A RRIF is an investment plan, established in accordance with Government of Canada requirements, into which you can transfer registered funds (usually your RRSP) without tax liability to establish a source of retirement income.
Some RRIFs are similar to continuing an RRSP beyond age 71, with the exception that you must take some taxable income from the RRIF. You can choose any payment level, as long as the total each year is at least equal to the minimum annual amount. There is no maximum payment level.
With many RRIFs you can vary your annual payments above the minimum amount to meet your needs. Obviously the higher the payments, the sooner your funds will be depleted. RRIFs can continue for the lifetime of the holder.
Minimum Annual Payments
You don't have to take any payment from a RRIF in the calendar year it is first funded. In subsequent years, the minimum annual payment changes annually, based on your age and the total value of the RRIF at the beginning of the year.
In some cases, it makes sense to elect to base your minimum RRIF payment on your spouse's birthdate. You must make this election when the RRIF is created:
- If you choose the age of a younger spouse¹, your minimum payment will be lower; much lower when your spouse is younger than you.
- If you select the age of an older spouse, your minimum payment will be higher without triggering withholding tax at source.
- If you have RRIFs based on the same birthdates, when one spouse passes away the survivor can combine the two RRIFs into one, rather than having to continue with two RRIFs.
- If you didn't make this election when you applied for your RRIF, or you marry later, you can transfer your RRIF to a new RRIF based on your younger spouse's age.
¹Spouse includes a common-law or same-sex partner.
Minimum Payment, Age Less Than 71
If your age (or your spouse's age if you have elected) is less than 71 at the beginning of the year, the minimum payment is calculated by subtracting the age at that time from 90, and dividing the result into the value of the RRIF at the beginning of the year. This formula produces an increased payment each year.
Minimum Payment, Age 71 to 77
If the age at the beginning of the year is from 71 to 77, the minimum payment depends on whether the RRIF was first funded before or after January 1, 1993.
The percentages in the first column below apply to RRIFs first funded before January 1, 1993, and to which:
- no additional RRSP funds have been added after that date, and
- no funds have been transferred from another RRIF first funded after that date.
The second column applies to RRIFs first funded after January 1, 1993, or a previous RRIF that receives funds from either of the above sources after that date.
All calculations are based on the total value of the RRIF at the beginning of the year.
| Age | All RRIFs 2015+ | Pre-1993 RRIFs - Prior to 2015 | Post-1992 RRIFs - Prior to 2015 |
|---|---|---|---|
| 71 | 5.28 % | 5.26 % | 7.38 % |
| 72 | 5.40 % | 5.56 % | 7.48 % |
| 73 | 5.53 % | 5.88 % | 7.59 % |
| 74 | 5.67 % | 6.25 % | 7.71 % |
| 75 | 5.82 % | 6.67 % | 7.85 % |
| 76 | 5.98 % | 7.14 % | 7.99 % |
| 77 | 6.17 % | 7.69 % | 8.15 % |
Minimum Payment, Age More Than 77
From age 78 on, the following percentages are applied to the value of all RRIFs at the beginning of the year, based on the age at that time:
| Age | Percentage | Age | Percentage |
|---|---|---|---|
| 78 | 6.36 % | 87 | 11.33 % |
| 79 | 6.58 % | 88 | 10.21 % |
| 80 | 6.82 % | 89 | 10.99 % |
| 81 | 7.08 % | 90 | 11.92 % |
| 82 | 7.38 % | 91 | 13.06 % |
| 83 | 7.71 % | 92 | 14.49 % |
| 84 | 8.08 % | 93 | 16.34 % |
| 85 | 8.51 % | 94 | 18.79 % |
| 86 | 9.99 % | 95 or older | 20.00 % |
Withholding tax*
Income tax may be deducted from RRIF payments. The withholding tax only applies to the portion of a RRIF payment in excess of the annual minimum. However, it applies to the full amount of any payments taken in the same calendar year your RRIF is opened.
| RRIF Withholding Tax Table | |
|---|---|
| Withdrawal | Tax rate** |
| Up to $5,000 | 10.00 % |
| $5,000 to $15,000 | 20.00 % |
| Over $15,000 | 30.00 % |
* Source - CRA Tax Bulletin
** Applies to all provinces except Quebec.
At your request, your RRIF provider can withhold more tax than the minimum required. This can be a convenient way of ensuring that sufficient tax is being deducted at source to fend off quarterly income tax installment payments.
Estate Considerations
RRIFs also offer simplicity in estate planning. If you die, your spouse or partner can continue to receive income from your RRIF or the account can be transferred tax-free to their RRIF or RRSP. Or, the remaining balance can be paid to your estate or beneficiary.
Investment Choices
Like RRSPs, RRIFs come in all shape and sizes. Because they can be customized to meet your retirement income needs, your first step should be to contact our office for more information.