Registered retirement income fund

What is a RRIF?

A Registered Retirement Income Fund (RRIF) is an investment account that allows a Registered Retirement Savings Plan (RRSP) to continue past maturity and is established to draw income for those nearing or living in retirement.

How does a RRIF work?

A RRIF must be opened before December 31 in the year you turn 71. Once a RRIF is opened, it must be funded from an RRSP or Spousal Registered Retirement Savings Plan (Spousal RRSP), or in certain situations, from another type of registered plan. Contributions are made from these accounts on a tax-deferred basis.

There is no limit on withdrawals; however, there is an annual minimum withdrawal amount based on your age and the RRIF balance as of December 31 of the previous year. A RRIF can be opened at any age, although many people wait until they are either retired or their RRSP matures (December 31 of the year they turn 71) to open one.

What are the benefits of a RRIF?

RRIF accounts offer several advantages, including:

• Tax-deferred growth on earnings – Investments in a RRIF account grow tax-deferred until withdrawn.
• No limit on withdrawals – Subject to the government’s minimum annual requirements, you may withdraw as much money as you want from your RRIF, whenever you want.
• Withholding tax is limited – Although all withdrawals are taxable, tax is only withheld from a RRIF withdrawal when the amount withdrawn is above the calculated minimum.
• Tax-deferred transfer on death – Upon death, the assets in your RRIF can be transferred to your spouse or common-law partner's RRSP, RRIF or eligible annuity, on a tax-deferred basis if they are a named beneficiary and they qualify.
• Ability to self-direct – Self-directed RRIFs allow you to select and manage your own investments within your RRIF account. 

How to open a RRIF account

You must open a RRIF account before the end of the year in which you turn 71. Your Edward Jones financial advisor can help you understand your options, answer your questions, and set up your account.

RRIF contributions

You cannot contribute to your RRIF directly. A RRIF can only be funded by transferring assets from another registered plan.

RRIF investments

Assets transferred to your RRIF from another account can continue to appreciate in your RRIF. You can also receive dividends and earn interest on assets held in your RRIF. Edward Jones offers a variety of investment options for your RRIF, including:

• Government bonds
• Corporate bonds
• Guaranteed investment certificates (GICs)
• Mutual funds
• Exchange traded funds (ETFs)
• Stocks
• Managed investment programs

Withdrawal rules

As a RRIF account holder, you can withdraw any amount at any time, subject to the government-mandated annual minimum.

Minimum payments must begin no later than December 31 in the year after you establish your RRIF. However, you can begin withdrawing funds the year you open your RRIF account. Withdrawals in the first year of the account being opened could be subject to withholding taxes and fees.

The amount you are required to withdraw each year is based on two criteria:

• The value of your account as of December 31 of the previous year and
• A calculation determined by the federal government

If you are age 70 or under, the RRIF withdrawal rate is calculated in a two-step calculation:

1. 90 minus your current age
2. Divide the number 1 by the number from your calculation above

For example, if you are 68 years old and have a RRIF account balance of $400,000 on December 31 of the previous year, the calculation would be:

90 – 68 = 22
1/22 = 4.55%
$400,000 x 4.55% = $18,200
The mandatory minimum withdrawal for the year would be $18,200.

If you are 71 or older, the RRIF withdrawal rate is based on the following chart (Source: Canadian government):

Spousal or common-law partner withdrawals

If you intend to keep your money in your RRIF as long as possible, you may be able to elect to receive payment based on the age of your spouse or common-law partner, if they are younger. However, keep in mind that whichever party's date of birth you choose will remain in place for the term of your RRIF. Talk to your Edward Jones financial advisor to help you explore and decide which option is best for your situation.

Attribution

Attribution rules state that if the beneficial owner of a spousal RRSP or spousal RRIF makes a withdrawal from the account and there was a contribution to the account in that year or the two preceding years, the withdrawal must be attributed back to the contributor. This rule only applies to a RRIF withdrawal above the mandatory minimum, or to a withdrawal in the year the RRIF account was opened.

Rollback option

You can roll the contribution to a RRIF back to your RRSP if you do not need the income and you (or your spouse, if the spouse's age was chosen) are younger than 71. A rollback is a transfer of funds from your RRIF to your own RRSP. However, even if you are rolling funds back, you must withdraw the calculated minimum amount of income for the current year.

Various payment options available

At Edward Jones, you have various options available regarding how you receive your regularly scheduled minimum annual payments. You can receive payments in cash or in-kind by:

• Cheque
• In-kind transfer to an Edward Jones non-registered account; or
• EFT (electronic fund transfer) to your bank account

You can elect to receive your annual minimum payments:

• Bi-monthly
• Monthly
• Quarterly
• Semi-annually; or
• Annually

Deregistration fees and withholding tax on unscheduled RRIF withdrawals

Although you may withdraw any amount from your RRIF at any time, additional withdrawals could be subject to deregistration fees and withholding tax. Unscheduled RRIF payments are handled differently than scheduled payments, per the chart below.

*A minimum of $145 must remain in the account in order for the withdrawal to be considered a partial deregistration. Leaving less than $145 in the account will be considered a full withdrawal/deregistration.

Please notify your advisor at least two business days before your next scheduled payment if your current payment arrangement isn’t working for you.

Transfer of funds upon death

Upon death, your RRIF can be transferred directly to your spouse or common-law partner on a tax-deferred basis, as long as they are named the beneficiary on your RRIF account and they transfer the assets from your RRIF to their own RRSP, RRIF, or eligible annuity.

If you have designated a financially dependent child or grandchild as your beneficiary, they can transfer your RRIF to their RRSP, tax-free. If the child has a disability, your beneficiary can transfer your RRIF to their Registered Disability Savings Plan (RDSP) if they have available contribution room and don’t exceed the $200,000 lifetime contribution limit. They also have the option to purchase an annuity

RRIF Taxes

You are required to pay income tax on all RRIF withdrawals at your marginal tax rate. If you withdraw funds from your RRIF in the year you establish it, tax will be withheld from the withdrawal.

Both unscheduled payments and payments above the mandatory minimum amount are subject to withholding tax.

Upon filing your taxes, you may owe additional taxes due to the withdrawals made from your RRIF account during the year. This could happen if your marginal tax rate is higher than the withholding tax rate applied to the withdrawals. To avoid this, you can request that more tax be withheld on withdrawals, even when it is not mandatory.

Below is the withholding tax table for reference.

How we can help

We know you’ve worked hard to accumulate the assets in your registered plan. We can help you determine how to retain those assets and ensure they continue to grow in a way that supports your current and future lifestyle and goals. Talk to an Edward Jones financial advisor to learn the many ways we can help you meet your needs.