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Tax tips tailored to the pandemic were on tap at the Institute of Advanced Financial Planners\u2019 virtual symposium. Peter Bowen, vice president of tax and retirement research with Fidelity Investments Canada ULC, gave his annual tax and retirement update on Thursday.<\/p>\n
One topic covered was reduced RRIF withdrawals. The federal government\u00a0lowered the annual minimum withdrawal<\/a>\u00a0amount for RRIFs by 25% for 2020 in March, as retirees saw their portfolios dip in value amid pandemic-induced market volatility.<\/p>\n If your retired client hasn\u2019t made their full RRIF withdrawal yet this year, could they benefit from the measure?<\/p>\n Bowen said that, for most clients, \u201cit\u2019s not necessarily advisable.\u201d<\/p>\n Still, the decision depends on a client\u2019s personal circumstances. Specifically, \u201cWe don\u2019t want to defer taxes from a low-tax year to a high-tax year,\u201d he said.<\/p>\n Thus, a client whose income fell this year due to Covid-19 likely shouldn\u2019t reduce their withdrawal.<\/p>\n \u201cThey\u2019re probably at a lower tax rate than they would be in normal years,\u201d Bowen said.<\/p>\n The client whose income remains at the usual level should consider their potential tax rates for the next few years as well as estate planning, he said.<\/p>\n For example, when a RRIF annuitant dies and has no surviving spouse, their RRIF would be included in income on their final tax return, he noted. A high RRIF balance would mean a higher terminal tax bill, reducing the size of the annuitant\u2019s estate.<\/p>\n Another factor is ensuring net income stays below $79,054 (2020) to avoid any clawback of old age security (OAS).<\/p>\n Bowen said clients already subject to OAS clawback may ask about a reduced RRIF withdrawal.<\/p>\n He also noted that automatic withdrawals are calculated based on the usual rules, not the 25% reduction. So, if a client\u2019s withdrawal is automatic and the client would benefit from a reduction, \u201cyou need to take positive action to reduce the amount that comes out of the RRIF,\u201d he said.<\/p>\n Another topic Bowen covered was the potential for tax changes as\u00a0the government\u2019s deficit balloons<\/a>.<\/p>\n