The Registered Retirement Income Fund (RRIF) is a tax deferral vehicle available to Registered Retirement Savings Plan (RRSP) holders. A RRIF account needs to be set up first, the RRSP assets can be transferred without incurring a taxable transaction. Starting in the year after the year you establish a RRIF, you have to be paid out a yearly minimum amount (monthly or a lump sum). You can withdraw more, but not less than the minimum. The payout period under your RRIF is for your entire life. If you don’t immediately require the full amount of your minimum payment, consider contributing what’s not needed to your Tax-Free Savings Account (TFSA). RRIF payouts are essentially the opposite of annual RRSP-deductible contributions. There are maximum annual amounts that may be contributed to an RRSP, and there are minimum RRIF withdrawals each year. The amount withdrawn from a RRIF will be taxable each year. As with an RRSP, growth within a RRIF is tax-deferred, and annuitants may continue to manage their investments if a self-directed plan is used.
Setting Up a RRIF
You set up and fund a RRIF account by transferring your RRSP investments into this new investment vehicle. Your financial institution will advise you on the types of investments they can contain. Once the RRIF is established, there can be no more contributions made to the plan, nor can the plan be terminated except through death. Consider naming your spouse a successor annuitant. A RRIF can be opened at any age, but new contributions can never be made to a RRIF. The most common way money gets into a RRIF is through a rollover from an RRSP. When this is done, no taxes are payable on the transferred funds. As with an RRSP, tax is generally payable only on amounts actually withdrawn from a RRIF, allowing the remaining assets to continue to grow on a tax-deferred basis.
Many annuitants find the tax rate on RRIF withdrawals much lower than the tax rate they faced while employed because their income in retirement is not as high. One of the benefits of the RRSP/RRIF system is that RRSP contributions are often made and deducted from income that is taxed at high marginal rates, while RRIF withdrawals are often included in income and taxed at much lower rates.
RRIF Withdrawal Minimums
Once a RRIF is established, the annuitant is required to withdraw a minimum amount each year. That amount is based on the age of the annuitant or the annuitant’s spouse or common-law partner as outlined in the sidebar at left titled RRIF minimum factors. If your spouse is younger than you, you may want to base minimum payments on their age, allowing for lower minimum payments and tax-deferred growth for a longer period. Your taxable income impacts your eligibility for certain government benefits, such as Old Age Security (OAS).
| Age At Start Of Year | RRIF Minimum Payout Percentage |
|---|---|
| 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% |
| 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+ | 20.00% |
Receiving Income from a RRIF
You will receive a T4RIF each year to report the income on your tax return. When you withdraw funds from an RRIF, your financial institution withholds the amount of taxes due to the government on your behalf. The tax rates for withdrawals depend on your residency and the amount you withdraw. For residents of Canada (excluding Quebec), the rates are as follows:
- 10% on amounts up to $5,000
- 20% on amounts over $5,000 up to and including $15,000
- 30% on amounts over $15,000
Death of a RRIF Annuitant
Amounts received from a RRIF upon the death of an annuitant can be transferred directly or indirectly to your RRSP, your RRIF, or buy yourself an eligible annuity if you were a qualified beneficiary of the deceased annuitant. This only occurs if the spouse has been named the successor annuitant. You can roll over the proceeds of a deceased annuitant’s RRIF to the Registered Disability Savings Plan (RDSP) of a financially dependent infirm child or grandchild. Beneficiaries should be named to help avoid probate taxes.
