Registered Retirement Income Fund

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A Registered Retirement Income Fund (RRIF) is a tax-deferred retirement plan under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their Registered Retirement Savings Plan (RRSP). As with an RRSP, an RRIF account is registered with the Canada Revenue Agency.

Like RRSPs, RRIFs are tax-advantaged savings plans that allow gains to compound, within the plan, without attracting tax. Withdrawals from a RRIF, as with an RRSP, are taxed as ordinary income irrespective of whether they were originally characterized as capital gains, dividends, income or return of capital inside the registered account. Contributions cannot be made to a RRIF.

Creating a RRIF

You can only contribute to a RRIF by directly transferring property from a matured or unmatured RRSP[1], a Registered Pension Plan (RPP) or another RRIF. You cannot transfer any part of your retirement allowance to a RRIF.[2]

Establishing a RRIF can be done at anytime, but must be done no later than the year the one turns 71. Once a RRIF is established, there can be no more contributions made to the plan nor can the plan be terminated except through death.[3]

It is possible to convert a RRIF back to an RRSP, if the annuitant is under the age of 71. A RRIF can be converted to an annuity at any age.[citation needed]

The rules allow you to have more than one RRIF and RRIFs can be self-directed in a similar manner to RRSPs.

RRIF minimum withdrawal schedule

Holders of RRSPs who elect to convert their RRSP to a RRIF must withdraw funds from the RRIF in accordance with the following schedule.[4] These are minimum withdrawals and the annuitant may withdraw more than these amounts, if they wish to.

The withdrawal percentages are based on the annuitant's age (or, if he/she so chooses, the spouse's age) and the value of the holdings on January 1 of each year. Your carrier calculates the minimum amount based on your age at the beginning of each year. However, you can elect to have the payment based on your spouse or common-law partner's age. You must select this option when filling out the original RRIF application form. Once you make this election, you cannot change it.[5]

Slightly different factors were used for RRIFs that were created prior to 1992[4]; starting in 2015 all plans use the same factors[6] .

The withdrawal schedule below also applies to minimum withdrawals from Locked-In Retirement Fund (LRIF) or a Life Income Fund (LIF). No minimum withdrawal is required in the year the retirement fund is converted.

There is no maximum withdrawal from an RRIF. However, maximum withdrawals apply to the otherwise-similar LRIFs and LIFs.

The Federal 2015 Budget has reduced the minimum withdrawal factors.[6]

Age of Account Holder
on January 1
Percentage of Total RRIF
Value to be Withdrawn
2015 Percentage of Total RRIF
Value to be Withdrawn[6]
65 4.00% 4.00%
66 4.17% 4.17%
67 4.35% 4.35%
68 4.55% 4.55%
69 4.76% 4.76%
70 5.00% 5.00%
71 7.38% 5.28%
72 7.48% 5.40%
73 7.59% 5.53%
74 7.71% 5.67%
75 7.85% 5.82%
76 7.99% 5.98%
77 8.15% 6.17%
78 8.33% 6.36%

The minimum withdrawals are defined as:[7]

Age of Account Holder
on January 1
Percentage of Total RRIF
Value to be Withdrawn
2015 Percentage of Total RRIF
Value to be Withdrawn[6]
under 71 ("x") 1/(90 − x) 1/(90 − x)
79 8.53% 6.58%
80 8.75% 6.82%
81 8.99% 7.08%
82 9.27% 7.38%
83 9.58% 7.71%
84 9.93% 8.08%
85 10.33% 8.51%
86 10.79% 8.99%
87 11.33% 9.55%
88 11.96% 10.21%
89 12.71% 10.99%
90 13.62% 11.92%
91 14.73% 13.06%
92 16.12% 14.49%
93 17.92% 16.34%
94 20.00% 18.79%
95+ 20.00% 20.00%

As an example, suppose Gerald was 75 in September, 2011 and his RRIF was worth $211,038 on January 1, 2012. The minimum withdrawal in 2012 (based on his age) is 7.85% of $211,038, or $16,566. A similar scenario played in 2015 or later years would result in a minimum withdrawal at age 75 of 5.82%, or $12,282.

In the Federal 2008 Economic and Fiscal Statement[8], the minimum annual withdrawal from a Registered Retirement Income Fund (RRIF) was reduced, on a one-time basis, by 25% for 2008 withdrawals. The legislation for this was included in Bill C-10, which received Royal Assent on March 12, 2009. For those taxpayers who had already withdrawn more than the reduced minimum amount, the excess (up to the original minimum amount) was allowed as a recontribution to an RRSP or RRIF, and could be deducted on the 2008 tax return. The recontribution was required to be made by April 14, 2009.[9]

In-kind withdrawals

It is possible to withdraw a security from a registered fund "in-kind:" that is, without selling it first.[10] If an in-kind withdrawal is made, it must be at fair market value and there must be sufficient cash in the registered plan to cover any withholding tax. Investors facing forced withdrawals at reduced market prices may wish to consider an in-kind withdrawal if they do not wish to sell a security, but are forced to make a withdrawal to meet the minimum withdrawal requirements.

Withholding tax on payments from a RRIF

According to the CRA[11] if you withdraw more than the "minimum amount", the amount above the minimum is subject to withholding tax.

Withholding rates

  • 10% if the payment is not more than $5,000
  • 20% if the payment is more than $5,000 but not more than $15,000
  • 30% if the payment is more than $15,000

RRIF rollovers upon death of spouse

CRA[12] advises: You can contribute to your RRIF any amounts you receive or are considered to have received from a deceased annuitant's RRSP if:

  • the annuitant under an RRSP dies and, at the time of death, you were the deceased annuitant's spouse or common-law partner;
  • you were a financially dependent child or grandchild of the deceased annuitant who depended on the annuitant because of a physical or mental infirmity. If this is the case, you may be able to transfer the amount even if the deceased annuitant had a spouse or common-law partner at the time of death.

CRA [13] further advises: before any payments are made under the fund, the annuitant has to elect to use the prescribed factor corresponding to the age of the spouse or common-law partner when calculating the minimum amount. Once the election is made, it cannot be changed, even if the spouse or common-law partner dies. However, the annuitant can establish another RRIF by transferring funds and then make a new election for this other RRIF.

References

  1. Canada Revenue Agency, Property from an unmatured RRSP, viewed February 2, 2014.
  2. Canada Revenue Agency, Transferring to your RRIF, viewed February 2, 2014.
  3. Canada Revenue Agency, Registered Retirement Income Fund (RRIF), viewed February 2, 2014.
  4. 4.0 4.1 Canada Revenue Agency, IC 78-18R6 Registered Retirement Income Funds, March 6, 2002. Expanded for ages from 50 to 70.
  5. Canada Revenue Agency, Receiving income from a RRIF, viewed August 16, 2012.
  6. 6.0 6.1 6.2 6.3 "Prescribed Factors for Minimum Annual Withdrawal From a RRIF". TaxTips.ca. http://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm. Retrieved 2015-05-29.
  7. "Income Tax Information Circular 78-18R6: Registered Retirement Income Funds" (PDF). Canada Revenue Agency. 2002-03-06. http://www.cra-arc.gc.ca/E/pub/tp/ic78-18r6/ic78-18r6-e.pdf. Retrieved 2015-09-05.
  8. Economic and Fiscal Statement, November 27, 2008, viewed February 10, 2014.
  9. TaxTips.ca - Minimum annual withdrawals from a RRIF, viewed September 9, 2012.
  10. TaxTips.ca, Making "in-kind" withdrawals from an RRSP or a RRIF, viewed March 6, 2009.
  11. Withholding Tax on Payments from a Registered Retirement Income Fund (RRIF), viewed February 6, 2012.
  12. Amounts paid from an RRSP or RRIF upon the death of an annuitant, viewed November 17 2013.
  13. Registered Retirement Income Funds, viewed November 17, 2013

Further reading

External links