Understanding RRIFs: The Basics

You've spent years planning your retirement, and now you're ready to live it. A Registered Retirement Income Fund (RRIF) is a popular option for providing retirement income, as your investments can continue to grow on a tax-deferred basis until you withdraw them.

What is a RRIF?

A RRIF is a registered account that provides you with income drawn from the investments and savings in your Registered Retirement Savings Plan (RRSP). RRIFs are similar to RRSPs in that they offer multiple investment options, allow for tax-deferred growth of qualified investments and funds are taxable as income when withdrawn. Unlike RRSPs, however, you can't make new contributions to a RRIF – you can only transfer funds from an RRSP or another RRIF.

You can convert your RRSP (or a portion of it) into a RRIF at any age you wish, but you must transfer all your RRSP funds into a retirement income option by December 31 of the year in which you turn 71.

Consolidating multiple RRSPs into a single RRIF can make it easier to keep track of your withdrawals. At RBC Direct Investing, you have the benefit of being able to view your RRIF information online, including your annual minimum withdrawal requirement. You can even make changes and see your details updated online so you're always in the know.

Minimum Withdrawal Requirement

In the year you open your RRIF account, there is no minimum withdrawal requirement, but in the following calendar year you must start withdrawing from your account annually.

The required minimum withdrawal is calculated at the beginning of every calendar year, and is based on your account's market value and a prescribed percentage factor depending on your age (as the annuitant) or your spouse or common-law partner's age (if elected at the time the plan was set up).

If you have a younger spouse or common-law partner and your aim is to minimize withdrawal amounts, you can use your spouse's age to calculate your minimum requirement. Withdrawals may be less, with correspondingly lower income taxes payable on the withdrawals. You don't have to have a spousal RRIF in place to set this up, but you must call 1-800-769-2560 or send us a secure message (click on Customer Support at the top of your page on the site) to advise us of this strategy before your first withdrawal.

You can take out more than your minimum requirement, but RBC Direct Investing will apply (and remit to the CRA) withholding tax on cash amounts or in-kind withdrawals that exceed your annual minimum requirement. Withholding tax will not be applied if you only withdraw your minimum requirement in a year, unless you request that we do so.

You can have more than one RRIF account, but you must withdraw at least the minimum annual amount from each of your accounts.

Have a RRIF account at RBC Direct Investing and want to know what your minimum requirement is? Check out How to View Your RRIF Information and Make Changes.

How do Spousal (or common-law partner) RRIFs work?

If you had a Spousal RRSP and you've converted to a RRIF, the RRIF is considered a Spousal RRIF. Withdrawals are made by the annuitant (owner) of the plan, not the spouse who contributed to the RRSP. If you've contributed to a spousal RRSP in the same year, or in either of the two preceding taxation years of a RRIF withdrawal, be aware that the withdrawal will be taxed in your hands rather than your spouse's – something known as "attribution" of income. Similarly, if the annuitant withdraws more than the minimum amount, the excess will be included in your income and subject to tax. Attribution rules don't apply in the event of divorce.

To reduce your household's overall tax bill, you and your spouse may jointly elect to split your RRIF income (a strategy known as pension income splitting), which can be advantageous if one spouse is in a lower tax bracket. The individual transferring income is required to be 65 or older and can allocate up to 50 per cent of their RRIF income to their spouse (both must be Canadian residents). Certain types of pension income other than RRIFs are also eligible. Visit www.canada.ca to learn more.

To Open a RRIF

Ready to convert your RRSP or pension funds into a self-directed RRIF? Access the online application here.

Learn more about RRIFs in Key Features of RRIFs, and explore more investing guides in the Investing Academy.

The information provided in this article is for general purposes only and does not constitute personal financial or tax advice. Please consult with your own professional advisor to discuss your specific financial and tax needs.