RRIF Basics

RRIFRRIF is an acronym that stands for Registered Retirement Income Fund.  A RRIF, like a RRSP, is a retirement fund that you establish with a financial institution, such as a bank, credit union, trust or insurance company, or through your full service or discount brokerage firm, and that is registered with the Canada Revenue Agency. Like an RRSP, the RRIF is the tax favoured environment or container, if you like, in which your investment is housed. In essence it is the income phase (or format) of your RRSP. Establishing a RRIF can be done at anytime, but must be done no later than in the year the individual turns 71 or his younger spouse or common-law partner 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.

You can slice up your RRSP and have more than one RRIF which can have advantages in certain circumstances. A RRIF can be self directed. The rules that apply to self-directed RRIFs are generally the same as those for RRSPs.

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Starting the year after the year you establish a RRIF, you must, according to CRA’s RRIF rules, receive a minimum income from the RRIF. The payout period under your RRIF is for your entire life. Your financial institution 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 selection, you cannot change it.

You can withdraw more, but not less than the minimum. The excess amount withdrawn cannot be applied as part of the minimum for the next year. Therefore the annual minimum income must be taken yearly.

All payments from a RRIF are subject to income taxation. Enter these payments as income on your tax return for the year you receive them.

Here’s how the minimum payout structure works:

In Year

When your

Age is

Minimum

Annual

Withdrawal (%)

In Year

When your

Age is

Minimum

Annual

Withdrawal (%)

55

2.86%

75

7.85

56

2.94

76

7.99

57

3.03

77

8.15

58

3.13

78

8.33

59

3.23

79

8.53

60

3.33

80

8.75

61

3.45

81

8.99

62

3.57

82

9.27

63

3.70

83

9.58

64

3.85

84

9.93

65

4.00

85

10.33

66

4.17

86

10.79

67

4.35

87

11.33

68

4.55

88

11.96

69

4.76

89

12.71

70

5.00

90

13.62

71

7.38

91

14.73

72

7.48

92

16.12

73

7.59

93

17.92

74

7.71

94+

20.00

 

 

RRIF rates have changed in the past so a RRIF rate table can be different depending on the start of the RRIFs.

As a matter of fact, the 2015 budget indicated that effective immediately, a 71 year old will only need to withdraw 5.28 per cent of their plan’s value as of the first of the year. That percentage increases each year at a slightly faster rate than previously demanded. However, the minimum annual amount will always be less than it had been under previous rules, until it hits a maximum of 20 per cent at age 95.

RRIF rules call for a withholding of tax for payments made above the minimum annual payment. penalty is calculated by dollar amount exceeding the minimum withdrawal amount. Up to $5000 over the minimum is subject to a 10% withholding, between $5000 and $15000 at 20% and any amount above $15000 at a rate of 30%. This withholding is remitted on your behalf to CRA and credited towards taxes owning in the year the income is taken. Once you file your tax, the amount either 

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