Ben Nguyen 
A Registered Retirement Income Fund (RRIF) is a critical component of Canadian retirement planning that provides a structured way to generate income from your retirement savings. As a tax-deferred investment vehicle registered with the Canada Revenue Agency (CRA), a RRIF allows Canadians to convert their Registered Retirement Savings Plans (RRSPs) into a steady income stream while continuing to enjoy tax-sheltered growth.
Understanding how RRIFs function is essential for optimizing your retirement strategy and ensuring financial security throughout your later years.
What is a Registered Retirement Income Fund?
A Registered Retirement Income Fund (RRIF) is a retirement income arrangement between an individual and a carrier, typically a financial institution, that is registered with the Canada Revenue Agency (CRA).
RRIFs allow individuals to transfer tax-sheltered savings from Registered Retirement Savings Plans (RRSPs) and certain registered pension plans in order to provide a steady income stream during retirement. The financial institution pays out a minimum annual amount to the RRIF annuitant based on their age.
Unlike RRSPs, which focus on accumulating retirement savings through contributions, RRIFs focus on distributing those savings as income. Once established, no further contributions can be made to a RRIF, but the investments within it continue to grow tax-free until withdrawn.
How Does a RRIF Work?
A Registered Retirement Income Fund (RRIF) is a tax-deferred account that helps you manage your investments while you receive income during retirement. When using a RRIF, you transfer assets, invest them, and make required withdrawals on a set schedule. You won’t pay taxes on your investment earnings until you take them out.
Here are six key steps to set up a RRIF:
Step 1: Research your options
Select the institution that best matches your needs. Research their investment options, fees, withdrawal flexibility, and customer service.
Step 3: Complete application forms
Fill out the RRIF application, which includes personal information, beneficiary designations, and investment instructions.
Step 4: Select your investments
Choose the specific investments for your RRIF based on your investment strategy and what is offered by your chosen institution.
Step 5: Arrange the transfer
Complete the forms needed to transfer assets directly from your RRSP or other eligible plans into your new RRIF.
Step 6: Set up withdrawal instructions
Establish your withdrawal schedule (monthly, quarterly, etc.) and specify whether you want to withdraw the minimum or a higher amount.
RRIF Contribution and Transfer Rules
Unlike RRSPs, you cannot make direct contributions to a RRIF. The only way to add funds is through transfers from eligible registered plans.
You can transfer assets to your RRIF from:
- Your RRSP (unmatured or matured)
- Registered Pension Plans (RPPs)
- Pooled Registered Pension Plans (PRPPs)
- Specified Pension Plans (SPPs)
- First Home Savings Accounts (FHSAs), in case you don’t have an excess FHSA amount
- Another RRIF
These transfers must be done directly between financial institutions to avoid tax consequences. If you attempt to withdraw from an RRSP and then deposit into a RRIF, you’ll face immediate taxation on the withdrawal.
RRIF Minimum Annual Withdrawals
The CRA requires a minimum payout from your RRIF each year after it is opened. The minimum withdrawal percentage is based on your age (or your spouse’s younger age) at the start of the year, according to a schedule set by the CRA.
| Age | Minimum Withdrawal (%) | Age | Minimum Withdrawal (%) |
|---|---|---|---|
| 55 | 2.86% | 76 | 6.17% |
| 60 | 3.33% | 80 | 6.82% |
| 65 | 4.00% | 85 | 8.51% |
| 70 | 5.00% | 90 | 11.92% |
| 71 | 5.28% | 91 | 13.06% |
| 72 | 5.40% | 93 | 16.34% |
| 75 | 5.82% | 95 and older | 20.00% |
Source: RRIF Minimum Withdrawal, CIBC
You can withdraw more than the minimum amount required. There is no maximum withdrawal limit, providing flexibility to adjust income as needed. When setting your annual withdrawal rate, consider the minimum percentage, your income needs, and tax implications. Aim to maintain account growth while generating steady income.
For more information on how to receive income from a Registered Retirement Income Fund, refer to RRIF withdrawal rules.
Taxation of Registered Retirement Income Funds
All assets transferred into and growth within a RRIF are tax-deferred. Income tax is only paid when you withdraw funds from your RRIF. The full amount (excluding any return of capital) is added to your total income and taxed at your marginal income tax rate.
Withholding tax of between 10% and 30% may apply if more than the minimum amount is withdrawn in a given year. This aims to cover the income tax owing, so you don’t face a large tax bill when filing your return.
RRIFs Beneficiary Designation
Proper beneficiary designation can save thousands of dollars in taxes and probate fees. The tax treatment of your RRIF at death varies significantly depending on who receives the assets.
For more information on beneficiary options and your RRIF at death, read our guide on What Happens to Your RRIF When You Die?
What Are the Different Types of RRIFs?
Most financial institutions offer Registered Retirement Income Funds in various forms to suit different investment objectives and levels of flexibility.
Guaranteed Interest RRIF
This RRIF invests in guaranteed investment certificates (GICs) that provide a fixed, regular interest payment over a defined term, usually 1 to 5 years. GICs can be laddered to provide income at renewal. It offers low investment risk with guaranteed returns.
Mutual Fund RRIF
This RRIF holds investment funds that pool money and invest according to a specific objective, such as money market, bonds, equity growth or dividend funds. Risk tolerance ranges from conservative to aggressive. Returns vary based on fund performance.
Segregated Fund RRIF
Segregated funds offered by insurance companies are similar to mutual funds but also guarantee your principal investment. Asset protection comes at the cost of higher management expense ratios (MERs).
Self-Directed RRIF
This RRIF allows the holder to invest in individual assets like stocks, bonds, ETFs, and GICs. It provides the most flexibility for experienced investors who want to manage their portfolios actively.
Fully Managed RRIF
With Manage RRIF, you pay a professional investment manager to develop and maintain a customized portfolio on your behalf. The manager oversees asset allocation and risk management based on your goals. Accounts often require high minimum investments.
The type of RRIF you choose depends on your investment knowledge, risk tolerance, and desired effort in managing the investments. Your investment horizon and income needs also determine suitable RRIF assets.
Here is a key summary of the different types of RRIFs available in Canada:
| RRIF Type | Risk | Management Style | Fees | Best For |
|---|---|---|---|---|
| Guaranteed Interest | Low | Conservative | Low | Capital preservation, predictable income |
| Mutual Fund | Low to High | Professional | Medium | Growth with professional management |
| Segregated Fund | Low to High | Professional with guarantees | High | Downside protection with growth potential |
| Self-Directed | Varies | Do-it-yourself | Varies | Investment control, customization |
| Fully Managed | Varies | Personalized professional | Highest | Comprehensive wealth management |
What Are the Benefits of an RRIF?
Registered Retirement Income Fund provide 6 advantages for generating retirement income compared to directly withdrawing from an RRSP or purchasing an annuity:
- Tax-deferred growth – Continued tax-sheltering of your savings and investment gains.
- Flexible income – Unrestricted withdrawals above the minimum payment amount.
- Maintain control of assets – Unlike annuities, you control investment decisions.
- Estate planning – The ability to name a successor annuitant or beneficiary of a will.
- Creditor protection – RRIF assets are shielded from creditors in some provinces.
- Pension tax credit – Eligibility for the pension income tax credit is worth up to $2000.
Determining if a RRIF is the right retirement income strategy depends on your financial priorities and circumstances. Many retirees are attracted to RRIFs because of their flexibility and tax efficiency.
Can You Have Multiple RRIFs?
It is permitted to open and contribute to multiple RRIFs. Reasons for having more than one RRIF may include:
- To keep different investment portfolios separate for clarity
- To have accounts with different financial institutions
- To divide assets intended for different beneficiaries
- To diversify risk across institutions
If you have multiple RRIFs, it is important to strategically manage withdrawals across accounts to minimize taxes and maximize any pension income splitting.
RRIF vs. LIF: What’s the Difference?
A Life Income Fund (LIF) is a special type of RRIF designed specifically to hold locked-in pension assets from registered pension plans.
Locked-in assets cannot be withdrawn as a lump sum, so an LIF ensures these funds provide retirement income. Otherwise, an LIF functions similarly to an RRIF, setting a minimum withdrawal percentage each year with no maximum.
Key differences between standard RRIFs and LIFs include:
- Eligible assets – LIFs can only hold locked-in pension funds, whereas a RRIF can contain various registered savings.
- Withdrawal rules – LIFs have stricter maximum yearly withdrawal limits compared to RRIFs.
- Conversion rules – Locked-in amounts can only be converted to LIFs under certain conditions, whereas RRSP savings can be freely moved to a RRIF.
If you have locked-in pension assets, discuss with a financial advisor whether a LIF or RRIF is more appropriate for your situation.
Planning for retirement? Discover our guides on retirement savings in Canada to secure your future
- Retiring Allowance in Canada
- Retirement Planning as a Newcomer in Canada
- Locked-in Retirement Income Fund
When Should You Convert Your RRSP to a RRIF?
All RRSP savings must be converted by December 31 of the year you turn 71. You can convert to a RRIF earlier if retirement income is required.
5 key factors to consider for RRIF conversion timing include:
- Age and life expectancy – Converting later maximizes tax-deferred growth in your RRSP but decreases the duration of your RRIF payments.
- Retirement status – If retired early, a RRIF can provide income before age 71. If still working at 71, delaying conversion maintains RRSP room.
- Other income sources – Converting early provides more flexibility if you have pensions or other sources of retirement income.
- Spousal age difference – A younger spouse’s age can be used for minimum withdrawals, allowing savings to last longer.
- Estate planning – Early conversion begins the spousal rollover process, potentially providing more benefits to beneficiaries.
While mandatory by age 71, converting between age 65 and 70 is common for retirement income flexibility. However, each individual’s optimal timing depends on their unique financial situation.
RRIF Strategies by Life Stage
Your ideal RRIF strategy depends on your age and stage of retirement:
Early Retirement Before Age 65
If retiring early, a RRIF can generate income until government and employer pensions commence at 65. Consider more conservative investments like GICs and bonds to preserve capital with a long time horizon. Withdraw only the required minimum amounts to allow continued tax-deferred growth.
Standard Retirement After age 65
During your main retirement years, develop a balanced RRIF portfolio that addresses income needs while still providing growth. If investment expertise is lacking, consider appointing a professional manager. Review asset allocation regularly and rebalance your portfolio to match your risk profile as you age.
Advanced Age After 75
In later retirement years, prioritize stable income and capital preservation with your RRIF. Hold mainly fixed-income investments like GICs, bonds, and annuities. Withdraw sufficient funds to utilize pension income credit and income-splitting opportunities before age 65. Review beneficiary designations and estate plans regularly.
Learn how a Registered Retirement Income Fund works, including transfer rules, minimum withdrawals, and tax advantages for Canadians planning their retirement income.
Frequently Asked Questions about RRIFs
Can I convert my RRIF back to an RRSP?
Once converted, RRIFs cannot be changed back into an RRSP, even if you are below age 71. Some exceptions may apply in case of financial hardship.
What happens if I withdraw less than the RRIF minimum amount?
If you fail to withdraw the minimum RRIF amount by the calendar year-end, the financial institution will automatically distribute the shortfall. This ensures RRIF rules compliance.
How do RRIF withdrawals impact Old Age Security (OAS) benefits?
RRIF income is considered part of your net income used to determine OAS claw backs. Higher net income from larger RRIF withdrawals may cause OAS reductions.
Can I transfer my RRIF to another financial institution?
Yes, you can transfer your RRIF from one provider to another at any time. Some fees or penalties may apply with your originating institution.
How do RRIFs work for non-residents of Canada?
Non-residents can maintain existing RRIFs but cannot open a new RRIFs unless transfers relate to Canadian-source employment. RRIF withdrawals by non-residents are subject to a non-resident withholding tax of 25%.
The Bottom Line
RRIFs play an important role in generating tax-efficient retirement income from RRSP savings. Understanding the various RRIF options, minimum payout schedules, and tax implications empowers you to maximize benefits. Consulting qualified financial and tax planning experts is highly recommended when developing your personal RRIF strategy. Revisit your RRIF arrangements regularly to ensure they continue meeting your needs and retirement goals. RRIFs provide significant flexibility to help fund your desired lifestyle during your retirement years.
