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RRIF Payments
Several investors have some general questions and concerns about Registered Retirement Income Funds (RRIFs) and would like to know the best way to set up their RRIFs for the payments.
We have compiled a basic outline of RRIFs as well as a few basic guidelines that will help and educate you on how to withdraw income from your RRIFs.
What are Registered Retirement Income Funds (RRIFs)?
When an individual turns 71, they are no longer eligible to own a Registered Retirement Savings Plan (RRSP) and are left with 3 options or a combination for his or her RRSP:
- Cashing in the RRSP
- Purchase of Annuities
- Converting RRSPs to RRIFs
Cashing in the RRSP
When RRSPs are cashed in, the complete fair market value of the entire plan will be included in the plan holder’s income for that particular year of withdrawal and taxed at his or her marginal tax rate. This could mean a tax bite which is closed to 50% for many Canadians. So withdrawing from an RRSP would not be the preferable way to start out your retirement.
Purchase of Annuities
Since annuities pay a predefined amount of annual income over a specified number of years the amount paid would be based primarily on the interest rates prevailing at the time the annuity is purchased. The amount received yearly through an annuity will be taxed as income each year.
Converting RRSPs to RRIFs
RRIF payouts are the opposite of annual RRSP deductible contributions. There are certain maximum annual amounts that may be contributed to an RRSP and there are minimum RRIF withdrawals annually. The amount that is drawn from an RRIF is taxable each year.
Minimum Payments Required from an RRIF Annually
An individual’s age and the RRIF’s market value as of January 1st of the year shall determine the minimum amount one must withdraw.Minimum RRIF Payment Schedule
AGE
GENERAL
QUALIFYING RRIFs*
71**
0.073
0.052
72
0.074
0.055
73
0.075
0.058
74
0.077
0.062
75
0.078
0.0667
76
0.079
0.071
77
0.081
0.076
78
0.0833
0.083
79
0.085
0.085
80
0.087
0.087
81
0.089
0.089
82
0.092
0.092
83
0.095
0.095
84
0.099
0.099
85
0.103
0.103
86
0.107
0.107
87
0.113
0.113
88
0.119
0.119
89
0.127
0.127
90
0.136
0.136
91
0.147
0.1473
92
0.161
0.161
93
0.179
0.179
94 or older
0.200
0.200
* A qualifying RRIF is generally a Registered Retirement
Income Fund entered into before 1993.
** For ages below 71, the formula is 1 / (90 – age).
Maximum Withdrawal from RRIF Annually
There are no limits on the amount withdrawn from your RRIF each year. However, all capital withdrawn is completely taxable.
How are the RRIF Payments made to you?
The institution of the RRIF plan must make the minimum payments from an RRIF to you by the end of each year. Depending on your cash flow requirements, you may elect to have the payments made to you on a monthly, quarterly, twice a year or once a year basis.Do RRIF Payments in Canada qualify for the $2,000 pension credit?
If you are 65 years of age and plus, any amounts received from an RRIF would qualify for the pension credit. It should also be noted that if you simply de-register an RRSP then this would not qualify for the $2,000 pension credit. An RRSP has to be converted to a RRIF first then any income taken from the RRIF will qualify for the pension credit.
RRIF Payments received by an individual in Canada, as a result of your spouse passing away will also qualify as income for the $2,000 pension credit, regardless of what your age is at the time. If you qualify for the tax credit, but don’t need the deduction, this can be transferred to your spouse.For investors looking for conservative investments for RRIFs visit Guaranteedinvestments.com
The financial advisors at Guaranteedinvestments.com hold credentials and titles which include “Certified Financial Planner”, “Chartered Financial Analyst”, “Masters of Business Administration (MBA)” and “Certified Investment Manager”.
Investment products offered by Guaranteed Investments include but are not limited to: Guaranteed Investment Funds, Segregated Funds, Annuities and Insured Annuities, Guaranteed Withdrawal Benefit Plans and Guaranteed Lifetime Withdrawal Benefit Plans.
“The information and content on this website should not be viewed as financial advice nor should it be viewed as a solicitation for investment purposes. The information should be viewed as general information and does not replace the advice and recommendations of licensed and accredited advisors including financial planners, lawyers, trust advisors, accountants and other industry professionals. Investment product information is available in prospectuses and information statements and should be reviewed carefully before investing. Not all investments are guaranteed in value and unit values on certain investments will fluctuate.”
TS Wealth Inc.
1033 Bay Street, Suite 221
Toronto, Ontario,
Canada, M5S 3A5
