When you retire, you need to withdraw money from the retirement savings in your registered retirement savings plan (RRSP). This is where the registered retirement income fund (RRIF) comes in.

You can convert your registered retirement savings plan (RRSP) plan to a registered retirement income fund and receive periodic income from the fund. Your deposits are not taxable. However, your RRIF income payments are taxable. Here’s everything you need to know about the RRIF: how and when to open one, the rules of the RRIF, and how the RRIF works.

How does a Registered Retirement Income Fund work?

When you turn 71, you must close your registered retirement savings plan. While you can take a lump sum amount out of the RRSP, this may not be the most tax-efficient option. You will pay tax on the money. A better option would be to convert your RRSP to a RRIF and withdraw your money in installments. 

Growing tax free

The registered retirement income fund is like an extension of your RRSP. Your money in the account continues to grow tax-free in the RRIF until you receive payments from the account.

The RRIF is similar to the RRSP in many ways. It is a tax-sheltered account, and you can invest in allowable financial assets such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), options, guaranteed investment certificates (GICs), etc.

The RRIF is designed to provide you with retirement income for life. There is one stipulation to remember: you must withdraw the annual minimum amount from your RRIF. This starts the year after you open the account.

The minimum annual withdrawal amount from your registered retirement income fund depends on your age or your spouse/common-law partner’s age, if applicable. 

 

Transferring funds to your Registered Retirement Income Fund (RRIF)

Your RRSP is not the only account you can transfer to a RRIF. Other accounts you can transfer funds from are:

  • another RRIF
  • a Specified Pension Plan (SPP)
  • a Deferred Profit Sharing Plan (DPSP)
  • a Registered Pension Plan (RPP)
  • a pooled retirement pension plan known as a PRPP
  • a spouse, former spouse, or common-law partner’s unmatured RRSP
    • this happens due to a under a decree, order or judgment of a court, or under a written separation agreement
    • it can also be due to settling rights on or after the breakdown of your relationship

What about lump sums and spousal plans?

If you want to transfer a lump sum from an SPP, DPSP, or RPP to your RRIF, you must be a member of the plan.

Otherwise you must be entitled to receive the payment from your current or former spouse or common-law partner who was a member of the SPP under certain conditions.

Transferring from your current or former spouse or common-law partner’s SPP, DPSP, or RPP to your RRIF applies in two cases:

  • one is if the person is dead and you are their beneficiary
  • you are living separately and entitled to receive the lump-sum amount from their pension plan.

Where to open a RRIF

Typically, you can open a registered retirement income fund with your RRSP provider. It is also possible to transfer your RRIF to a different provider. Your RRIF provider can be a traditional bank, a credit union, an investment company, a trust, or an insurance company. 

You can also open a self-directed RRIF with an online brokerage. With a self-directed RRIF, you can manage your investment portfolio and choose which assets you invest in.

Manage your RRIF with a Canadian online broker

Self-directed RRIFs with an online broker allow you to control your investment assets while growing your retirement savings. It is essential that you know how to select investment assets and re-balance your portfolio if you want to manage your RRIF. 

You can manage your investment assets in a RRIF using these online brokers in Canada:

Questrade

Questrade self-directed investing allows you to trade and invest in varying products in your RRIF. In your RRIF, you can buy ETFs without paying fees. However, stocks and selling ETFs will cost you about $4.95 to $9.95. 

To open a RRIF, you need to provide your personal details such as your address, SIN, and government ID number. You also have the option to select a beneficiary or successor for your RRIF account.

National Bank Direct Brokerage

National Bank Direct Brokerage (NBDB) is the direct brokerage arm of National Bank. To open a RRIF, you will fill out an application form. You can buy ETFs and trade stocks for free in your RRIF. No commission or minimum amount is required.

Qtrade

To open a RRIF with Qtrade as an exiting client, you’ll need to complete the RRIF application form and submit it, and the Qtrade team will create your account. If you do not have any brokerage account with Qtrade, you need to open an account online and complete the RRIF supplementary application form.

Like your RRSP, you can buy options, stocks, and mutual funds in your RRIF with commission fees of about $6.95 to $8.75 or zero-trades on specific US and Canadian listed exchange-traded funds (ETFs). 

Manage your RRIF with a Canadian robo-advisor

Robo-advisors provide a middle ground between a managed portfolio and fully automated investments. By investing in exchange-traded funds, and indexed funds, you can continue to grow your RRIF investments using robo-advisors.

If you already have a RRSP account with robo-advisor, you can convert your plan to a RRIF any time or the year you turn 71. Your plan’s management fees would still be lower than traditional banks, and your portfolio will be re-balanced as your retirement status changes. 

Investment platforms that can help with RRIFs

Wealthsimple

You can open a RRIF account or a spousal RRIF account through Wealthsimple. When you convert your RRSP to a RRIF, if you decide to withdraw in the same conversion year, Wealthsimple will withhold tax and remit it to the Canadian government. The tax rate varies by withdrawal amount and province.  

The management fees on your account are similar to your RRSP. The management fee range is from 0.4% to 0.5%.

Questwealth Portfolios by Questrade 

Questrade’s managed investing platform allows you to open a RRIF. After you open a RRIF, you can transfer your RRSP or another RRIF to your account.  Questwealth Portfolios has low management fees from 0.2% to 0.25%, with additional management expense ratio (MER) fees up to 0.35%. 

National Bank Direct Brokerage Investcube Program

The Investcube Program is National Bank’s robo-advisor for automated and expert-built portfolios of exchange-traded funds. You can open and manage your RRIF with the Investcube Program. The robo-advisor re-balances your investment portfolio automatically.

RRIF withdrawal rules

The RRIF minimum withdrawal rule ensures that you use up your saved-up retirement funds and have enough to sustain yourself in retirement. The Canada Revenue Agency (CRA) considers your RRIF withdrawals as income, and you must include this income when filing your taxes. 

You can withdraw more than the minimum amount, but when you do, your RRIF issuer will withhold and remit taxes directly to the CRA. In retirement, your marginal tax rate and applicable taxes are expected to be relatively lower, so this should not throw you off.

If you need more information about your RRIF, you can find the details in your T4RIF Statement of income from a Registered Retirement Income Fund. 

The RRSP vs RRIF

The RRSP and RRIF are complementary accounts. A RRSP is for saving and putting money aside for retirement. A Registered Retirement Income Fund is for receiving retirement income from your savings.

Your RRSP provider will transfer the money in your RRSP to a RRIF without tax implications.The great part about the RRIF is that you can keep investing and growing your savings in the account.

Similar to the RRSP, your investment income in the account is tax-free until you withdraw it.  If you do not need the money from your RRSP, you can defer converting to a RRIF until later.

The difference between the LIF and the RRIF

When it comes to withdrawing pension savings in retirement, the life income fund (LIF) and RRIF allow you to keep investing your savings and receiving income at the same time.

If you have locked-in pension plans from a former employer, you can convert them to a LIF. Generally, you cannot access the funds in locked-in pension plans before you transfer the money into a LIF.

Another key difference is the withdrawal limits.

  • With a RRIF, you can withdraw any amount above the set minimum limit
  • With a LIF, there is a maximum limitto prevent you from using up your retirement savings. 

Things to consider when opening a RRIF

Taxes

You can control your taxable income in retirement through your RRIF. The CRA mandates you to withdraw a minimum amount, but you can withdraw above this limit up to an amount that allows you to manage taxes effectively. 

Income needs

If you do not have urgent need for the funds in your RRIF, you can leave your money in the account to keep growing with no tax implications. 

Determine how much income you need in retirement after considering your other retirement income and pension accounts. You can receive RRIF payments in installments, monthly, semi-annually, annually, or any other schedule that works for you and your issue.

Your age

You must convert your RRSP to a RRIF in the year you turn 71, but you can convert your RRSP earlier. The CRA and your RRIF issuer use your age to calculate your minimum withdrawal amount. 

Beneficiaries

Assigning beneficiaries or successors to the funds in your registered retirement income fund is important. Your RRIF is part of your estate.

Investment platform

You can open a RRIF with a bank or robo-advisor, or manage your account yourself using a self-directed brokerage. If you want a more passive portfolio management approach with lower management fees, a robo-advisor may be more suitable. 

Frequently asked Questions about RRIF

How do I calculate my minimum RRIF withdrawal?

Your RRIF issuer will determine your minimum RRIF withdrawal amount by multiplying the fair market value (FMV) of your RRIF at the end of the previous year by a prescribed percentage factor. The prescribed percentage depends on your age or spouse’s age (if you opted to use your spouse’s age when you opened the RRIF).

What happens to a RRIF account when you die?

In the event of death, your spouse or beneficiary can transfer amounts from your RRIF to their RRSP, RRIF, PRPP, or SPP. They can also buy an annuity to receive money from your RRIF or transfer funds to a registered disability savings plan (RDSP) if they classify as a financially dependent infirm child or grandchild.

Who pays the tax on a RRIF after the owner dies?

Your spouse or common-law partner, estate, or beneficiary who receives the payments from your RRIF is responsible for paying tax on the income. If a RRIF is transferred to another RRIF or an RRSP, then the CRA will not tax the amount until the beneficiary withdraws the funds.

Can I withdraw a lump sum from my RRIF?

Yes, you can withdraw a lump sum from your RRIF. However, you will be subject to a lump sum withholding tax on excess amounts above the minimum RRIF withdrawal amount.

As of 2022, the withholding rates below apply to RRIF lump-sum payments:

Up to $5,000 – 10% (5% for Quebec)
Over $5,000 and up to $15,000 – 20% (10% for Quebec) 
Over $15,000 – 30% (15% for Quebec)

How are RRIF withdrawals taxed?

When you withdraw the required minimum amount from your RRIF, you will include this amount as part of your income when filing your taxes. The CRA will tax your RRIF income at your marginal tax rate. 

If you withdraw above the minimum amount, your RRIF issuer will withhold tax at the source and remit it to the CRA directly.

Can I convert my RRSP to a RRIF at age 60?

You can convert your RRSP to a RRIF at any age. By the end of the year you turn 71, you must either convert your RRSP to a RRIF, take a lump-sum payment, or open an annuity.

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