What is an RRIF ?
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 There’s no limit to the maximum amount that can be withdrawn from a RRIF or an RRSP.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.
Age At Start Of Year
RRIFs Set Up After The End Of 1992
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.
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 !!