Registered Retirement Income Fund (RRIF)

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How is your RRIF income withdrawn?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?

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.

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.

FAQ

Like a RRIF, a LIF has a minimum withdrawal amount, but a LIF is created for a longer term, it also has a maximum withdrawal. A LIF allows you to take withdrawals from your investments to use for any purpose. Only once you reach the minimum age, set by your Canadian province can you convert these pension funds into a Life Income Fund.

The minimum income amount changes depending on your age. In Canada, the government implemented a new minimum income schedule in the 2015 Federal Budget. Due to COVID, the minimum required withdrawal for all types of registered retirement income funds (RRIFs) has been reduced by 25% in 2020.

While a LIF requires a minimum payment amount to be withdrawn annually, an RRIF lets you control your investments during your entire lifetime. A RRIF allows you to defer making withdrawals from your registered retirement savings plan (RRSP) until you retire.

A retirement account is an investment vehicle with many different forms. A Registered Retirement Income Fund is one of them, subject to many rules.

The minimum withdrawal amount for 2021 depends on your age. You can visit the official Canada Revenue Agency (CRA) website to find the table showing the minimum withdrawal amounts for RRIF’s.  Minimum withdrawal factors for registered retirement income funds – Canada.ca

A locked-in retirement account (LIRA) is a special type of registered retirement savings plan designed to preserve and protect pension benefits.

Unlike an RRSP, the funds in a LIRA are locked-in and can only be used to provide a retirement income. Thus, the amounts cannot be withdrawn until you retire.  There are exceptions, in order to meet the exceptions you need to prove financial hardship and do a lot of paperwork.

It depends on a lot of different variables that change from person to person. An Experior associate can help determine the amount that is right for you and the situation you want to be in when you retire.  $500,000 can sound like a large amount but when you divide it up over the months and years it can deplete very quickly. 

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