If part of your retirement planning initiatives involve contributing to a tax-free savings account (TFSA) or owning a registered retirement income fund (RRIF), you should be aware of some of the changes implemented into the 2015 federal budget. These changes have to do with the contrition limits for TFSAs and the withdrawal requirements for RRIFs.
TFSA Contribution Limits
Before the federal budget was recently addressed, TFSA account owners were only allowed to contribute $5,500 every year to these accounts. Now, the contribution limit has been raised to $10,000 per year.
It is estimated that only about 10 percent of employers provide TFSA options to their employees. By increasing the contribution limit, more employers may be compelled to offer this type of account to their employees for retirement planning purposes.
RRIFs Withdrawal Requirements
People over the age of 71 currently have to make mandatory withdrawals at a rate of 7.38 percent from their RRIF account, even if they do not need the money. With the new changes made to the 2015 federal budget, senior citizens with these accounts now only have to withdraw at a rate of 5.28 percent. In addition to this recent change, those who hold an RRIF account who end up withdrawing more than 5.28 percent from it will be able to put the excess funding back into this account.
The original withdrawal rates for RRIFs were established in 1992. People are now living longer than they did back then, promoting the need for a change to be made to this withdrawal rate. This will ultimately prevent retirees from going through their retirement savings too quickly.
If you have any questions about retirement planning with either an RRIF or TFSA account, contact us at BlueRock Wealth Management Inc. We are here to help you plan for a successful financial future.