A RRIF (Registered Retirement Income Fund) is a Canadian retirement vehicle designed to pay you income after retirement, typically created by converting an RRSP.
? What is a RRIF?
A RRIF is essentially the “decumulation phase” of an RRSP:
- You transfer your RRSP into a RRIF (usually by the end of the year you turn 71)
- The investments stay tax-deferred
- You must withdraw a minimum amount each year, which is taxable
? Key Features
1. Tax-Deferred Growth
- Investments inside the RRIF continue to grow tax-free
- You only pay tax when you withdraw funds
2. Mandatory Withdrawals
- Each year, you must withdraw at least a minimum percentage
- The percentage increases as you age
Example:
- Age 65 → ~4.00%
- Age 71 → ~5.28%
- Age 80 → ~6.82%
- Age 90 → ~11.92%
3. Flexible Income
- You can withdraw more than the minimum if needed
- Useful for:
- Supplementing pension income
- Managing tax brackets
- Funding lifestyle needs
4. Investment Control
- A RRIF can hold:
- Stocks
- Bonds
- Mutual funds
- ETFs
- You (or your advisor) control how it’s invested
? Tax Treatment
- All withdrawals are fully taxable as income
- No withholding tax on minimum withdrawals
- Withholding tax applies to withdrawals above the minimum
? Estate Planning Uses (Important for your work)
A RRIF is highly relevant in estate planning:
✔ Named Beneficiaries
- You can name:
- A spouse (tax-deferred rollover)
- Children or others (taxable on death)
✔ Spousal Rollover
- If left to a spouse:
- RRIF transfers tax-free
- Continues as their RRIF or RRSP
✔ Avoiding Probate
- If a beneficiary is named:
- Funds pass outside the estate
- Avoid Ontario Estate Administration Tax (probate fees)
? Risks / Pitfalls
- Large RRIF → large taxable income in later years
- On death (if no spouse rollover):
- Entire RRIF is deemed income in final tax return
- Can create a significant tax liability
? Example
- RRIF value: $800,000
- No spouse, left to children
? Entire $800,000 is added as income in the year of death
? Could result in $300,000+ in taxes depending on rates
? Strategic Uses
- Income smoothing in retirement
- Pension splitting (with spouse)
- Estate planning with beneficiary designations
- Gradual drawdown to reduce terminal tax hit
? Bottom Line
A RRIF is:
- A required retirement income vehicle
- A tax-deferral tool (not tax-free)
- A key estate planning asset
Brian Madigan LL.B., BrokerTop of Form