Registered Retirement Income Fund (RRIF)
How to get income once you retire
As you approach retirement, it’s a good idea to start thinking about your options for converting your Registered Retirement Savings Plan (RRSP) into retirement income. Government regulations require you to select an option by the end of the year in which you turn 71, and to begin withdrawing funds the following year. By far the most popular choice among Canadian retirees is the Registered Retirement Income Fund (RRIF).
What is a RRIF?
A RRIF is a registered investment account that’s used to provide for income rather than savings. In other words, you don’t make contributions to your RRIF; instead, you take the money that you’ve invested in your RRSP and put it into your RRIF to fund your retirement.
As with an RRSP, earnings on investments inside your RRIF are tax-sheltered until they are withdrawn. By converting your RRSP into a RRIF, you avoid cashing in your RRSP for a lump-sum payment, which may result in a significant tax hit when you retire.
You have until December 31 of the year you turn 71 to convert your RRSP into a RRIF, and you are required to start making withdrawals the following year. There are no annual limits on how much you can withdraw from your RRIF, but there are government-mandated annual minimums, expressed in percentage terms.
Keep in mind that the income you receive from your RRIF will affect the amount of taxes you pay and how much you are entitled to receive in government benefits.