Catch my RRIF?

2 minutes
December 9, 2021

When time comes to cash in your RRSP, why not transfer it to a RRIF, a registered retirement income fund? Here’s why!

RRIFs are similar to RRSPs in that they enable you to grow your savings tax-free. The difference is that instead of contributing to a RRIF, you must take your money out.

There is no age requirement when it comes to transforming RRSPs to a RRIF. However, most people tend to do it at retirement.

Investment Planning

RRIFs let you continue to manage your investments, just like with your RRSPs. You can keep the same ones or change them, and that will depend on your investor profile at the time.

Plus, since your investments remain registered, they continue to grow tax-free—an advantage you’d lose if you simply cashed in your RRSPs. So, be sure to ask your financial institution to automatically transform your RRSPs into RRIFs before the deadline.

Minimum Withdrawal

By December 31 of each year, you will have had to withdraw a specific amount from your RRIF. This amount will be added to your income and will therefore be taxable.1.

Know that there is no maximum withdrawal limit when it comes to RRIFs.

Before and After Age 71

Up to age 71, the minimum withdrawal is calculated according to the value of the RRIF at the start of the year as well as your age—or that of your spouse in the case of a spousal RRIF.

By the way, it’s to your advantage to use the younger of your two ages when calculating the minimum withdrawal.

At 71, you’re legally obligated to liquidate your RRSPs. See this as an opportunity to transfer them to your RRIF.

As of age 71, the minimum withdrawal amount is equal to a percentage of the fund’s value on January 1. This percentage increases every year until age 95.

Age / Percentage

71: 5,28 %

80: 6,82 %

90: 11,92 %

Starting at 95: 20 %

 

 

Administrative Flexibility

You can ask your financial institution to schedule automatic withdrawals, whether annually or monthly. You can always adjust them as you see fit. You can also withdraw an additional amount when need be (a trip, perhaps?).

Basically, it’s probably a good idea to transfer your RRSPs to a registered retirement income fund, if you catch my RRIF.

1. Your marginal tax rate is the amount of tax you must pay on each extra dollar of income. For example, in 2021, it was 37.12% for taxpayers who declared income between $49,020 and $70,000.