Registered Retirement Income Fund
| Retirement Planning |
|---|
|
| Tax Deferred and Tax Free Savings Plans |
|
| Pension Plans |
| Government Retirement Benefits |
| Retirement Planning |
Contents |
Introduction
A Registered Retirement Income Fund (RRIF) is used to disburse funds in an RRSP during retirement. 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.
RRIF Minimum Withdrawal Schedule
Holders of RRSPs who elect to convert their RRSP to a Registered Retirement Income Fund (RRIF) must withdraw funds from the RRIF in accordance with the following schedule.[1] 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. Slightly different factors are used for RRIFs that were created prior to 1992.[2]
The withdrawal schedule below also applies to minimum withdrawals from LRIFs and LIFs. No minimum withdrawal is required in the year the retirement fund is converted.
RRIF withdrawal factors - post-1992 RRIFs Age (Y) Factor Age (Y) Factor Age (Y) Factor 50 2.50% 65 4.00% 80 8.75% 51 2.56% 66 4.17% 81 8.99% 52 2.63% 67 4.35% 82 9.27% 53 2.70% 68 4.55% 83 9.58% 54 2.78% 69 4.76% 84 9.93% 55 2.86% 70 5.00% 85 10.33% 56 2.94% 71 7.38% 86 10.79% 57 3.03% 72 7.48% 87 11.33% 58 3.13% 73 7.59% 88 11.96% 59 3.23% 74 7.71% 89 12.71% 60 3.33% 75 7.85% 90 13.62% 61 3.45% 76 7.99% 91 14.73% 62 3.57% 77 8.15% 92 16.12% 63 3.70% 78 8.33% 93 17.92% 64 3.85% 79 8.53% 94 or older 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.
In the 2008 Economic Statement, a temporary 25% reduction in these limits was proposed. Canada Revenue Agency has posted some questions and answers regarding this proposal.[3]
In-Kind Withdrawals
It is possible to withdraw a security from a registered fund "in-kind:" that is, without selling it first.[4] 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[5] 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
References
- ↑ Canada Revenue Agency, IC 78-18R6 Registered Retirement Income Funds, March 6, 2002. Expanded for ages from 50 to 70.
- ↑ Ibid.
- ↑ Canada Revenue Agency, Important Notice Economic Statement - Proposed Measure for Annuitants of Registered Retirement Income Funds (update), viewed February 26, 2009.
- ↑ TaxTips.ca, Making "in-kind" withdrawals from an RRSP or a RRIF, viewed March 6, 2009.
- ↑ Withholding Tax on Payments from a Registered Retirement Income Fund (RRIF), viewed February 6, 2012.
