A Registered Retirement Income Fund (RRIF) is an account registered with the federal government. It’s designed to provide you with an income stream from your RRSP in your retirement. Before, you were putting money into your RRSP to accumulate savings for retirement. Now, you withdraw that money from your RRIF as retirement income.
Once you convert your RRSP to RRIF you’ll need to understand how to withdraw money from the account. Depending on your income needs and saving priorities in retirement, using both RRIFs and annuities may work for you. If you choose to use both a RRIF and an annuity as retirement income there are few considerations to keep in mind.
On this page you’ll find
How much can you withdraw from your RRIF and when?
You must start withdrawing money from your RRIF in the year after you open it.
The federal government sets the minimum amount you must take out of your RRIF every year. It’s based on a percentage of the value of your RRIF. While there is a minimum amount you have to take out each year, there is no maximum amount.
Here’s how it works:
- The minimum amount increases as you get older.
- If your spouse is younger, you can use their age to calculate your minimum amount. The lower the age, the lower the minimum amount and the less income tax you’ll pay on the withdrawals.
- You can choose to make regular monthly, quarterly, semi-annual or annual withdrawals.
- All withdrawals are fully taxable.
Using your spouse’s age to calculate your minimum withdrawal amount
If you have a spouse who is younger than you, you can use their age to calculate your minimum amount. This is a good strategy if you have other sources of income and want to leave your money in your RRIF for as long as possible. You don’t have to have a spousal RRIF or name your spouse as the RRIF beneficiary to use their age for your minimum amount. But you must tell your financial institution that you’re doing so before you make your first RRIF withdrawal. And you can’t change your mind later.
How the minimum withdrawal amount is calculated
The minimum withdrawal amount is based on the value of your RRIF on December 31 of the previous year. Learn more about how minimum withdrawal amounts are calculated here.
For example: Let’s say on January 1, 2022 you were 82. The value of your RRIF on December 31, 2021 was $200,000. Based on the minimum withdrawal amount of 7.38%, you must withdraw at least $14,760 in 2022. This means you can leave an additional $185,240 in your RRIF to continue to grow tax deferred.
When you reach age 95, the minimum amount remains at 20% until your RRIF is used up.
Try our RRIF calculator to estimate withdrawals from your RRIF in retirement and see how long your savings will last.
What if you take out more than the minimum amount from your RRIF?
You can withdraw more than the minimum amount from your RRIF each year, however, make sure you consider the tax implications. Here’s how it works:
- There is no maximum annual withdrawal limit.
- All withdrawals are fully taxable.
- If you take out more than the minimum amount, you’ll also pay withholding tax on the excess amount. Your financial institution will hold back an amount, based on the withholding tax rates, and pay it directly to the government on your behalf.
Withholding tax rates | |
| Amount more than the minimum amount | Withholding tax rate (except in Quebec) |
| Up to $5,000 | 10% |
| Between $5,000 and $15,000 | 20% |
| More than $15,000 | 30% |
Withholding tax rates are different for taxpayers in Quebec. Learn more about withholding rates in Quebec.
Even though withholding tax is deducted from withdrawals that exceed the minimum amount, you may still owe more tax later when you file your tax return. It depends on your total income and tax situation.
Taking your RRIF withdrawals “in kind”
If you don’t need the income from your RRIF right away, you don’t have to take your minimum withdrawal amount in cash. Instead, you may be able to transfer the investments directly to a non-registered account or TFSA (provided you have contribution room remaining in that year). This is known as an “in kind” withdrawal.
In kind withdrawals often work best with mutual funds, stocks and bonds. A GIC can be transferred in kind only if it is transferable and assignable.
For example:
If your minimum withdrawal amount is $4,000.
And your RRIF has $4,000 worth of mutual fund units.
You could transfer those units to a non-registered mutual fund account.
Here’s how it works:
- You avoid any redemption fees because you’re not selling the units. But you may have to pay a transfer fee.
- You don’t have to pay withholding tax because you’re only withdrawing the minimum amount from your RRIF.
- Like any RRIF withdrawal, you’ll have to include the $4,000 withdrawal in your income when you file your tax return.
How can you use both RRIFs and annuities in retirement?
When you convert your RRSP before the age of 71, you can either transfer it to a RRIF or use it to purchase an annuity. Depending on your income needs and saving priorities in retirement, using both RRIFs and annuities may work for you.
One way to balance growth and safety is to invest your retirement savings in both a registered retirement income fund (RRIF) and one or more annuities. How and if you divide your money depends on many factors, including:
- Retirement income priorities – Your decision depends on how you prioritize security, income, growth or building an estate.
- Interest rates – If interest rates are low, you may put less in an annuity or, you might want to stagger annuity purchases over a few years.
- Guaranteed retirement income – If you have other guaranteed sources of income, like a defined benefit pension plan you may not need as much income from an annuity.
Reasons you may want to use both RRIFs and annuities
For many people, using RRIFS and annuities is not an either-or situation. You may decide to use both RRIFs and annuities for your retirement because:
- Annuities give you some guaranteed income for life regardless of market performance.
- You can keep a portion of your savings invested within your RRIF with the potential for growth.
- You may preserve some capital for your estate by not putting all of your savings in an annuity.
- If interest rates rise, you can use funds kept in your RRIF to purchase an additional annuity.
Questions to ask before choosing an annuity
Consider your total financial picture, your goals, and your need for safety before choosing an annuity. You’ll want to know answers to the following questions:
1. How much income will you get from government and workplace pensions? This will tell you how much additional income (if any) you may need from an annuity.
2. Are you worried about your investments losing money? If you are concerned about your investments losing money and not providing enough income in retirement, an annuity may eliminate some of this risk.
3. Are you concerned about inflation? Annuities provide a set payment for life but generally are not protected against inflation. However, you have the option of adding inflation protection.
4. How much tax will you pay? Annuity payments, RRIF withdrawals and other retirement income (for example, workplace pensions) are taxed as income. But your savings will continue to grow tax-deferred in a RRIF. If your total income including annuity payments and the minimum RRIF withdrawal is more than you need, you may save on tax by keeping most of your savings in your RRIF.
5. Are you concerned about outliving your savings? If you’re worried about longevity risk, an annuity will provide some income for life – but payments usually end when you die, so you may pay more into the annuity than you get out.
6. Do you want to leave some capital for your estate? With annuities this option costs more, or you may have to accept a lower monthly payment. RRIF savings go to your designated beneficiary or are added to your estate.
