Registered Retirement Income Funds (RRIFs)

Here are some useful facts about Registered Retirement Income Funds (RRIFs) :

  • A RRIF is one of the options you can choose when you convert your RRSP to start drawing retirement income. It is one of the most flexible options, if you wish to maintain complete control over your savings.

  • Converting a RRSP to a RRIF does not change your investment holdings and the assets you transfer continue to grow tax-sheltered until withdrawn as income. However, this is a good time to review your investment strategy to ensure that it is still in line with your financial objectives.

  • According to current legislation, you must withdraw a minimum amount from your RRIF every year, except the year in which the RRIF account is opened. However, you can make additional RRIF withdrawals.

  • The rules for calculating your minimum annual withdrawal are set out in the Income Tax Act (Canada). Your payment is calculated as a percentage of the total value of your RRIF account on January 1 of each year, and is based on your age or the age of your spouse, at your choice. If your spouse is younger than you, you may want to consider using his or her age to calculate your minimum payment. This will allow your RRIF to grow over a longer period of time and the funds within the RRIF will continue to be tax-sheltered.

  • No withholding tax is deducted from minimum RRIF payments, but additional withdrawals are subject to tax deductions. You must keep that in mind when planning your retirement income. If you prefer, you may ask to have income tax withheld from your regular income payments.
  • All RRIF withdrawals are taxable in the year they are received and must be added to your other taxable income.

  • You may open as many RRIF accounts as you wish and transfer them between financial institutions without any tax consequences. However, since you will have to withdraw the minimum annual payment each year from each RRIF you hold, it may be more complicated to manage your investments and total retirement income. Hence, it could be beneficial to consider grouping them into a single RRIF. This could simplify the overall management of your RRIF account and the calculation of your minimum payments.

  • Before you transfer any RRIFs from one institution to another, keep in mind that your institution will have to pay out the remaining minimum amount for the year before transferring the balance of your RRIF.