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Rethinking RRIF Withdrawals: New Rates and Methodologies for New Realities

Author

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  • Moshe A. Milevsky

    (Schulich School of Business, York University; IFID Centre, Fields Institute, Toronto)

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1980s (a period with higher interest rates and lower longevity), a quarter of a century later the schedule has become outdated.

Suggested Citation

  • Moshe A. Milevsky, 2014. "Rethinking RRIF Withdrawals: New Rates and Methodologies for New Realities," Canadian Tax Journal, Canadian Tax Foundation, vol. 62(4), pages 971-983.
    • Handle: RePEc:ctf:journl:v:62:y:2014:i:4:p:971-983
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    Citations

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    Cited by:

    1. Huang, Huaxiong & Milevsky, Moshe A., 2016. "Longevity risk and retirement income tax efficiency: A location spending rate puzzle," Insurance: Mathematics and Economics, Elsevier, vol. 71(C), pages 50-62.
    2. William B.P. Robson & Alexandre Laurin, 2015. "Drawing Down Our Savings: The Prospects for RRIF Holders Following the 2015 Federal Budget," e-briefs 210, C.D. Howe Institute.

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