What Is a Registered Retirement Income Fund (RRIF)?
A RIF is a general term for the various retirement accounts individuals can open up. A registered retirement income fund (RRIF) is similar to an annuity contract, which pays out money to one or more beneficiaries over time. When it comes time for you to actually withdraw from your RRSP, you have a choice to withdraw your RRSP in cash, elect an annuity (a series of payments over a pre-selected period of time), or convert it into what’s called a Retirement Income Fund (RIF). RIFs require payments.
However, in Canada there are minimum and maximum amounts that are set every year. As you get older, the minimum and maximum changes based on your age. If you’re looking for investment advice, or if you have a question about RRIFs and investment growth, an Experior Financial Group associate can help!
How do RRIFs Operate?
You can set up an RRIF account through a financial institution such as a bank, credit union, trust, or insurance company. It’s possible to convert your RRSP into an RRIF at any time before the end of the year in which you turn 71. You have options on what you want to do with this however the Canadian government stipulates the minimum you must take out each year for your retirement income fund (RRIF) account. With retirement savings plans, you pay income tax on your investment options when you make withdrawals from your RRIF.
How is your RRIF income withdrawn?
When you convert your savings or RRSP funds to a RRIF, the amount of each annual withdrawal will be determined by your age and life expectancy. Once you start receiving income, you’ll also be subject to the minimum income rules. You don’t have to withdraw any income until the year you turn 72.
If you take money from your RRIF, you’ll have to pay tax on the amount. If you don’t need the cash immediately, there are ways to make the most of your withdrawals. For example, If you’re eligible to contribute you can put your after-tax money into a tax-free savings account (TFSA).
Transferring your funds into an RRIF
You transfer assets to the investment vehicle from your RRSP savings, RRIF, or any other Canadian retirement vehicle that offers RIFs and the carrier will make income payments to you. Registered Retirement Income Funds (RRIF) do not have to be liquidated in full at once. Usually this would be something that you really do not want to do as it can cause a large tax implication rather than saving you money on taxes, which is the purpose of these types of investment coverings. You can transfer money from your RRSP to your RRIF, and the same applies to your spouse’s RRSP if applicable. If you are considering converting your RRSP to an RRIF, make sure to ask your financial associate about the withdrawal limits and options available.
What are the benefits of a RRIF?
Flexibility
A RRIF allows you to set up an income stream during your retirement. Savings account options such as RRIFs give flexibility which can be important when managing your investments and money for the future.
Growth
Registered Retirement Income Funds are accounts that will allow you to have extra funds available in case you need them, while also enabling you to gain interest on your investment without taxation until you pull it out.
Benefits of working with an Experior Financial Group associate
If you need help with transferring your RRSP to a RRIF, our Experior associates can offer expert advice and superior solutions. Our associates will do a complete analysis of your needs and, from there, build an affordable financial plan that leads you to your Financial Independence Number. The financial goal is to retire well.
Benefits you will receive from working with Experior’s associates include peace of mind knowing you have the right amount of savings and a plan in place to live the retirement of your dreams. Experior provides the best advice in the industry, backed by years of experience. Planning your investments for your future is important. The sooner you start saving the more time you have to get on the right track for an amazing retirement! We can help with the process.
