The Liberals held on to power in the recent federal election, and this has tax implications for Canada’s seniors and other taxpayers—in particular, for retirees and their strategies for their registered retirement income fund (RRIF) this year and possibly in the future.
Reduced RRIF minimum withdrawals
The Liberals’ primary RRIF proposal is to decrease the minimum withdrawal that is required for 2025. The party announced on April 7, 2025, its intention to “protect retirement savings by reducing the minimum amount that must be withdrawn from a Registered Retirement Income Fund (RRIF) by 25% for one year. This will allow Canadian seniors more flexibility in choosing when to draw from their retirement savings.”
This proposal was made in response to U.S. tariffs, which have created economic uncertainty and triggered stock market volatility in recent weeks. Reducing RRIF minimum withdrawals is a measure to “help Canadian seniors and retirement savings weather this storm.” The government has not yet announced when the decrease in minimum withdrawals will begin.
How RRIF minimum withdrawals work
Once a registered retirement savings plan (RRSP) is converted to a RRIF, there are minimum withdrawals that must be taken starting in the year after conversion. These minimums are calculated based on the December 31 market value of the account for the previous year. Each year, the minimum percentage rises based on the age of the account holder or their spouse. (See RRIF withdrawal rates by age.)
You can base the RRIF withdrawals on the age of your spouse if they are younger and you want to have a lower required withdrawal. If the RRIF is a non-locked-in account, so did not come from a pension transfer to a locked-in RRSP, there is no maximum or limit on your withdrawals.
The proposed 25% reduction is reminiscent of 2020 in the wake of the pandemic, when the Liberals responded to stock market volatility with a 25% decrease in required RRIF minimum withdrawals.
A lower minimum percentage means less pressure on a senior to sell stocks to fund RRIF withdrawals. Practically speaking, many seniors do not have the liberty of forgoing their minimum withdrawals and rely on their RRIF payments for spending.
RRIF withdrawals can be taken monthly, quarterly or annually depending on your needs. If you have not yet taken your entire minimum withdrawal for 2025, you should consider whether it makes sense to delay your withdrawals to benefit from the potential 25% reduction for this year.
Tax rate decrease for the lowest tax bracket
Another Liberal campaign proposal was to decrease the tax rate payable on income in the lowest tax bracket by 1%. Based on 2025 tax rates, this would mean paying 15% instead of 14% on up to $57,375 of taxable income. Taxpayers are currently entitled to a tax-free federal basic personal amount of $16,129 if their net income is less than $177,883. Paying 1% less in the lowest tax bracket would mean savings of up to $412 on income between $16,129 and $57,375 for this year’s tax brackets. Tax thresholds and the basic personal amount generally rise annually.
It is unclear whether this rate reduction would apply in 2025 if enacted, but whether it does or does not, seniors with RRIFs should always keep their tax rate in mind when considering how much to withdraw from their RRIF accounts.
The potential 25% reduction in 2025 RRIF minimum withdrawals does not necessarily mean you should withdraw less this year. If your tax rate is low this year and could be higher in the future, you should consider taking RRIF withdrawals that will keep you in a low tax bracket—especially if you are in the lowest tax bracket, and especially if the 1% rate reduction applies for 2025.
Higher RRIF withdrawals may save you tax later, help you keep your tax-free savings account (TFSA) invested longer, or reduce tax payable by your estate upon your death.
As of today (May 5), stock markets have mostly recovered from their declines over the past couple months. The Toronto Stock Exchange has returned 2% year-to-date and 18% over the past year. The S&P 500 has lost 7% year-to-date in Canadian dollars—4% due to currency losses—but has returned 14% over the past year.
So, despite the volatility, stocks are still looking pretty good. And as long-term investment vehicles, a couple months of volatility is simply the trade-off to earn higher returns than fixed income investments such as bonds and guaranteed investment certificates (GICs) over the long run.
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Other considerations for RRIFs and taxes
The Conservatives proposed delaying the required age to convert an RRSP to a RRIF from December 31 of the year an account holder turns 71 by two years, to age 73. Whether this concept works its way into any future legislation remains to be seen.
The Liberals campaigned on not implementing their previously proposed capital gains tax increase, which—following the prorogation of Parliament in January—they put on hold until January 1, 2026.
Tax decreases are always nice for taxpayers. Whether taxes should go down or up, and how tax revenues should be spent by a government, are bigger questions. But that is a macroeconomic discussion, and you should be mostly focused on your own personal financial situation. Make sure to consider your own income and investments in 2025 to determine whether you should take advantage of the 25% RRIF minimum reduction if it gets implemented. Keep in mind some seniors should forgo the reduction and take even more than the minimum.
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Read more about retirement accounts:
- Should I draw down my RRIF to avoid estate taxes?
- Can you make RRSP contributions after age 71?
- How to make sure you have enough money to fund your RRIF withdrawals
- When and how should I start drawing on my retirement savings?
The post How the Liberals’ re-election impacts RRIFs, taxes and more appeared first on MoneySense.