Opening a RRIF

6 steps to opening a RRIF

1. Review your investment strategy

When you convert your RRSP to a RRIFRRIF See Registered Retirement Income Fund.+ read full definition, it may be a good time to reconsider your investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition strategy. For example:

  • If you retire early and expect you’ll need income for 20 to 30 years in retirement, you may want to allocate a portion of your RRIF to investments with a higher growth potential over the long termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition, such as equity mutual funds, ETFs or stocks. However, these investments also have higher risk.
  • If security is your main concern after retirement, you may want to put more of your money in guaranteed investments like GICs or fixed incomeFixed income An investment that pays regular income to you. Examples: Guaranteed Investment Certificates, Canada Savings Bonds and types of other bonds.+ read full definition investments like government bonds.

Plan and monitor your RRIF investments carefully. If you lose money investing, it can be difficult to make up these losses if you’re no longer working. Learn more about planning for retirement.

2. Shop around to compare fees and plans

You can set up a RRIF at most financial institutions, investment firms and insurance companies. Ask:

  • What are the fees?
  • Are there penalties to change the withdrawal frequency?
  • Can you make extra withdrawals at any time?
  • What investment options are available?

3. Choose a RRIF and financial institution

You don’t have to open the RRIF at the same institution where you hold your RRSP. If you want a variety of investment optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition and are comfortable making investment decisions, talk to investment firms about opening a self-directed RRIF. If you have a large amount of retirement savings and would like your RRIF to be managed by a professional money manager, ask about a fully managed RRIF.

4. Choose a beneficiary and successor annuitant

Decide who you want to inherit your RRIF savings. If you don’t choose a beneficiaryBeneficiary The person(s), institution, trustee or estate you choose to give money, property or other benefits when you die. You may name beneficiaries in your will, insurance policy, retirement plan, annuity, trust or other contracts.+ read full definition, your RRIF will become part of your estateEstate The total sum of money and property you leave behind when you die.+ read full definition when you die, and it may be subject to income tax and probate fees.

If you choose your spouse as beneficiary, you can also name them as the “successor annuitant”. That means they can take over your RRIF and receive your payments automatically after your death.

5. Plan your withdrawals

You must take out a minimum amount each year. You can choose regular monthly, quarterly, semi-annual or annual withdrawals.

Make sure you will have cash available when you need it. You want to avoid any penalties for cashing in an investment early or selling investments at a time when they have lost value.

For example, if you have a guaranteed interest RRIF, stagger the terms of your investments. That way, you will have money maturing each year. If you have a self-directed RRIF, hold some investments that are easy to turn into cash like short-term GICs or money market funds.

6. Review and sign the contract

Read all papers carefully. This includes the application form and your RRIF contractContract A binding written or verbal agreement that can be enforced by law.+ read full definition. Make sure you understand the fees and rules for withdrawing money from your RRIF.

Caution

Plan your investments so you have cash available when you need it. Try to avoid paying a penalty for cashing in an investment early or selling investments at a time when they have lost value.

Fast fact

If you have a self-directed RRSPSelf-directed RRSP A retirement savings plan that lets you choose from a wide range of investments. You can choose from a wide range of investments or work with an advisor. There are rules about how much you can save each year, and you don’t pay tax on the money that stays in your plan.+ read full definition, you can convert it to a self-directed RRIFSelf-directed RRIF A retirement plan that you use to create income after you retire. You can choose from a wide range of investments or work with an advisor. There are rules about how much you take out each year, and you don’t pay tax on the money that stays in your plan.+ read full definition without having to sell any of your investments.

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