This is another stupid article from MoneySense*. Jonathan Chevreau claims that current regulations requiring seniors to annually withdraw minimum amounts from their registered plans are unfair in this era of low interest rates and longer lifespans. Using simple math he illustrates that the averaged retiree’s registered plan will be reduced to near zero by age 90-95. And he’s right. But it’s not a problem.
It’s not a problem because the hypothetical retiree’s savings are not reduced to near zero. It’s his/her registered savings that are reduced. The non-registered savings are increased as funds are transferred from the registered plans.
The regulations that Chevreau complains about don’t require the retiree to dispose of the funds in the retirement account – the requirement is to withdraw a proportion of funds from the registered account and pay tax on that portion. The after-tax balance still belongs to the retiree.
Chevreau knows better. I’m at a loss to explain why he failed to explain that the “retirement rule” is no more than a phased-in taxation of the amounts that have been tax-sheltered for many years.
* the last stupid article was the one that understated senior’s housing expenses and failed to distinguish between home owners and renters.