What is a RRIF?

A Registered Retirement Income Fund (RRIF) is similar to an RRSP except that you cannot make contributions, and you are required to withdraw a minimum amount each year. Your RRSPs are converted into a RRIF account once you decide to draw income or at age 71. The RRIF earns money from investments, just as your RRSP did while you were contributing to it, and the RRIF makes payments to you according to a formula selected by you in accordance with CRA’s requirements.

The investments in your RRIF are the same as those, which were in your RRSP investments, including savings accounts, term, deposits, mutual funds etc. The selection is determined by you and may be changed as appropriate into other investments. RRIF are subject to market fluctuations depending on the investments held within the plan.

Withdrawals from a RRIF

You must withdraw at least the annual minimum amount from you RRIF each year. You withdraw money from a RRIF according to one of three options chosen by you. You are able to change your choice of options each year as your financial requirements change.

The Annual Minimum Amount Option

There are two formulae that apply to the Minimum Amount Option depending on the year that the RRIF is purchased. The tables below illustrate the differences in the RRIF formulas and percentages Pre-1993 versus Post-1992.

RRIF Purchased prior to Jan 1, 1993 Purchased after Dec 31, 1992
Age Range Formula Age Range Formula
Up to 78 90 – age at Jan. 1st Up to 70 90 – age at Jan. 1st
79 – 93 % of plan at Jan. 1st 71-93 % of plan at Jan. 1st
94+ 20% of plan at Jan. 1st 94+ 20% of plan at Jan. 1st
Age Pre-1993 Post-1992
70 5.00 5.00
71 5.26 7.38
72 5.56 7.48
73 5.88 7.59
74 6.25 7.71
75 6.67 7.85
76 7.14 7.99
77 7.69 8.15
78 8.33 8.33
79 8.53 8.53
80 8.75 8.75

The percentages are applied to the value of your RRIF at December 31st of the preceding year, according to your age at that time.

The Specified Payment Option

With a Specified Payment Option, each year you can determine how much money you wish to take from the plan, and how often. For example, one year you may need $500 a month from the plan; the next month you may want only a single payment of $1,000. As long as the amount meets the annual minimum amount requirement for your age, and subject to your investment selection, it’s your choice to make.

The Specified Term Payment Option

Instead of specifying the amount of income that you want from your RRIF, you may wish to specify the number of years the RRIF will pay you before it is depleted. For example, you might choose this option if you retire at age 55 with an RRSP, but are not eligible immediately to draw other retirement income such as a company pension plan, CPP or OAS. Under this option you can convert your RRSP to a RRIF, which would pay an income until the other sources begin.

Cash Withdrawals

There’s nothing to prevent you from taking more than the minimum out of your RRIF. In fact, you can withdraw the entire amount at any time, but you will then have to declare the withdrawal amounts as part of your income and pay the applicable withholding taxes for that year. The amounts you withdraw from your RRIF each year must also be declared as income.

Tax Considerations

All payments from your RRIF must be declared as income for the year in which you receive them. At the end of the year, you will receive a T4RIF slip showing the full amount of RRIF payments received, the amount in excess of your annual minimum amount for that year, and the withholding tax deducted at source on the excess.

Withholding tax, which is a prepayment of your annual income tax liability, may be deducted from your RRIF payment. No withholding tax is deducted if you receive only the annual minimum amount for a year. If you receive more than the annual minimum amount for a year, the amount is excess of the annual minimum amount is subject to withholding tax, which will be deducted from the payment. The amount deducted depends on the amount withdrawn from your RRIF that year in excess of the annual minimum amount.

Your RRIF in the Event of Your Death

If any funds remain in your RRIF, your surviving spouse may assume ownership of the plan or transfer the funds to his or her own RRIF or annuity. If he/she is not older than 71, the funds may be transferred to an RRSP.

There are provisions for the transfer of RRIF funds, without immediate taxation, to be made a dependant child or grandchild who is financially dependant on the deceased annuitant.

If you have not specified your spouse as beneficiary (or your spouse predeceases you) funds from your RRIF will be paid in a lump sum to your estate or named beneficiary. The estate is responsible to pay any tax owing on the terminal tax return.

If you would like more information about RRIF’s or would like us to help you manage your RRIF please contact us.