Personal Tax Strategy

Beat the April 14 RRIF deadline

If you want to benefit from the federal government’s decision to reduce the minimum RRIF payment by 25% for 2008, you must act on or before April 14, 2009.

For example, if you received a minimum payment for 2008 of $10,000, the 25% reduction ($2,500 in this case) can be re-contributed to your plan, but it must be done on or before the deadline.

Although you will need to report the entire $10,000 RRIF payment as income on your 2008 income tax return, you can then report the $2,500 as a tax deduction. (Report the RRIF income on line 115 of your tax return and the tax deduction on line 232.)

There is also a RRIF strategy available to seniors who may not want to sell their RRIF securities, such as mutual funds, stocks or bonds when the markets are low. Here is how it works: Although the common practice is for a RRIF payment to be made to you in cash, Mackenzie has always allowed for a RRIF payment to be made in-kind to your non-registered investment account or the new Tax-Free Savings Account.

This means that a mutual fund investment that may have decreased in value at the moment can be transferred out of your RRIF. This will accomplish two things:

  1. Meet the minimum RRIF withdrawal
  2. Allow you to continue to hold an investment until it has sufficiently recovered before having to cash out of that security. Mackenzie can accommodate whatever option is in your best interest – a cash withdrawal or an in-kind transfer. Although either withdrawal will be taxed to you as income, you have a choice in these challenging times.

Contact your financial advisor to discuss your options.