November 27, 2008

Campbell's Caucus on RRIFs

To my enormous surprise, the BC Liberal Government Caucus has promoted me to the position of the NDP's "key strategist and pollster". That is certainly news to Carole James and her caucus! Although I remain a loyal member of the NDP, I'm fully retired, have never done any polling and only offer strategic advice in public forums to whomever listens when I speak or write (and this includes to the Liberals).

Parts of my weekly amusements include participating in a debate on Joe Easingwood's show on CFAX radio every Thursday morning from 8:22 AM until 9:00 AM. Today the show ran over until 9:30 AM and towards the end of the show I was asked my opinion on the proposal to change the rules for registered retirement income funds (RRIFs) so that mandatory withdrawals would not have to start at age 71. Some, including Premier Campbell in his November 1st supplement to his October 22nd economic plan, argue that federal law should be amended so withdrawals would not have to start at age 71. Currently someone with a RRIF must withdraw 7% at age 71. The mandatory withdrawal amount increases every year thereafter reaching 8.75% at age 81, 13.62% at age 91 and 20% from age 95 above.

Campbell seems to think that there are a lot of seniors who at age 71 have so much of their retirement funds tied up in equities that the mandatory withdrawal provisions would force them to prematurely realize capital losses in a terrible stock market. Anyone who at age 71 has more than 50% of their retirement funds in equities is either a gambler or a victim of incredibly stupid investment advice. If there are many such people, the proper government response should be better regulation of the investment community, not a bailout. What Campbell proposed is similar to someone asking for their money back after betting it all on black at the casino.

Federal Finance Minister Jim Flaherty read his economic statement in Parliament this afternoon (in contrast to what Campbell did when he ignored the legislature and called a news conference during the 6:00 PM news hour). Flaherty's statement, particularly his promise to eliminate public funding for political parties, may see Canada back at the polls before the May 12th provincial election, but that's another matter.

On the question of RRIF's Flaherty chastised investment advisers who might be telling clients that they would have to realize capital losses in order to meet RRIF withdrawal requirements. He reminded them that: "The income tax rules permit "in-kind" asset transfers to meet the minimum withdrawal requirements – they do not require the sale of assets." He made one small concession which is to allow a onetime reduction of 25% in the amount that must be withdrawn this year. It appears that Flaherty is unimpressed with Campbell's advice.

Campbell's caucus is fond of heckling the NDP about the quality of their research; on their attempt to promote me to key strategist and pollster they are the ones on the short end of the stick. Nevertheless, their suggestion makes me think that I should try cutting an invoice and see if it's paid.