Registered Retirement Income Fund (RRIF)

September 2015

A RRIF is a popular RRSP maturity option. RRIFs and RRSPs share many of the same features, except they are basically designed to work in reverse. While RRSPs allow you to accumulate tax-sheltered savings for retirement, RRIFs generate a taxable retirement income stream from these savings. In other words, you make tax-deductible contributions to an RRSP, and receive taxable income withdrawals from a RRIF. 

Registered Retirement Income Fund     

RRIF income can be customized to meet your needs. There is no maximum limit on annual income withdrawals, as long as they are equal to or greater than the minimum stipulated by Canada Revenue Agency (CRA). The RRIF pays income as long as the capital lasts. At death, any remaining value forms part of your estate or transfers to your spouse if a designation of beneficiary has been completed.

You must withdraw at least the “annual minimum amount” from your RRIF each year. The Income Tax Act sets a minimum payout formula based on the value of your RRIF each year. The minimum payout formula can be based on your age, or that of your spouse. If your spouse is younger, this will result in a lower annual minimum amount requirement. (Your choice must be made when you rollover your RRSP funds to the RRIF).

The age limit at which an RRSP must be converted either to a RRIF or an annuity is age 71. You may delay your first payment until the end of the year you reach 72. This deferral could mean additional tax-sheltered growth. 

You can change the amount you withdraw, subject to the terms of the investments you choose. If you decide to withdraw more than your annual minimum, tax will be withheld at source on those amounts in excess of the minimum. No tax is withheld on the annual minimum payment.

The government has established guidelines for minimum withdrawals that permit RRIF payments to extend over your lifetime (or your spouse’s lifetime). 

Federal Budget 2015 introduced reduced factors for RRIF/LIF minimum calculations. The new lower withdrawal rates now in effect will apply for the 2015 and subsequent taxation years for RRIF/LIF account holders 71 to 94 years old. Those who have withdrawn more than the reduced 2015 minimum amount, can re-contribute the excess to their accounts prior to February 29, 2016. The re-contribution will be deductible for the 2015 tax year. If you have not yet withdrawn your total annual minimum for 2015, the amount will be reduced to the new prescribed factor.

RRIF Education Article     Want to learn more about RRIFs and other income options available for your retirement? Contact your Investment Advisor for a complimentary copy of our "Retirement Income Options" publication.


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