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Winnipeg Free Press - ONLINE EDITION
Help the seniors
The meltdown in the world's financial sectors and stock markets has forced governments everywhere to run to the aid of banks and key industries, such as the auto sector, to reduce the impact of the gathering economic storm. The best way to help the ordinary citizen in these times of anticipated disaster is to help the banks and the beleaguered companies, or so the argument goes.
Some senior citizens, however, are already feeling the pain, or about to feel it, because of the collapse of their retirement savings. They are at risk because of federal rules that force investors to convert their RRSPs to a registered income fund, or RIF, at age 71.
The regulations require seniors to withdraw a certain percentage from their RIFs, which is then subject to income taxes. The problem is that those RIFs are worth considerably less today than before the trouble started and there is a real risk that some seniors could run out of money in the last years of their lives, forcing them to apply for federal support payments, which are tax-supported.
Several premiers, including Manitoba's Gary Doer, have proposed changing the law to allow seniors an extra two years' time before they have to convert their RRSPs to RIFs. It is hoped that the value of their savings will have improved in two years, thus reducing their losses. Many economists say it will take a lot longer than two years for equity markets to return to their former levels, but, really, no one knows for sure and the future is uncertain. Two years' grace may not be enough, but it is better than nothing, and it possibly may help prevent some elderly citizens from lining up at the food bank, which they should not have to do after a lifetime of work and saving.
The C.D. Howe Institute, a respected think-tank, estimates that allowing seniors to hold onto all or part of their savings for another two years would cost the government $138 million a year in lost tax revenue. The income would not be lost forever, however, but merely deferred for one or two years. The tax man would eventually get everything that is due.
The notion of adjusting the age at which registered savings become liable to taxation is not new. The Liberal government of Jean Chrétien, for example, reduced it to 69 in 1995 because it was casting about for extra revenue to eliminate the deficit.
Seniors complained, but did their duty. It's now time for the federal government to do the right thing and offer a modest break to help our seniors. It's the least that can be done, particularly considering the spirit of giving now being enjoyed by banks and other industries.
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