What you need to know about Registered Retirement Income Funds


Share this:

5724957212_7a904248a3_zAll Registered Retirement Savings Plans (RRSP) are required to be converted into Registered Retirement Income Funds (RRIF) by December 31st of the year in which you turn 71. Some financial institutions will do the conversion automatically, as RRIF accounts can hold the same investments as an RRSP account.  However, you do have the option to convert to an RRIF any time before then.

The difference between an RRSP and RRIF is that an RRSP allows you to make contributions as long as you have the contribution room and withdrawals are optional. Meanwhile, with an RRIF contributions are not allowed and there are minimum mandatory withdrawals each year. The minimum withdrawal amount is equal to 5.3% of the value of your RRSP (effective 2015) in the year you turn 71, and the minimum withdrawal percentage increases each year. See the table below:

Table of RRIF Factors

All RRIFs 2015+ Post-1992 RRIFs
prior to 2015
Pre-1993 RRIFs
prior to 2015
Age RRIF
Factor
RRIF
Factor
RRIF
Factor
71 0.0528 0.0738 0.0526
72 0.0540 0.0748 0.0556
73 0.0553 0.0759 0.0588
74 0.0567 0.0771 0.0625
75 0.0582 0.0785 0.0667
76 0.0598 0.0799 0.0714
77 0.0617 0.0815 0.0769
78 0.0636 0.0833 0.0833
79 0.0658 0.0853 0.0853
80 0.0682 0.0875 0.0875
81 0.0708 0.0899 0.0899
82 0.0738 0.0927 0.0927
83 0.0771 0.0958 0.0958
84 0.0808 0.0993 0.0993
85 0.0851 0.1033 0.1033
86 0.0899 0.1079 0.1079
87 0.0955 0.1133 0.1133
88 0.1021 0.1196 0.1196
89 0.1099 0.1271 0.1271
90 0.1192 0.1362 0.1362
91 0.1306 0.1473 0.1473
92 0.1449 0.1612 0.1612
93 0.1634 0.1792 0.1792
94 0.1879 0.2000 0.2000
95+ 0.2000 0.2000 0.2000

Source: http://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm

The amounts withdrawn will be added to your taxable income, and there is no maximum withdrawal amount on an RRIF.

Overall, the most notable advantage of an RRIF is that your investment fund can continue to grow tax sheltered like an RRSP until the funds are withdrawn (i.e. continue to earn interest on interest). Furthermore, note you don’t actually have to sell your investments to complete a withdrawal. Most financial institutions will allow you to transfer you investments to a non-registered investment account or a TFSA. Unlike an RRSP you have the option of not having withholding tax on the mandatory withdrawals, but if you withdraw more than the mandatory amount there are minimum withholding taxes like an RRSP. Lastly, if your spouse is younger you can use their age to calculate the minimum withdrawal amount. This is very helpful if you have other sources of income.


Follow Us on Facebook, LinkedIn, or Twitter to receive Market Updates, Investment Tips, & More.


Author

Elias Zeekeh, MBA, CPA, CMA

Real Estate Investor & Blogger

EZ Profile Photo v2

 

 

 

 

 

Share this:

Leave a comment

Your email address will not be published. Required fields are marked *

One thought on “What you need to know about Registered Retirement Income Funds