A RRIF account (Registered Retirement Income Fund) is what most people turn their RRSP accounts into once they turn 71. The main difference between an RRSP and a RRIF is that you can only withdraw funds from a RRIF account – you can no longer make contributions.
While you are not required to mature your RRSP until the year you turn 71, the many people who choose the option of maturing their RRSP into a RRIF will make the conversion before this time (i.e. if they retire earlier than that). But regardless of what age you hold a RRIF account at, you are required to withdraw a minimum amount each year known as the prescribed minimum withdrawal amount. Any RRIF withdrawals are fully taxable as income in the year you receive them (just like an RRSP withdrawal).
The methods for determining how much you need to take out is shown below:
IF YOU ARE 70 OR YOUNGER
In this case there is a relatively simple formula for determining the minimum amount of money you need to withdraw from your RRIF: 1 / (90 – Your Age). So let’s say that you were 65 on January 1st of the year in question. If we plug this into the formula we find: 1 / (90 – 65) = 4%. Therefore you would have to make a minimum withdrawal of 4% of the value of the RRIF. The value of the RRIF is based on the market value as of January 1st.
IF YOU ARE 71 OR OLDER
In this case, the minimum withdrawal amount needs to be looked up on a chart. Also note that if your RRIF account was opened before 1993 (known as a “qualifying RRIF”), then there are different rates from ages 71 – 78. The percentage amount you need to withdraw are as follows. The middle columns shows the percentage for RRIF accounts that were opened in 1992 or earlier and the right most column shows the percentage for RRIF accounts opened in 1993 or later.
|| Up to 1992
|| 1993 or Later