Dear Editor
There is a huge tax increase for anyone using a retirement income fund.
Revenue Canada has now changed the minimum withholding tax payable on monthly withdrawals from a Registered Retirement Income Fund (RRIF). Withholding tax is now based on the total annual amount requested as if it were withdrawn as a lump sum and not on each individual payment. For example, $24000 per year withdrawals of $2,000 per month used to be taxed at a withholding rate of 10 per cent, but is now taxed at 30 per cent per month based on the total 'elected' portion requested. Instead of $200 per month tax under the old rules it is now $600 per month. This reduces the payment amount to $1,400 per month from $1,800 per month.
The tax bit is huge for seniors who planned ahead, using the RSP system for retirement, thinking they would pay tax at a lower rate at a time when they had less income.
No one in Canada pays 30 per cent on a monthly income of $2,000.
I would strongly caution anyone planning on using RSPs for retirement that the system is not what it is supposed to be.
This information is available on the Revenue Canada website under what's new for RRSPs and related plans Registered Plan administrators frequently asked questions, withholding rates. The website address is http://www.cra-arc.gc.ca/tx/rgstrd/rrspriff-reerfeer/fq-eng.html, frequently asked question number seven.
Robert Moffat
North Battleford
