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