How to Minimize RRIF/LIF Withdrawals or Maximize LIF withdrawals
In this article:
How to minimize RRIF and LIF withdrawals
By default, minimums are withdrawn from RRIF and LIF accounts unless there isn't enough cash flow from other assets, then Snap will try to withdraw more. If you wish to withdraw the minimum annual amount from a RRIF or LIF you can do the following. Note that RRSP and DCPP or LIRA accounts will convert to RRIF/LIF accounts following the RRIF/LIF withdrawal schedules. The following example shows how to minimize RRIF withdrawals. Please use the same steps to minimize LIF withdrawals.
1) On the Planning page, click the blue value in the RRSP/LIRA Contribution column in the first year that you wish to minimize the withdrawals.
2) Enter $0. Check the box to Copy down until age XX, enter the desired age, and click the large blue checkmark.
3) Run the scenario. Snap will correct the $0 withdrawal to the minimum allowed withdrawal for each year and your overrides will be highlighted in yellow. The rest of the cash flow will be allocated according to the default CFM logic.
Once the minimum withdrawals are enforced, how do you remove them? You can see in the above screenshot that there is a shortfall (pink highlighting) in the final 2 years. Once you have entered an override to force minimum RRIF withdrawals, Snap will not withdraw any more money from the RRIF, even if more money is needed to reach the desired After-Tax Spending target. In this example, once the TFSA is depleted, the minimum RRIF withdrawals are not enough to support the desired spending. To prevent the shortfall and allow Snap to withdraw more than the minimum RRIF withdrawal amounts, you will need to clear the overrides.
Note: The override values will not be automatically updated if during future editing of the scenario the required RRIF/LIF minimum withdrawals are reduced. For example, if you reduce the RRSP contributions over the years prior to converting the RRSP to a RRIF, the value of the RRIF will be less, and so will the required minimum withdrawals. The software will not automatically reduce the RRIF withdrawals to match this. You must repeat the above steps in order to reset the minimum withdrawal amounts. However, if changes to the scenario are made which increases the minimum required RRIF withdrawals, Snap will automatically update the withdrawals to match the minimum required. Snap will not allow you to withdraw less than the minimum.
How to maximize LIF withdrawals
By default, minimums are withdrawn from LIF accounts unless there isn't enough cash flow from other assets, then Snap will try to withdraw more, up to the maximum LIF withdrawal. To enforce maximum LIF withdrawals, enter a much larger negative value than what is automatically displayed. Snap will correct this amount to the maximum withdrawal allowed based on the account jurisdiction.
1) On the Planning page, click the value in the LIF Contribution column in the first year that you wish to maximize withdrawals.
2) Enter an amount larger than the government-specified maximum withdrawal as a negative value. (Make sure to include the negative sign or the software will enforce the minimum withdrawals rather than the maximum withdrawals as shown above.) Check the box to Copy down until age XX, enter the desired age, and click the large blue checkmark.
3) Run the scenario and you will see the maximum LIF withdrawals enforced.
Note: The override values will not be automatically updated if during future editing of the scenario the allowed LIF maximum withdrawals are increased. For example, if the LIRA account balance is edited to a larger starting value or if the rate of return for the account is increased. You must repeat the above steps in order to reset the maximum withdrawal amounts.