What You Need to Know About RRIF’s
Converting your RRSP to a RRIF
You must convert your RRSP to a RRIF by the end of year you turn 71. However, you can convert prior to 71 depending on timing and need for retirement income.
Making withdrawals from your RRIF
You are required to begin making withdrawals the year after you have converted to a RRIF. This is referred to as the yearly minimum amount. This minimum amount is calculated using two factors; age and previous year end market value of the RRIF. Refer to the table below to see the calculation and amounts for minimum withdrawal rate each year (age is as of January 1st). You can also elect your payment rate to be based on your spouse or common-law partner should their age be lower than yours.
To calculate any amount age 70 and under use the formula:
1/(90 - age)
Fo example, at age 65:
1/(90 - 65) = 4.00%
Withholding tax on RRIF payments
Each year you are required to take out the minimum payment based on the table above. However, you can elect to take out more each year as you need. All withdrawals are fully taxable and reported as income the year they are withdrawn. Your financial institution is not required to withhold taxes on your minimum payment, however any withdrawal above the minimum is subject to the follow withholding tax.
Withholding tax rates above the minimum (except in Quebec)
Up to $5,000
Between $5,000 and $15,000
More than $15,000
10%
20%
30%
For taxpayers in Quebec please refer here.
It is important to understand that when you file your tax return you may owe more tax than what’s withheld, depending on your total income and tax situation.
Death of an RRIF annuitant
Since a RRIF is a registered account, the government allows you to designate a beneficiary. Generally there are two scenarios that would play out in the event of a RRIF annuitant’s death.
If the surviving spouse or common-law partner is designated as the beneficiary, they will be eligible to transfer the amount to their own RRIF without any tax consequences.
If any other person is designated as beneficiary, then the RRIF would have to be liquidated and claimed as income on the deceased annuitants final tax return.
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