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What is an RRIF and how do you use it?

October 10, 2021

Money Sense

Doug Carroll

Two happy grandparents, running along the beach with their grandchildren.

When you start saving for retirement, you open an RRSP (Registered Retirement Savings Plan). This allows you to contribute to and earn income on your savings tax-free. You can add to your RRSP up until age 71, provided you have the income. By the end of the year you turn 71, you must withdraw the money from your RRSP. You have three options when you withdraw, and you can use one or any of them in combination:

Cash in your RRSP – The entire cashed-in amount will be taxable that year, which could push you into higher tax brackets. Unless you have a small RRSP, this isn’t a good option.

Purchase an annuity – Annuities pay a guaranteed fixed amount for life or a set number of years. Payments are often made monthly, with the total annual receipts taxable each year.

Transfer to an RRIF (Registered Retirement Investment Fund) – You can convert RRSP funds to an RRIF, tax free. You must take a minimum amount out of an RRIF each year (except the first year), though you can take more if you need it. Amounts taken are taxable each year.

When can you start an RRIF?

You can start an RRIF at any age, not just when you are retired from working. Still, since the required withdrawals are taxable, you generally wouldn’t do so until you need the funds for living expenses. Most people start an RRIF by the end of the year they turn 71, as a way to withdraw funds from their RRSP.

RRIF contributions and tax sheltering

Unlike an RRSP, you cannot contribute anything more to an RRIF once it’s established. To be clear though, you aren’t required to mature all your RRSPs at the same time. For example, you could withdraw one RRSP at age 65, cash out some and start an RRIF with the rest. You just need to remember that at age 71, you need to withdraw all RRSP funds.

RRIF withdrawals are taxable, but what remains in the RRIF will continue to grow tax-sheltered. As to investments, you can choose among essentially the same options available to you in your RRSP.

How are RRIF minimum annual withdrawals calculated?

A minimum must come out of an RRIF each year, based on your age as “annuitant.” Review Table 1 to learn about minimum withdrawals. The general formula is 1/(90-age), which is multiplied by the RRIF value at December 31 to obtain the minimum for the year that follows. There is no minimum the year you set up the RRIF.

If you want, you can use your spouse or common law partner’s age, which would reduce the minimum if he or she is younger.          

How are RRIF withdrawals taxed?

All RRIF withdrawals are taxable. When you take out more than the minimum amount, you also pay withholding tax on the excess amount. Withholding tax means that your financial institution will hold back an amount, based on the withholding tax rates, and pay it directly to the government on your behalf. Review Table 2 to learn about withholding tax rates. When you calculate your actual tax due on your income tax return, you receive a credit for the withheld taxes. This may lead to a tax refund if more was withheld than necessary, but if the withheld amount is insufficient, you will owe the difference.

When you file your return, if the difference between tax payable and withheld tax is over $3,000 ($1,800 in Quebec) for the current year and either of the two preceding years, you may have to pay future taxes in quarterly instalments. This can happen if the RRIF is large, and the annuitant is taking only minimums without any withholding. The CRA will send you an Instalment Notice if this is the case, outlining the amounts required and the payment due dates.

Annual splitting, and transfers at death

If you are over 65, you are entitled to split up to 50% of your RRIF income with a spouse or common law partner, which could reduce your household tax bill if he or she is in a lower tax bracket. You make the election to split RRIF income on your annual tax return.

On death, the full RRIF amount is normally brought into terminal year income (Jan 1 to date of death). However, a tax-deferred rollover is allowed to a spouse or common law partner who is named as RRIF beneficiary or is entitled as an estate beneficiary. It is also possible to roll to a minor child or a dependent disabled adult child in qualified circumstances.

Learn more about retirement

RRSP Basics: What you need to know
The basics of retirement readiness
Seven ways to add money to your RRSP


Table 1 - RRIF minimum withdrawal rates (Age on Dec 31 of preceding year)

Age Rate Age Rate Age Rate Age Rate
60 3.33% 69 4.76% 78 6.36% 87 9.55%
61 3.45% 70 5.00% 79 6.58% 88 10.21%
62 3.57% 71 5.28% 80 6.82% 89 10.99%
63 3.70% 72 5.40% 81 7.08% 90 11.92%
64 3.85% 73 5.53% 82 7.38% 91 13.06%
65 4.00% 74 5.67% 83 7.71% 92 14.49%
66 4.17% 75 5.82% 84 8.08% 93 16.34%
67 4.35% 76 5.98% 85 8.51% 94 18.79%
68 4.55% 77 6.17% 86 8.99% 95+ 20.00%

Notes: Though the earliest age shown is 60, the formula 1/(90-age) also applies at earlier ages. RRSP must be converted to RRIF by Dec 31 of the year annuitant turns 71.

Table 2 - Withholding tax rates on RRSP/RRIF withdrawals

Withdrawal General rate Quebec rate
Up to 5,000 10% 5%
5,001 - 15,000 20% 10%
15,000 + 30% 15%

Notes: Withheld tax may not be enough to account for actual tax due, which is based on individual tax brackets.  Withholding does not apply to RRIF minimums.  For non-residents of Canada, withholding is 25% unless reduced by a treaty.