Rethinking RRIF Withdrawals: New Rates and Methodologies for New Realities

Moshe Milevsky

Canadian Tax Journal, 2014, vol. 62, issue 4, 971-983

Abstract: In this article, the author employs a microeconomic framework to examine the registered retirement income fund (RRIF) withdrawal schedule in the context of current interest rates and longevity projections. He argues that today's demographic and economic realities require that the schedule be revised to remain justifiable and fair. The methodology employed in this article differs from other policy-based (or probabilistic) arguments: the author compares the legislated withdrawal schedule with an optimal withdrawal schedule in a consumption-smoothing life cycle model (LCM) for a longevity risk-averse retiree. He argues that while the LCM might be able to justify the RRIF withdrawal rates in place during the late 1980s (a period with higher interest rates and lower longevity), a quarter of a century later the schedule has become outdated.

Keywords: Registered retirement income fund; RRIF; life cycle model; retirement (search for similar items in EconPapers)
Date: 2014
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