Feds should eliminate mandatory minimum annual RRIF withdrawals: C.D. Howe Institute report | Page 5 | General financial discussion | Discussion forum

With different ways to try to get around / game the OAS clawback, that is exactly the reason why it should either be available to all, or it has to be income + net worth tested.
As Norman pointed out, a low income senior and live in the city means thar individual has other sources of income that are just not on the tax return, example cash or cash like instruments.

I like Doug’s idea to get rid of RRSP and expand TFSA. Takes care of the wait forever to collect the tax too.

Lastly, one should always put money into both TFSA and RRSP, if they can afford it. Not doing it with the intention of maximizing govt handout down the road is just wrong.

Stop talking about using wealth as a criteria for anything or we risk the governments bringing a "wealth tax". If they do you and more importantly your children/spouse will be very unhappy.

Doug said
I would be be fine with eliminating RRSPs, as an overly complex retirement savings regime that can have a tendency to penalized self-directed retirement savers who are middle income earners as opposed to those with workplace pensions and in the same income bracket, but only with the following reforms, which include:

* Nearly doubling the TFSA annual contribution limit, to $10,000 per year, and increasing the minimum inflation adjustment factor from the nearest $500 to the nearest $1,000
* In exchange for the above, I would also recommend making the year in which one turns 71 the final year where new contribution limits are given. If one still has outstanding prior year TFSA contribution room, they could still contribute past 71; they just wouldn't get new room
* Providing TFSAs with the same benefits of RRSPs with respect to trading activity; and,
* Lowering the capital gains inclusion rate to 25% and enshrining it legislation, not just an Order-in-Council or by regulation

Cheers,
Doug  

With fewer people with reasonable benefits and pensions nowadays, eliminating the tax deferral incentive of RSP's might result in a very difficult retirement for future generations. Without an immediate incentive to save, most people just spend what they make deferring savings until they realize they want or are forced to retire and have inadequate funding to support themselves.

COIN said
Stop talking about using wealth as a criteria for anything or we risk the governments bringing a "wealth tax". If they do you and more importantly your children/spouse will be very unhappy.  

Not sure I see the link between means testing handouts and the “wealth tax”. They are kinda opposite concepts.

In feudal times the “wealth tax” concept was very popular. Everything you owned belonged to your lord and he could take a cut at any time. And his overlord could take a cut of lord’s wealth.

The government might well implement this great idea but I doubt they will be influenced by chatroom discussions.

Norman1 said
People don't need extra incentive to save. But, people who don't have a workplace pension plan could have access to RRSP's to access the tax benefits that a registered pension plan provides.  

I agree the intent of the RRSP in the first place was to have a fair?equitable? alternative for those without workplace pensions. At one time, one could only buy an annuity when converting at age 71. Finance went to great lengths at the time to work with actuarial and market data to come up with a minimum annual withdrawal mechanism as a reasonable substitute for annuity payments. Then they reduced the withdrawal rates in 2015 to reflect longer longevity. There is simply nothing wrong with the RRSP/RRIF system as designed.

BTW, just like folks with annuities or DB pensions don't have to spend their monthly cheques, neither does one have to spend the RRIF minimum annual withdrawal amount.

People, and organizations like C D Howe, have lost sight of why current policy is what it is.

About entitlements versus savings: I can live reasonably comfortably on my current (entitlement and investment) income, but if I lost my (affordably rented) home or had to go into an institution I'd be penniless (and in one of the worst institutions) without my savings.

Nobody's mentioned it so far in this thread, but TFSA earnings and withdrawals do NOT count in income testing. Another reason my the TFSA can be more beneficial than the TFSA!

Norman1: The provincial (they're not municipal) supplements we call "welfare" benefits are and have always (within my lengthy memory) included assets as well as income in calculations. In fact, it's really only assets as virtually no income is allowed at all. (At one time only about half was deducted.) Applicants also have to show where there money went - if they had cash and spent more than $2000 a month in the two years they will be disallowed.

Caveat: the $2000, two years and deduction of 100% of earnings from work may have changed since I last helped a friend through the process. (He was one of those who suffered clinical depression and was hospitalized after a previous BC government made everyone re-apply and demanded incredibly detailed [and illegally requested] details about his life. On the advice of another boarder in his rooming house, he kept his bank balance at -$1000 and gladly paid the overdraft fees to avoid the struggles to document everything. It's only bureaucrats who could think of putting clinical depressives through a procedural nightmare when they are already unable to keep their lives in order.)
RetirEd

mordko said
Vetese has just published an article summarizing who should and who shouldn’t be contributing to RRSPs.

To sum up who shouldn’t:
- oldies over 65
- kids under 25
- poor with earnings under $35K
- company pension plan members

This is broad strokes but leaves 6.7M Canadians who probably should contribute. As it turns out 6.2M Canadians do.

https://www.theglobeandmail.com/investing/personal-finance/retirement/article-are-canadians-saving-enough-for-retirement-in-fact-the-number-of-rrsp/  

For those under 25, one can still contribute. This way the contribution is earning tax deferred income. Just don’t claim the deduction later on in life when taxable income will be higher (hopefully)

mordko said

True but in most cases they should be busy getting skills rather than earning too much dosh. TFSA and (now) FHSA are likely more advantageous in those early years.  

That’s true, the introduction of FHSA, combined with the TFSA, that’s prob provide more room than someone young to use up.
We will most likely see usage of RRSP decline due to the new FHSA.
That makes the RRSP only applicable to the high earners, and it only ensure they will pay high tax well after their retirement, and being rob of all kinds of tax credits that they helped to fund all these years too.
Our tax system is the most communistic of the free world….

mordko said

Let’s not confuse this with communism.

Communism is a utopia which has no money.

Socialism has no taxes because the government owns everything and can subtract its needs before paying you your meagre salary.

High welfare systems are problematic for lots of good reasons but there is no need to misuse standard terms.  

learn something new. I always use the word communism to mean "all wealth gets pooled and shared" when it comes to money.

The highest of the high welfare system is what Canada has. It has so many wrong incentives put in places that a whole bunch of "experts" or a whole industry is created just to get around the system, all in the goal of maximizing welfare handout regardless.