What Is RRIF (Registered Retirement Income Fund)?
An account you convert your RRSP into by December 31 of the year you turn 71. Provides a regulated annual income stream in retirement, with minimum withdrawals taxed as income.
Definition
A Registered Retirement Income Fund (RRIF) is the most common vehicle Canadians use to draw down their RRSP savings in retirement. By law, your RRSP must be converted to a RRIF, annuity, or cashed out by December 31 of the year you turn 71. A RRIF retains your investment flexibility, but the government requires minimum annual withdrawals starting the year after conversion. The minimum withdrawal percentage is age-based and increases each year (e.g. approximately 5.28% at age 72, rising to 20% at age 95 and older). All RRIF withdrawals are added to your taxable income for that year and taxed at your marginal rate. Unlike an RRSP, no further contributions can be made to a RRIF. Proper RRIF planning can reduce taxes by spreading withdrawals across low-income years.
Formula
Example
You convert your $500,000 RRSP to a RRIF at age 71. At age 72, the minimum withdrawal rate is approximately 5.28%, so you must withdraw at least $26,400. This amount is added to your taxable income for that year.