It may be a long time before you have to think about spending your retirement income or it may be coming up sooner than expected.  In any case it doesn’t hurt to plan ahead and you need to decide what to do with those RRSP funds.

What Is A RRIF?

A Registered Retirement Income Fund (RRIF) is a product that allows you to continue to defer taxes owing on your saving until the money is withdrawn.  It is established on the transfer of RRSP assets and offers a wide variety of investment opportunities.  You can transfer your existing RRSP assets “in kind” or you can choose to change your portfolio to better suit your needs.

Once a RRIF is established there can be no contributions made to the plan nor can the plan be terminated except upon death.

When Should You Open A Plan?

This depends on your retirement income needs.  A RRIF must be opened no later than December 31st in the year in which you turn 71.  By waiting until then you defer the taxes paid on your withdrawals.

But you don’t have to wait until then to open one.  If you plan on retiring early, you can start a RRIF much sooner.  Establishing a RRIF can be done at any time.  Some people use all or a portion of their RRSP assets to fund retirement before they are eligible to receive money from their pension plan or CPP, especially if their taxable income will be higher when they reach retirement age.

Withdrawals From The Plan

Starting the year after you establish a RRIF you must be paid a legislated yearly minimum amount.  Your annual minimum payment is based on your age on January 1st and is calculated as a percentage of your RRIF value at the beginning of each year and increases as you get older.  Payments can be made monthly, quarterly or annually depending on your income needs.

You can elect to have the payment based on a younger spouses age.  However, you must select this option when filling out the original RRIF application.  Once you make this selection, you can’t change it.

You can withdraw more than the minimum.  If you wish to make a lump sum withdrawal that exceeds the minimum amount it will be subject to withholding tax based on the same rates that are applicable to RRSP lump sum withdrawals.  There is no maximum amount.

The money you withdraw from the fund must be reported as income and is taxed at your marginal tax rate.  The first $2,000 is eligible for the Pension Tax Credit if you are 65 or older.

It will make your bookkeeping easier if your consolidate all your RRIF’s into one account.

What About Locked-In Plans?

Assets from employer sponsored pension plans are transferred from a Locked-in Retirement Account (LIRA) to a LRIF or LIF or Life Annuity. Funds cannot be accessed until you reach a certain age depending on your provincial or federal pension legislation.  Unlike a RRIF, there is an annual maximum payment amount.

The LIF is available in all provinces except PEI.  The LRIF is available for plans registered in Alberta, Saskatchewan, Manitoba and Ontario.

Consult your former employer or pension agreement for details.


You may want to consider starting your retirement with a RRIF.  Then later on you could move it into an annuity or a combination of the two.  If you decide to cash in your RRSP, figure out if the income tax you’ll have to pay makes it worthwhile.  You might have to pay more in taxes than you earned.

Above all, don’t wait until the last minute.  One bank client waited until five minutes before closing time on December 31st to open a RRIF.  Not only that, he wanted to transfer his existing RRSP GIC’s into a RRIF trading account at a time when opening such an account took at least two weeks!  Be smart and start planning what you want well ahead of time.

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