Ben Nguyen 
A Registered Retirement Income Fund (RRIF) is a registered account designed to provide retirement income. While you contribute to an RRSP throughout your working years, a RRIF allows you to withdraw funds regularly during your retirement.
Managing your RRIF withdrawals effectively is essential for maximizing your retirement income and preserving your wealth.
This article explores everything you need to know about RRIF withdrawals, from minimum withdrawal requirements and tax implications to strategic withdrawal planning and estate considerations. Whether you’re approaching retirement or already managing a RRIF, this guide helps you make informed decisions about your retirement income.
What are RRIF Withdrawal Rules?
Unlike RRSPs, where you control when and how much you contribute, RRIFs have mandated minimum withdrawals that must be taken annually. These requirements ensure retirement savings are gradually used for their intended purpose.
RRIF Minimum Withdrawal in Canada
The minimum withdrawal amount is calculated by multiplying the fair market value (FMV) of your RRIF as of January 1 by a prescribed percentage factor based on your age.
The following table shows the prescribed minimum withdrawal percentages by age:
| Age | RRIF Minimum Withdrawal % |
|---|---|
| 65 | 4.00% |
| 66 | 4.17% |
| 67 | 4.35% |
| 68 | 4.55% |
| 69 | 4.76% |
| 70 | 5.00% |
| 71 | 5.28% |
| 72 | 5.40% |
| 73 | 5.53% |
| 74 | 5.67% |
| 75 | 5.82% |
| 76 | 5.98% |
| 77 | 6.17% |
| 78 | 6.36% |
| 79 | 6.58% |
| 80 | 6.82% |
| 81 | 7.08% |
| 82 | 7.38% |
| 83 | 7.71% |
| 84 | 8.08% |
| 85 | 8.51% |
| 86 | 8.99% |
| 87 | 9.55% |
| 88 | 10.21% |
| 89 | 10.99% |
| 90 | 11.92% |
| 91 | 13.06% |
| 92 | 14.49% |
| 93 | 16.34% |
| 94 | 18.79% |
| 95 – 100 | 20.00% |
Source: RRIF Minimum Withdrawal Chart, cibc.com
For example, if you’re 75 years old and have a RRIF valued at $200,000 on December 31 of the previous year, your minimum withdrawal for the following year would be $11,640 ($200,000 × 5.82%).
You can also use your younger spouse’s or common-law partner’s age to determine your personal minimum withdrawal percentage, potentially allowing you to withdraw less in early retirement. This election must be made by the end of the year after your RRIF is opened.
The minimum withdrawal amounts are considered regular income and taxed at your marginal rate without any withholding tax deducted.
Is There a Maximum Withdrawal Limit for RRIFs?
No, there is no RRIF maximum withdrawal limit. You can withdraw as much as you want from your RRIF in any given year. However, withdrawing more than the minimum amount will subject the excess to withholding tax at the time of withdrawal.
When Do RRIF Withdrawals Begin?
You must start withdrawing money from your RRIF in the calendar year following the year in which the RRIF is established. There is no minimum withdrawal requirement in the calendar year in which you establish your RRIF. Withdrawals must begin in the following year.
You have flexibility in how you schedule your withdrawals:
- Monthly payments
- Quarterly payments
- Semi-annual payments
- Annual lump sum payment
The timing of withdrawals can be strategically planned to align with your cash flow needs and tax situation. Some retirees prefer regular monthly income, while others may benefit from taking the entire minimum amount at the end of the year to maximize tax-deferred growth.
How Are RRIF Withdrawals Taxed?
All RRIF withdrawals are considered taxable income in the year they are received. However, any amounts withdrawn above your minimum yearly withdrawal will be subject to withholding taxes that are remitted directly to the CRA.
The following table shows the withholding tax rates for withdrawals exceeding the minimum amount (for all provinces except Quebec):
| Amount Exceeding Minimum | Withholding Tax Rate |
|---|---|
| Up to $5,000 | 10% |
| $5,001 to $15,000 | 20% |
| Over $15,000 | 30% |
For Quebec residents, the rates are different: 5% to 15% federally and 14% provincially.
The withholding tax is merely a prepayment of your income tax obligation. When you file your annual tax return, RRIF withdrawals are added to your total income, and you may owe additional tax or receive a refund depending on your marginal tax rate and other deductions or credits.
Source: What Tax is Deducted From RRIF or RRSP Withdrawals? – taxtips.ca
Tax on Your RRIF at Death
Any assets remaining in your RRIF on death are considered taxable income on your final tax return. However, there are some options to help minimize taxes owed by your estate:
- Name your spouse or common-law partner as the successor annuitant on your RRIF so they can take it over tax-free.
- Designate a qualified beneficiary so your RRIF can be transferred directly to their RRSP or RRIF on a tax-deferred basis.
- Withdraw securities in-kind from your RRIF while alive and transfer them to a TFSA to avoid estate taxes.
- Consult a tax advisor for strategies to minimize probate taxes on registered assets.
Explore our article to better understand what happens to your RRIF when you die.
Making In Kind Withdrawals from a RRIF: A Way to Save Taxes
If you don’t need cash from your RRIF right away, you can take in kind withdrawals by transferring investments directly to a non-registered account or tax-free savings account.
With an in kind withdrawal, you transfer the actual investments from your RRIF to another account without selling them. The fair market value of the transferred investments is considered a withdrawal from your RRIF and reported as taxable income.
In-kind withdrawals offer 4 potential benefits:
- You avoid redemption fees that might apply when selling certain investments
- You don’t have to pay withholding tax on minimum withdrawals
- You maintain your investment positions without disruption
- You can transfer investments to a TFSA, where future growth is tax-free (subject to contribution limits)
Strategies to Minimize Taxes on RRIF Withdrawals
While RRIF withdrawals are fully taxable, there are 6 strategies you can use to minimize taxes and keep more of your money growing tax-deferred for longer:
- Withdraw only the minimum amount required each year so more of your savings stay sheltered in your RRIF.
- Calculate your minimum withdrawal percentage using your spouse or common-law partner’s age, which allows you to withdraw less.
- Make one annual withdrawal at year-end rather than periodic withdrawals, giving your savings more time to grow before being taxed.
- Transfer any excess funds to a TFSA so they can continue to grow tax-free.
- If you’re over 65, you can split up to 50% of your RRIF income with a lower-income spouse to lower your overall tax bill.
- Draw income from non-registered and less tax-efficient accounts first to maximize the tax-deferred growth in your RRIF.
To make your retirement preparation more enjoyable, refer to:
- Retiring Allowance in Canada
- Retirement Planning as a Newcomer in Canada
- Locked-in Retirement Fund
- What is a LIRA
- Insured Retirement Plan (IRP)
Frequently Asked Questions about RRIF Withdrawals
Do RRIF Withdrawals Affect OAS and Other Government Benefits?
Yes, RRIF withdrawals are included in your net income and can affect income-tested benefits like OAS and the GIS if your total net income exceeds eligibility thresholds.
Can you transfer from a RRIF to a TFSA?
You can't directly transfer funds from a RRIF to a TFSA. However, you can withdraw RRIF assets "in-kind" and transfer them into a TFSA without selling. Taxes will apply on the amount withdrawn.
Do I have to make RRIF withdrawals?
Yes, you must make at least the minimum annual withdrawal from your RRIF after it is opened, even if you don't need the income. Any excess can be contributed to a TFSA if you have contribution room.
What is $2,000 Income Tax Credit?
Once you reach age 65, up to $2,000 of eligible pension income, including RRIF withdrawals, qualifies for the pension income tax credit. This non-refundable tax credit can save you up to $300 in federal taxes (15% of $2,000), plus additional provincial tax savings.
The Bottom Line
A RRIF provides a tax-efficient way to create a stream of retirement income from your existing RRSP savings. By understanding and strategically managing your RRIF withdrawals, you can optimize your retirement income, minimize taxes, and ensure your savings last throughout your retirement years. Consult a financial planner when deciding when to convert your RRSP and how much to withdraw from your RRIF each year.
