Key Features of RRIFs

Here are some of the top features to consider when converting a Registered Retirement Savings Plan (RRSP) to a Registered Retirement Income Fund (RRIF).

Income

You can set yourself up to receive income in a way that best suits your needs – whether you want a regular stream of income or a lump sum amount once a year. You're not required to make a withdrawal in the year in which you open your account, but in the following calendar year you'll need to begin withdrawing at least the government-determined minimum amount annually.

Withdrawals from a RRIF are fully taxable as income at your marginal tax rate in the calendar year they are received. Depending on your individual circumstances, a portion of the withdrawal amount may be eligible for the federal and provincial/territorial Pension Income Tax Credit. Check with a tax professional for more information.

Sufficient cash must be available on your withdrawal dates as a debit balance puts your RRIF account at risk of losing its tax-sheltered status.

Flexibility

While you can withdraw cash whenever you want, you can choose to receive amounts monthly, quarterly, semi-annually or annually – and you can pick the investments you wish to have your withdrawals taken from. Make arrangements to deposit your money directly into your RBC Direct Investing account, your RBC Royal Bank account or an account at another financial institution.

If you don't need the cash, your minimum requirement withdrawals can be made in "in kind," meaning securities can be withdrawn at their fair market value and transferred to a non-registered account without being sold. You'll need to include the value of the withdrawal as income on your tax return.

If you'd like to divert a portion of your withdrawn funds to another registered account (such as a TFSA or RESP, for example), you must first move the cash into a non-registered account and make your contribution from there (if you have the contribution room).

Taxes are not generally withheld from your minimum withdrawals, but if you withdraw more than your annual minimum, RBC Direct Investing is required to withhold and remit tax on the excess amount. To manage future taxes owing, you may elect to have tax withheld from your annual minimum withdrawals or choose to have a higher tax rate applied to your excess withdrawal amounts (a pay more now, less later strategy). Withholding taxes are reported on a T4RIF slip after the end of each calendar year to help with your tax return. Please contact a tax professional for more information.

Tax-deferred growth

While you must make your annual minimum withdrawals, RRIFs allow your remaining retirement savings to stay invested and continue to grow on a tax-deferred basis until withdrawn.

To learn more, check out 5 Things to Know About RRIF Withdrawals and How to View Your RRIF Information and Make Changes