Liberal Re-Election: Impacts on RRIFs, Taxes and Retirement

The Liberal Party retained power in the recent federal election, and that outcome has implications for taxes and retirement planning in Canada—particularly for seniors and anyone managing a registered retirement income fund (RRIF). Changes announced during the campaign and proposals in play could affect how much retirees must withdraw, the timing of withdrawals and the income tax paid on those amounts.

Reduced RRIF minimum withdrawals

One of the Liberals’ central proposals is to reduce the required minimum RRIF withdrawal for 2025. On April 7, 2025, the party said it planned to “protect retirement savings by reducing the minimum amount that must be withdrawn from a Registered Retirement Income Fund (RRIF) by 25% for one year,” giving seniors more flexibility about when to draw their retirement funds.

This measure was framed as a response to recent economic uncertainty and market volatility. While linked in part to the impact of U.S. tariffs and resulting stock market turbulence, the core goal is to ease pressure on seniors who might otherwise have to sell investments at inopportune times to meet mandatory withdrawals. The government has not yet set a formal start date for the proposed reduction.

How RRIF minimum withdrawals work

When a registered retirement savings plan (RRSP) is converted to a RRIF, minimum annual withdrawals become mandatory beginning the year after conversion. The required amount is calculated from the account’s market value on December 31 of the previous year, and the minimum percentage increases with the account holder’s age (or the spouse’s age if withdrawals are based on the younger spouse to lower the required rate).

For non-locked-in RRIFs—those not originating from a locked-in pension transfer—there is no maximum withdrawal limit, so account holders can take more than the minimum if that suits their objectives. The suggested 25% reduction mirrors a similar temporary cut implemented in 2020 during the COVID-19 market downturn.

A lower minimum percentage reduces the need to liquidate investments during a downturn, which can protect long-term growth potential. Many retirees depend on RRIF payments for living expenses, so the decision to delay or reduce withdrawals should carefully weigh immediate cash needs against portfolio health and tax consequences.

RRIF payments can be scheduled monthly, quarterly or annually. If you have not yet taken your full minimum withdrawal for 2025, consider whether postponing part of that withdrawal might be advantageous should the government implement the 25% temporary reduction.

Tax rate decrease for the lowest tax bracket

The Liberals also campaigned on lowering the federal tax rate for income in the lowest bracket by 1%. Under 2025 federal rates, that would reduce the rate from 15% to 14% on taxable income up to $57,375. The federal basic personal amount is currently $16,129 for individuals with net income below specified thresholds. A 1% cut in the lowest bracket could reduce federal tax owing by up to about $412 on income between the basic personal amount and the top of that bracket.

It is not yet certain when—or even if—this rate change will be enacted for 2025. Regardless, RRIF holders should factor their marginal tax rate into withdrawal decisions. If your current tax rate is low relative to possible future rates, it may make sense to take larger RRIF withdrawals now to avoid higher tax later, protect TFSA contribution room by leaving funds outside the TFSA for longer, or reduce potential estate taxes.

Conversely, if you expect your tax rate to be lower in future years or if you rely on RRIF income for day-to-day expenses, minimizing withdrawals now may be appropriate. There is no single right answer—your decision should reflect income needs, tax planning and long-term investment strategy.

As of early May, markets had largely rebounded from the recent pullback. The Toronto Stock Exchange showed modest year-to-date gains, while U.S. indices measured in Canadian dollars presented a mixed picture due to currency movements. Volatility is an expected part of equity investing; for retirees, the trade-off is balancing short-term market swings with the higher long-term returns equities can offer compared with fixed-income options such as bonds or guaranteed investment certificates (GICs).

Other considerations for RRIFs and taxes

The Conservative platform included a proposal to delay the mandatory RRSP-to-RRIF conversion age from 71 to 73. Whether that change will ever become law is uncertain. Similarly, the Liberals have paused a previously proposed change to the capital gains inclusion rate, deferring further action into 2026, so retirement planning should continue to account for both current rules and the possibility of future adjustments.

When weighing RRIF withdrawal choices, consider your projected taxable income, eligibility for the basic personal amount, TFSA room and estate planning goals. In some cases taking more than the minimum RRIF withdrawal this year can reduce future tax exposure, allow additional TFSA contributions to shelter growth from tax, or simplify estate tax outcomes. In other situations, preserving capital by taking the minimum—or even less in the event of a temporary reduction—may be the better option to sustain long-term income.

Tax policy changes can be beneficial, but ultimately your decisions should reflect your personal financial picture: income needs, risk tolerance, portfolio composition and projected future tax rates. If the 25% cut to RRIF minimums is implemented for 2025, it is an opportunity worth evaluating, but not universally the right move for every retiree.

Read more about retirement accounts:

• Should I draw down my RRIF to avoid estate taxes?
• Can you make RRSP contributions after age 71?
• How to make sure you have enough money to fund your RRIF withdrawals
• When and how should I start drawing on my retirement savings?