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What should I think about as I spend my RRIF savings?

 

With a Registered Retirement Income Fund (RRIF), you have to withdraw a minimum amount each year. Beyond that, what you take out is up to you. The choices you make, of course, will have a big effect on your quality of life. Before you decide, consider three things:

1.      How can I make my money last?

2.      How can I defer or reduce taxes?

3.      How can I keep my savings growing?

Learn more now

What happens if I take out more than the minimum from my RRIF?

Let’s say you have $500,000 in a RRIF when you retire at age 65. This chart shows two plans:

  • Plan A: You take out just the minimum withdrawal allowed each year.
  • Plan B: You take out more in the first five years. That’s because minimum RRIF withdrawals are lower until age 70.

See what that one change does to your financial picture by age 90.

Age

Plan A: Minimum yearly withdrawal

Money left in RRIF at year- end

Plan B: Higher yearly withdrawal

Money left in RRIF at year- end

65

$20,000

$504,000

  $35,000

$488,250

66

  21,002

  507,148

    34,178

  476,776

67

  22,051

  509,352

    33,374

  465,572

68

  23,155

  510,507

    32,590

  454,631

69

  24,310

  510,506

    31,824

  443,947

70

  25,525

  509,230

    31,076

  433,514

75

  35,510

  437,693

    30,230

  372,614

80

  32,988

  361,218

    28,083

  307,510

85

  30,501

  278,002

    25,966

  236,667

90

  27,978

  186,313

    23,818

  158,610

Note: This chart assumes the money will grow 5% a year and that withdrawals are made on an annual basis in January, with 0% tax withheld.

With Plan A, your withdrawals are quite a bit lower in the first five years, and your money lasts longer. But, your income goes up from age 75 on. The challenge is to keep your costs low until you get more income.

Under Plan B, you get more income at first. But, after you go back to minimum withdrawals, your income starts to fall behind Plan A. In fact, you get about $5,000 less each year after age 75. And, you have paid more tax over the years. Only you can decide if getting the extra income early balances out these drawbacks.

Remember: Your withdrawal choices will have a big effect on your RRIF income.

You may find you need expert advice. You can most likely get help from the adviser who set up your RRIF. Work with them to make sure your choices reflect your financial goals, time frame, tolerance for risk, and income needs.

Tip: If you have a lot of retirement savings or a complex financial situation, you may want a fully managed RRIF. Here, a personal money manager creates a custom portfolio to fit your financial goals and situation. Costs are in the same range as the administrative fees of a mutual fund.

Learn more

  • 50Plus.com: This is an online reference for Canadians over the age of 50. It’s also the online home of CARP, Canada's largest 50+ advocacy group. Here you can also find CARPNews and 50Plus magazine, Canada's largest seniors’ publication.
  • Seniors Canada On-Line: This Government of Canada website provides links to information about programs and services for seniors, estate planning, taxes, pensions, retirement planning, and more.
  • Seniors 55 and up: This section of the Canada Revenue Agency website offers information on topics and services of special interest to seniors.