Estimates of the Number of Guaranteed Income Supplement Recipients Who Receive Income from Registered Retirement Savings Plans

A guaranteed income supplement (GIS) recipient will have at least 50 percent of any registered retirement savings plan (RRSP) income clawed back on the margin. Resulting RRSP effective rates of return during retirement can often be low or even negative relative to the alternative of cashing out the RRSP before age 65. This study presents new estimates from taxfiler data indicating that approximately 15 percent to 30 percent of all seniors have received income at some time that originated from their RRSPs and is subject to GIS clawback. This range is slightly lower than the 2003 estimate by Richard Shillington based on an examination of asset holdings of near-seniors. The same issues can apply to registered pension plan income. Given current policies, many households that will soon be recipients of the GIS or its related allowance programs may benefit substantially from tax planning