Making withdrawals from your RRIF
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A quick look at the rules for RRIF withdrawals
Two key decisions you have to make with a Registered Retirement Income Fund (RRIF) are how much money to take out and when. You can choose to make regular monthly, quarterly, semi-annual or annual withdrawals. All withdrawals are fully taxable.
Making the minimum withdrawal
You have to start withdrawing money from your RRIF in the year after you open it. The federal government sets the minimum amount you must take out of your RRIF every year. It's based on a percentage of the value of your RRIF.
Here's how it works:
- The minimum withdrawal rate increases as you get older.
- If your spouse is younger than you, you can use their age to calculate your minimum withdrawal. The lower the age, the lower the minimum withdrawal and the less income tax you'll pay on the withdrawals.
- All withdrawals are fully taxable.
If your spouse is younger than you, you can use their age to calculate your minimum withdrawal. This is a good strategy if you have other sources of income and want to leave your money in your RRIF for as long as possible.
How the minimum withdrawal is calculated
| 65 |
4.00% |
80 |
8.75% |
|---|
| 66 |
4.17% |
81 |
8.99% |
|---|
| 67 |
4.35% |
82 |
9.27% |
|---|
| 68 |
4.55% |
83 |
9.58% |
|---|
| 69 |
4.76% |
84 |
9.93% |
|---|
| 70 |
5.00% |
85 |
10.33% |
|---|
| 71 |
7.38% |
86 |
10.79% |
|---|
| 72 |
7.48% |
87 |
11.33% |
|---|
| 73 |
7.59% |
88 |
11.96% |
|---|
| 74 |
7.71% |
89 |
12.71% |
|---|
| 75 |
7.85% |
90 |
13.62% |
|---|
| 76 |
7.99% |
91 |
14.73% |
|---|
| 77 |
8.15% |
92 |
16.12% |
|---|
| 78 |
8.33% |
93 |
17.92% |
|---|
| 79 |
8.53% |
94+ |
20.00% |
|---|
When you reach age 94, the minimum withdrawal rate stays at 20% until your RRIF is used up.
You don't have to have a spousal RRIF or name your spouse as the RRIF beneficiary to use their age for your minimum withdrawals. But you must tell your financial institution that you're doing so before you make your first RRIF withdrawal. And you can't change your mind later.
If you take out more than the minimum withdrawal
You can take out as much as you need every year from your RRIF, but there are tax considerations.
Here's how it works:
- There is no maximum withdrawal limit.
- All withdrawals are fully taxable.
- If you take out more than the minimum withdrawal amount, you'll also pay withholding tax on the excess amount. Your financial institution will hold back an amount, based on the withholding tax rates, and pay it directly to the government on your behalf.
Withholding tax rates
| Up to $5,000 |
10% |
21% |
|---|
| Between $5,000 and $15,000 |
20% |
26% |
|---|
| More than $15,000 |
30% |
31% |
|---|
Even though withholding tax is deducted from withdrawals that exceed the minimum amount, you may still owe more tax later when you file your tax return. It depends on your total income and tax situation.
Taking your withdrawals "in kind"
If you don't need the income from your RRIF right away, you don't have to take your minimum withdrawal in cash. You may be able to transfer the investments directly to a non-registered account or Tax-Free Savings Account (TFSA) instead. This is known as an "in kind" withdrawal. It usually works best with mutual funds, stocks and bonds. A Guaranteed Investment Certificate (GIC) can be withdrawn in kind only if it is "transferable and assignable”.
Example
Let’s say your minimum withdrawal is $4,000. If your RRIF has $4,000 worth of mutual fund units, you could transfer those units to a non-registered mutual fund account.
Here's how it works:
- You avoid any redemption fees because you're not selling the units. But you may have to pay a transfer fee.
- You don't have to pay withholding tax because you're only withdrawing the minimum amount from your RRIF.
- Like any RRIF withdrawal, you'll have to include the $4,000 withdrawal in your income when you file your tax return.