While it may be helpful for some, research from the FP Canada Research Foundation concludes that the value of withdrawing more than necessary from a registered retirement income fund (RRIF) and withdrawing before the age of 72 may be overstated. As an example, perceived advantages often disappear for those whose investment returns vary from the average expected return, says its ‘Retirement Drawdown’ document. This means financial planners considering RRIF strategies for a client must consider factors like the client's potential lifespan and future returns on investment, keeping in mind that projections based on a single age and set of returns can create undue risk. "When helping a client determine when and how to withdraw from a RRIF, there are complexities involved and many unknowns," says Doug Chandler, an actuary specializing in retirement research and an associate fellow of the National Institute on Ageing who carried out the research. "This research demonstrates the importance of seeing the bigger picture. That means accounting for things like current and future tax rates, income-splitting opportunities, investment risks and returns, and more." He says the bottom line is, there is no one-size-fits-all approach to creating a RRIF withdrawal strategy. Financial planners must continue to rely on a combination of professional judgment and financial models.
- PWC