RRIF Withdrawal Rules

 

What is an RRIF ?

Source: Wikipedia
Registered Retirement Income Fund (RRIF) is a tax deferred retirement plan registered under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their Registered Retirement Savings Plan (RRSP). I have written about RRSP Contribution Rules.

As with an RRSP, an RRIF is registered with the Canada Revenue Agency (CRA). RRIF income is completely tax sheltered inside your RRIF account, but all withdrawals are taxable.

Canadians have a few options with their RRSP before an individual reaches the end of their 71st year (or spouses age if younger). It is mandatory to either withdraw all funds from a RRSP plan, convert the RRSP to a RRIF or purchase a life annuity.

RRIF Withdrawal Rules

There are two primary differences between a RRSP and a RRIF. The first is that no further contributions can be made and second there is a minimum RRIF withdrawal.
The minimum RRIF withdrawal each year is determined by a percentage that is calculated by the account holder’s age and the total value of the plan on January 1 each year. There’s no limit to the maximum amount that can be withdrawn from a RRIF or an RRSP.

The table below shows the RRIF minimum payout percentages for different ages. As you can see, the annual percentage payouts gradually increase to age 95.

Age At Start Of Year.

65                       4.00%
66                       4.17%
67                       4.35%
68                       4.55%
69                       4.76%
70                       5.00%
71                       5.28%
72                       5.40%
73                       5.53%
74                       5.67%
75                       5.82%
76                       5.98%
77                       6.17%
78                       6.36%
79                       6.58%
80                       6.82%
Age At Start Of Year
RRIFs Set Up After The End Of 1992
81                      7.08%
82                      7.38%
83                      7.71%
84                      8.08%
85                      8.51%
86                      8.99%
87                      9.55%
88                     10.21%
89                     10.99%
90                     11.92%
91                     13.06%
92                     14.49%
93                     16.34%
94                     18.79%
95 and older     20.00%

 

RRIF are flexible

In your RRIF you can hold the same investments that are eligible for an RRSP, stocks, ETF, bonds, mortgages, GICs, options, warrants, rights, mutual funds etc. You can also hold foreign investments in your RRIF.
When you die you can leave your remaining RRIF assets to your designated beneficiary or estate.

Conclusion

There are a lot of issues to deal with when it comes to planning your retirement income. RRIF with pensions and annuities are an important part of the retirement process. Take the time to plan wisely. There is two good articles if you are interested that explain RRIF. Smartest things you can do with your RRSP at age 71/Jason Heath and Understanding RRIFs/Savvy New Canadian

Don’t wait for retirement to enjoy life !!

Comments

    • Hey Caroline,

      I might do both and put a portion of my RRSP as an annuity and put the rest in a RRIF. I haven’t looked into seriously yet I will wait till I am closer to retirement.

    • Hey professor,

      Yes it is different from the Australian Superannuation, but we only have 3 options when we our age 71 for our RRSP, cash it all out and pay taxes on that amount, turn it into an annuity, or open an RRIF. (or a combination)

    • Hi Tom,
      yes knowing your options can save a lot of money and with a good retirement plan can help you sleep good at night.

  1. I wonder if RRIF will change by the time I hit age 71 (which is a long way from now). Probably why I haven’t paid much attention to them… thanks for sharing this information!

    • Thanks GYM,
      I am older than you and I am sure things will change over the next 30 years but it is still good to keep updating my retirement plan..

  2. Canadians have so many options when it comes to managing their retirement funds – RRSPs, RRIFs, TFSAs, Annuities, etc. I guess when you get older, the saying that “variety is the spice of life” takes on an even greater meaning. 😉

    Thanks for the mention, Steve!

    • Your welcome Enoch,

      I hope its not too many options for people and they get confused. But it is a good thing to have options.

  3. Would it be possible to keep a RRSP i.e. not use it and pass it along to the next generation? or at least a portion of it. Why does CRA or IRS define minimum distributions?

    • Hi DG

      No you have to do 1 or a combination of the three options. If you could pass it along to the next generation it would make retirement planning easier but if you are still alive at 71 the CRA wants to start see there tax money back with Required minimum distributions. ( I can’t see that ever changing)

  4. Steve,

    Very good information about the RRIF minimum withdrawal percentage. Sounds like, RRIF is a viable option when people hit 71.

    In US, for tradition IRAs or 401k (which are similar to the RRSP in Canada), we don’t have to move or close the accounts anytime. But once at the age 70 and 1/2, we are required to take the RMD (Required Minimum Distribution) each year, otherwise the penalty is outrageous. The RMD percentage is similar to RRIF. It starts at 3.6% at 70 and 1/2, and then keeps going up each year.

    – Helen

    • Hi Helen

      I am glad your back !
      That’s interesting US 401k starts at a lower Required minimum distributions rate (3.6%). All of the US retirement accounts seem similar with Canada with minor differences and different names.

    • Hi Time,
      I agree I try to use all tax advantage accounts as much as possible. We pay enough in taxes, I don’t need to pay more than my share.

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