

If that’s too radical, the government could lower the minimums permanently so that future downturns do not require emergency fixes. Or at least exempt smaller annual withdrawals – say, anything under $8,500 – from the rules, to prevent premature depletion of modest nest eggs.

In addition, the reality of increasing longevity suggests we need to delay the age at which Canadians lose access to tax-deferred saving and must start running it down. If abolishing age limits entirely is too radical, we should raise the age at which saving must stop and withdrawals must start from 71 and 72 to at least age 75.

The federal government’s repeated temporary reductions of the RRIF minimums are an implicit admission that the rules are wrong. RRIF holders need immediate confirmation that the reduced minimums for 2025 will apply. And next week’s budget provides an opportunity for a lasting reform: Lower RRIF withdrawals that will let Canadians retire with confidence that their savings will last as long as they do.

William B.P. Robson is President & CEO and Alexandre Laurin is Director of Research at the C.D. Howe Institute. 

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