A Registered Retirement Income Fund (RRIF) lets you convert your Registered Retirement Savings Plan (RRSP) and certain supplemental pension plans into retirement income.
A RRIF is like an RRSP "extender." Your savings continue to grow tax-free, but withdrawals are taxable.
You have to withdraw a minimum amount each year starting the year after you transfer your investments into the RRIF. The minimum amount is calculated by the Canada Revenue Agency (CRA) based on your age and the value of your RRIF.
You can choose how often and how much you want to withdraw from your RRIF as long as you withdraw the required minimum each year.
The only way to contribute to a RRIF is by transferring investments directly from:
Investing rules for RRIFs are generally the same as for RRSPs.
If you have RRSP savings, you have to transfer them to a RRIF before the end of the calendar year you turn 71. You're also free to set up a RRIF any time before then if you'd like to.
You can have assets transferred directly to your RRIF from:
You can choose how much you want to withdraw and make changes to this amount as long as you withdraw the minimum amount required by law each year.
The minimum withdrawal amount changes every year. It's calculated using a formula established by the Canada Revenue Agency (CRA). The formula is based on your age or your spouse's age and the total value of the RRIF at the beginning of the year.
As far as the law is concerned, you can withdraw as much as you like from your RRIF. Keep in mind that the more you withdraw, the faster your RRIF savings will be used up.
Whether you need it or not, you have to withdraw the required minimum amount from your RRIF. However, nothing's stopping you from saving outside your RRIF once you've made the mandatory withdrawals.
You can invest the excess portion of your post-tax withdrawal in a TFSA (Tax-Free Savings Account) up to your contribution limit. Investment income earned in your TFSA is tax-free, and so are withdrawals. Plus, there's no age limit for contributing.
TFSA withdrawals also don't affect income-tested benefits or credits like the Age Credit, Old Age Security benefits or the Guaranteed Income Supplement.
The value of all the assets in your RRIF on the date of your death becomes taxable income unless all or a portion of the value has been transferred to and included in the income of your legal or common-law spouse or any children or grandchildren who were financially dependent on you at the time of your death. The money from your RRIF can be transferred directly or indirectly to their RRSP or RRIF, or they can use it to buy an annuity. If your RRIF is transferred to other heirs, different rules apply.
To find out more, check out the Canada Revenue Agency (CRA) website.
Don't want to transfer your RRSP savings to a RRIF? Why not consider a life annuity or a term certain annuity?
Another option is to cash out your RRSP savings, but if you do, you'll be fully taxed on this withdrawal.