Registered Retirement Income Fund (RRIF)

Understanding RRIFs

Generate a steady, predictable stream of retirement income with RRIFs.

So you’ve worked hard, and you’ve saved a nest egg, but now you’re ready to convert your RSPs into an income stream, so now what?

The government requires you to take action with your RRSPs before December 31st of the year you turn 71 – you can do it sooner, but no later.  Typically, you have 3 choices when deciding with to do with your RSP funds:

  1. Cash in your RSPs – most people don’t choose this option because the total amount of your RRSP will be included in your taxable income for that year.
  2. You can purchase an annuity, or
  3. You can transfer your funds to a Registered Retired Income Fund of RRIF

RRIFs are the most popular option chosen by our members because RRIFs are similar to RRSPs; your funds remain tax-sheltered until withdrawn and you maintain the flexibility with investment choice. 

A Registered Retirement Income Fund (RRIF) is a bit like a Registered Retirement Savings Plan (RRSP) in reverse. With an RRSP, you accumulate tax-deferred savings to fund your retirement, while a RRIF generates 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.

RRIF basics Expand/Collapse

You don’t make contributions to a RRIF. Instead, you open a RRIF by transferring money from your RRSP. It’s still a registered account, so your investment earnings remain tax-sheltered until you start to withdraw money. As well, a RRIF can typically hold all of the same types of investments as your RRSP.

You can roll your RRSP into a RRIF at any time, but you don’t have to until the end of the year in which you turn 71. Similarly, you can start taking withdrawals from your RRIF as soon as the account is set up, but you must start taking out an annual minimum payment by December 31 of the year following the year the RRIF was established, and each year thereafter. For example, if you open a RRIF in August 2016, you must make your first withdrawal on or before December 31, 2017. A financial professional can help you determine when the best time to open a RRIF is based on your individual circumstances.

Withdrawals Expand/Collapse

The key difference between an RSP and a RRIF is that an RSP is used for accumulation of funds while a RRIF’s primarily function is to create an income stream.  In fact, our government mandates a minimum payment that must be withdrawn from your RRIF each year.  Click here to access our RRIF calculator to explore withdrawal minimums and payment options.

The annual minimum withdrawal amount is calculated by multiplying the market value of your RRIF on December 31 of the previous year by a percentage set by the government, which increases with your age.

If your spouse is younger than you, you can use their age to calculate the annual minimum amount. The lower the age, the lower the minimum amount and the less income tax you’ll pay on the withdrawals. This could be a good strategy if you have other sources of income and want to leave money in your RRIF for as long as possible.

For example, some government benefits, like Old Age Security (OAS), are based on income levels. If your retirement income is too high because of your RRIF withdrawals, you risk receiving lower OAS payments.

While you must at least take the yearly minimum payment; you have the flexibility to choose to receive the payments more frequently and/or a higher level of income.  And actually, there is no maximum payment; your RRIF can be cashed in in its entirety at any time.  It is important to note though, all payments received from your RRIF are fully taxable and will be included in your taxable income for the year in which they were withdrawn. 

Our investment specialists at Weyburn credit union will tailor a retirement income strategy to suit your personal situation.  We will help you determine your individual income requirements, payment options, and investment choice as well as offer more in-depth advice such as how to structure your income in the most tax advantageous manner. 


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