Mandatory RRIF withdrawals are playing havoc with seniors because the amount to withdraw is based on the market value of the securities as of January 1, 2008. The TSX composite index is down 44% from January 1, 2008, forcing seniors who did not withdraw in a strong market to suffer a severe loss of funds to meet the mandatory requirement and pay the tax on it.
Below is a copy of an email I sent to Finance Minister Jim Faherty. If we want the government to quicky correct this injustice, it is imperative that everyone affected write to Minister Faherty to express their concerns, with a copy to their local MP.
The Honourable Jim Flaherty, Minister of Finance
I was perturbed to see no reference in the Speech from the Throne about relief for seniors forced to withdraw and pay tax on an arbitrary amount for RRIFs drastically depleted from the precipitous market fall.
At December 31, 2007 (the last date for the index before January 1, 2008) the TSX composite index stood at 13833. As of the close yesterday it was 7724.76, a drop of 44 %. And no one knows how low the index will go before the year end.
The effective rate for mandatory withdrawal is now 10.67% at age 71, 12.6% at age 80 and a whopping 28.8% at age 94. How are people going to recover their market losses when they are forced to withdraw such exhorbitant amounts?
Seniors have worked hard and contributed financially and socially to Canadian Society for many years. Many continue to do so through their voluntary charitable activities. They have paid their dues and are entited to enjoy the fruits of their labour in their retirement. Yet not only are their savings depleted from the market plunge, their own government is forcing them to drastically deplete their dwindling nest eggs by applying arbitrary and outdated rules.
Mr. Finance Minister, it is time to do away with mandatory RRIF withdrawals or at the very least grant a two-year moratorium to allow seniors to recoup some of their losses,and reduce the age-based rates to more reasonable levels. In the interest of fairness which I’m sure your government is committed to, I urge you to grant immediate relief for this distressing problem for seniors.
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