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Email this9:53 am
December 20, 2016
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Source of this article: BNN Bloomberg
Pattie Lovett-Reid: Budget delivers the triple crown for seniors
....for those worried about outliving their retirement income, you now have the option to defer a portion of the income until age 85. The new measure is referred to as the Advanced Life Deferred Annuities, or ALDAs. Currently, registered retirement funds must start annuity payouts by the time you reach age 71. With the new plan, you can hold an ALDA worth up to 25 per cent of your registered holding until the end of the year in which you turn 85, for a lifetime maximum amount of $150,000. Those in a higher tax bracket will welcome this change, which will allow them keep more money in their registered plan for longer.....
Stephen
6:31 pm
August 10, 2018
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Won't help getting my vote, but a good idea nonetheless.
4:12 am
October 21, 2013
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I suppose more flexibility is always good in principle, but, really, this is more likely a win-win for the insurance companies and CRA. If some individuals get some benefit, well, that's OK too, but they may not and it doesn't especially matter if they don't, because by the time this becomes clear, they will be dead and not likely to complain.
Insurance companies don't stint on lobbyists, and I think we can see their footprints here.
CARP, on the other hand, has lobbied for the elimination of mandatory withdrawal rules, to allow people to do what's best for them. That makes a whole lot more sense to me, but there is no benefit in that to the insurance industry.
http://www.carp.ca/wp-content/.....r-2014.pdf
It's not all that difficult to achieve the desired end of ensuring there is money left at the end by organizing your finances accordingly (assuming you actually have enough in the first pace) - especially if you don't have to deal with mandatory withdrawals. CRA would probably end up about the same. But the government doesn't trust us to do what's best for us. The previous government was no better, as they merely tweaked the mandatory minimums.
I'll wait for the fine print, but am not hopeful.
I didn't find anything at all in this budget that would benefit me or anyone I'm close to, rich or poor.
The real problems we face are so much bigger than giving or taking a little bit here and a little bit there.
5:23 am
February 20, 2018
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There should be a class action lawsuit against Rrsps they are bogus clawbacks taxed high a poor structure.
Ya the insurance industry especially auto employs corrupt lobbyists they hand out stacks of cash literally to former insiders who call themselves lobbyists
7:07 am
September 11, 2013
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It seems ALDAs are just another option to assist income security for the very old. Luckily they aren't mandatory, no need to partake if the insurance industry doesn't meet your standards re ethics, etc.
Also, there's another side to the RRIF "everybody just doing what's "best for them", or deferring taxes as long as THEY feel like it" thingy. The original contributions and related tax deferrals cost the Treasury (i.e. Canadians, not CRA) so there's an attendant right (and indeed fiscal responsibility) to put limits on that deferred tax revenue. (Virtue-signalling alert!): I don't judge a budget or specific policies solely by what's good for me or mine personally, I try to approach it as to what's best for our society in general.
8:12 am
April 6, 2013
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ALDA's are just another life annuity option for those wishing to insure their longevity risk.
Annuities for Dummies article Examining Advanced Life Deferred Annuities examines how they work.
Like other life annuities, they tend to be a form of insurance than a good investment. If one purchases at age 65, defers the lifetime payments until age 85, and dies at age 84, then there is a complete loss of the premium. That's why the income is higher or the premium is lower than if one just waits until age 85 before converting a RRIF to a life annuity.
9:45 am
September 11, 2013
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Like any annuity, particularly one at an advanced age, they can be very useful, i.e. if the family's younger generations aren't looking after or visiting you when you're really old you can blow their inheritance (or threaten to) by buying a life annuity to give you enough income to pay for the care or "companionship" 
you want.
I've never looked into it, does anyone know if there's an upper age (formal or informal) limit where no insurance company or bank will sell you an annuity?
9:54 am
October 15, 2015
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Here is another article on them
I am aware many people turn up their nose at annuities but the author's point is it is another tool or option for canadians.
2:01 pm
October 27, 2013
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Thank you Bill for your prior post. Canadian taxpayers deserve to get the deferred tax revenue stream back via a mandatory RRIF withdraw schedule. RRSP have had the benefit of tax deferment for decades. It is greedy to want to defer to as long as death.
Withdrawals don't have to be spent. Simply pay the Canadian taxpayer back and re-invest in a TFSA account and/or taxable account.
4:35 pm
October 21, 2013
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AltaRed said
It is greedy to want to defer to as long as death.
I can't believe you said that.
What's greedy about never getting your money out of your RIF?
The longer you leave it in, the bigger percentage CRA gets.
Having control of your withdrawals does not mean you will leave it all until you die. The majority of people will take it out as they go along, because most people need the income to live on, never mind TFSAs.
It would be a foolish choice in most cases to leave it in until you die, as Londonguy's example on another thread clearly demonstrated in regards to his mother's estate - in spite of the mandatory system. Yes, CRA had to wait for it, but they got 50%.
There's nothing wrong with deferred gratification when there is a reward, which there is.
BTW, I have nothing against annuities as a retirement income planning tool. Even better is a non-registered annuity. I just don't believe we need to add another layer of complication to RIFs.
Annuities have not been popular in recent years due to low interest rates. ALDA is an opportunity for the insurance industry to recoup some of that business without increasing the rates - they hope.
You can convert an RIF to an annuity any time. What's different about ALDA is the deferral on annuity income and the risk that you will get nothing at all out of it as Norman demonstrated above: "If one purchases at age 65, defers the lifetime payments until age 85, and dies at age 84, then there is a complete loss of the premium." What remains unclear to me is whether or how CRA would then get anything out of it. It isn't going to go into the deceased's income tax return. Does CRA somehow get it from the insurance company?
Come to think of it, what happen if you buy an ordinary life annuity with no guaranteed payout, using your RIF? If you die in a year, most of the money would be in the hands of the insurance company. Are they somehow obliged to turn some of that over to CRA? It would only seem reasonable, but I ask because I simply don't know the answer.
7:22 pm
September 11, 2013
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When someone with a life annuity dies prematurely I'd guess the money does not remain in the hands of the insurance company, it uses the money from folks who die before the expected life expectancy to pay those who die later than the expected average time, i.e. individual contributions/premiums are based on averages and some folks end up beating the averages (and thus less tax too) and some don't (and thus more tax).
7:47 pm
April 6, 2013
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Loonie said
…
Come to think of it, what happen if you buy an ordinary life annuity with no guaranteed payout, using your RIF? If you die in a year, most of the money would be in the hands of the insurance company. Are they somehow obliged to turn some of that over to CRA? It would only seem reasonable, but I ask because I simply don't know the answer.
Bill said
When someone with a life annuity dies prematurely I'd guess the money does not remain in the hands of the insurance company, it uses the money from folks who die before the expected life expectancy to pay those who die later than the expected average time …
I put more info about that situation in new thread How an annuity pool works.
8:23 pm
October 27, 2013
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Loonie said
AltaRed said
It is greedy to want to defer to as long as death.
I can't believe you said that.
What's greedy about never getting your money out of your RIF?
The longer you leave it in, the bigger percentage CRA gets.Having control of your withdrawals does not mean you will leave it all until you die. The majority of people will take it out as they go along, because most people need the income to live on, never mind TFSAs.
It would be a foolish choice in most cases to leave it in until you die, as Londonguy's example on another thread clearly demonstrated in regards to his mother's estate - in spite of the mandatory system. Yes, CRA had to wait for it, but they got 50%.
There's nothing wrong with deferred gratification when there is a reward, which there is.
The Canadian taxpayer simply does not want to potentially wait until RRIFers die to collect tax deductions generously handed out for all those decades with RRSP contributions.
Nor do some of us want retirees to avoid OAS clawback by back end loading into a lump sum. If withdrawals could be back end loaded, I'd want OAS to be means tested for RRIF account sizes then. It is bad enough that retirees can be sitting on a $5 million home and be collecting OAS. Last thing we need is to add more salt to the wound with potentially huge RRIF accounts. It is a matter of equity and fairness don't you think?
More importantly, the whole idea of RRSPs was to provide a retirement income so that the retiree is not dependent on the state, and especially for those that do not have the ability to participate in Defined Benefit pension plans. At one time, a RRSP had to be converted to an annuity to help make it 'mirror 'a DB pension plan. Be thankful that legislation has provided all of us with the RRIF flexibility we enjoy today.
10:51 pm
October 21, 2013
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Bill said
I've never looked into it, does anyone know if there's an upper age (formal or informal) limit where no insurance company or bank will sell you an annuity?
Informally, it seems to be around 80-85, depending on the issuer. I would expect that the insurance industry made it clear that 85 was optimum for them for this proposal.
1:02 am
December 17, 2016
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AltaRed said
Nor do some of us want retirees to avoid OAS clawback by back end loading into a lump sum. If withdrawals could be back end loaded, I'd want OAS to be means tested for RRIF account sizes then. It is bad enough that retirees can be sitting on a $5 million home and be collecting OAS. Last thing we need is to add more salt to the wound with potentially huge RRIF accounts. It is a matter of equity and fairness don't you think?
I just couldn't agree more with this sentiment. IN FACT ... I am a firm believer that there should be a helluva' lot more means testing when it involves receipt of any government "breaks" and benefits.
3:44 am
February 24, 2015
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So this year, my spouse will turn 71 and the single RRSP will be converted to a RRIF with BMOIL. What are the mechanics of the ALDA? The minimum withdrawal for 2020 will already be determined by the year-end market value of the RRIF. Is the 25% limit based on that or the market value at the time of the purchase of the ALDA? I assume there will be a number of insurance companies with different rates selling this product, as for annuities. Would this be just another investment held in the self-directed RRIF or a registered transfer to the selected insurance company?
6:32 am
September 11, 2013
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Not sure if I agree with means testing re gov't benefits, it does tend to punish desirable behaviour, no? If my choice is get an education to get a good job, work a lot, pay taxes and save money so I'll have my own dough instead of getting gov't benefits VS not doing that and instead maximizing my benefits and depending more on the generosity of my financially self-sufficient neighbours' taxes, well that tends to encourage and reward the latter behaviour. So to me there's an equally compelling argument for doling out gov't benefits, aside from basic ones people need for basic needs (a bit of virtue-signalling, I care about people!), in another way, i.e. the more you've contributed, the more taxes you've paid, then the more benefits you get. It's axiomatic to reward "good" behaviour, not "bad", no?
1:32 pm
April 6, 2013
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2of3aintbad said
… Is the 25% limit based on that or the market value at the time of the purchase of the ALDA? … Would this be just another investment held in the self-directed RRIF or a registered transfer to the selected insurance company?
Both. The proposed ALDA's can be an investment held in a RRIF or RRSP or it can be on its own.
The 25% limit will be based on previous year end value of the RRSP or RRIF.
Details of the proposal are in the 2019 Budget Plan document, at the back in the "Tax Measures: Supplementary Information" section under Permitting Additional Types of Annuities Under Registered Plans:
Permitting Additional Types of Annuities Under Registered Plans
…
To provide Canadians with greater flexibility in managing their retirement savings, Budget 2019 proposes to permit two new types of annuities under the tax rules for certain registered plans:
- advanced life deferred annuities will be permitted under a registered retirement savings plan (RRSP), registered retirement income fund (RRIF), deferred profit sharing plan (DPSP), pooled registered pension plan (PRPP) and defined contribution registered pension plan (RPP); and
- variable payment life annuities will be permitted under a PRPP and defined contribution RPP.
The measures will apply to the 2020 and subsequent taxation years.
Advanced Life Deferred Annuities
The tax rules generally require an annuity purchased with registered funds to commence by the end of the year in which the annuitant attains 71 years of age.Budget 2019 proposes to amend the tax rules to permit an advanced life deferred annuity (ALDA) to be a qualifying annuity purchase, or a qualified investment, under certain registered plans. An ALDA will be a life annuity the commencement of which may be deferred until the end of the year in which the annuitant attains 85 years of age.
Qualifying plans
An ALDA will be a qualifying annuity purchase under an RRSP, RRIF, DPSP, PRPP and defined contribution RPP. An ALDA will also be a qualified investment for a trust governed by an RRSP or a RRIF. Qualifying plan terms may need to be amended in order to permit the purchase of an ALDA under such plans.The value of an ALDA will not be included for the purpose of calculating the minimum amount required to be withdrawn in a year from a RRIF, a PRPP member’s account or a defined contribution RPP member’s account, after the year in which the ALDA is purchased.
Limits
An individual will be subject to a lifetime ALDA limit equal to 25 per cent of a specified amount in relation to a particular qualifying plan. The specified amount will equal the sum of:
- the value of all property (other than most annuities, including ALDAs) held in the qualifying plan as at the end of the previous year; and
- any amounts from the qualifying plan used to purchase ALDAs in previous years.
In practice, this limit will apply only when an ALDA is purchased or when an additional amount is added to an existing ALDA contract. As a result, an individual will not be required to surrender or dispose of ALDAs in situations where the value of ALDA purchases in previous years exceeds the individual’s lifetime ALDA limit for a particular year due to a decline in qualifying plan assets.
An individual will also be subject to a comprehensive lifetime ALDA dollar limit of $150,000 from all qualifying plans. The lifetime ALDA dollar limit will be indexed to inflation for taxation years after 2020, rounded to the nearest $10,000.
…
3:31 pm
October 27, 2013
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Bill said
Not sure if I agree with means testing re gov't benefits, it does tend to punish desirable behaviour, no? If my choice is get an education to get a good job, work a lot, pay taxes and save money so I'll have my own dough instead of getting gov't benefits VS not doing that and instead maximizing my benefits and depending more on the generosity of my financially self-sufficient neighbours' taxes, well that tends to encourage and reward the latter behaviour. So to me there's an equally compelling argument for doling out gov't benefits, aside from basic ones people need for basic needs (a bit of virtue-signalling, I care about people!), in another way, i.e. the more you've contributed, the more taxes you've paid, then the more benefits you get. It's axiomatic to reward "good" behaviour, not "bad", no?
OAS was originally meant to shore up low income seniors upon retirement at 65 to avoid being in poverty. The big mistake was to not to make this 'social welfare' program more rigorous in its means tested qualifications. So a bunch of fairly wealthy seniors can now get full OAS with a net income as much as $77k ($154k per couple potentially). And potentially over $200k before it is all clawed back Ridiculous! No one needs to be taxpayer subsidized at those levels of income.
GIS was set up to help very low income seniors to at least reach poverty thresholds. What should happen is to gradually take away OAS from these wealthy seniors and help boost the lowest income seniors to about $25k instead of about $18k where I believe GIS now ends (for a single). The system is really screwed up.
5:53 pm
September 11, 2013
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Not so sure about OAS's original intent, they did make it pretty universal and no clawback (that came much later) so that implies to me it was intended to be a universal program for all Canadians in later life. As I said, not so sure about the means test (vs universality) approach, where does it stop? e.g. should health care not be "free" to wealthy folks either? should public schooling not be "free" for kids of the wealthy? Etc.
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