Your Ultimate Guide to RRIFs: Strategies, Pitfalls, and the Secret Sauce to Retirement Income
A Registered Retirement Income Fund (RRIF) is like an RRSP’s responsible older sibling. Once you hit retirement, the RRIF takes over where the RRSP leaves off – turning your savings into retirement income.
Indeed, if RRSPs are the workhorse of your savings years, RRIFs are your retirement MVP. They take all that tax-deferred money you’ve been squirreling away and turn it into an income stream for your golden years.
But RRIFs aren’t just about taking the money and running; they’re about strategy, timing, and (hopefully) avoiding big mistakes. Let’s dive into everything you need to know to master the RRIF game.
So, buckle up for the most comprehensive RRIF guide you’ve ever read (this can be true if you’ve never read one before, stay with me).
Let’s dive into everything you need to know – from opening a RRIF to what happens when you kick the bucket (yes, we’re going there).
What is a RRIF?
Think of a RRIF as an extension of your RRSP – just with some rules about withdrawals.
While your RRSP is all about accumulating savings, your RRIF is where you start spending that money.
Here’s the kicker: your RRIF continues to grow tax-deferred, but the government requires you to withdraw a minimum amount every year.
Key RRIF Rules at a Glance:
By the end of the year you turn 71, you must convert your RRSP into a RRIF, purchase an annuity, or withdraw the funds as a lump sum. Many opt for a RRIF due to its flexibility and continued tax-deferred growth.
You can open a RRIF earlier if desired. Once established, contributions are not permitted, but you can hold multiple RRIFs and manage them similarly to self-directed RRSPs.
- You must convert your RRSP to a RRIF by the end of the year you turn 71.
- Minimum withdrawals begin the year after you set up the RRIF.
- Contributions are not allowed (your RRSP days are over).
Simple enough, right? But this is just the beginning.
When Can You Open a RRIF?
Here’s a fun fact: you can open a RRIF at any age. There’s no rule saying you have to wait until 71—or even 55, as the internet often claims.
Early retirees or anyone looking for tax strategies might want to open a RRIF earlier for several reasons:
- Income smoothing: If you retire in your 50s, withdrawing from a RRIF in small amounts can help keep your taxable income lower over time.
- Pension income tax credit: Starting at age 65, you can claim this credit on the first $2,000 of RRIF withdrawals.
- Flexibility: A RRIF gives you predictable income while letting the rest of your investments grow tax-deferred.
How Are RRIF Minimum Withdrawals Calculated?
Starting the year after you open a RRIF, you must withdraw a minimum amount annually.
The formula is:
Minimum Withdrawal = Fair Market Value × [1 ÷ (90 – age)]
Translation: The percentage you’re required to withdraw increases as you age. For example, at age 65, your minimum withdrawal is 4%, but by 80, it’s 6.82%, and at 95, it’s a whopping 20%!
Here’s a handy chart:
| Age | Withdrawal % |
|---|---|
| 50 | 2.50% |
| 55 | 2.86% |
| 60 | 3.33% |
| 65 | 4.00% |
| 70 | 5.00% |
| 75 | 5.82% |
| 80 | 6.82% |
| 85 | 8.51% |
| 90 | 11.92% |
| 95 | 20.00% |
Pro Tip: Base your withdrawals on a younger spouse’s age if you want to keep the percentages lower.
Why the increasing percentages?
The government designed these rules to ensure RRIF funds don’t sit untouched indefinitely. After all, tax-deferred savings were meant for retirement spending – not hoarding for the next generation (the CRA is not a fan of that idea).
Tax Implications
Withdrawals from a RRIF are considered taxable income. While the minimum RRIF withdrawal isn’t subject to withholding tax, any amount exceeding this minimum will have withholding tax applied.
It’s crucial to account for these withdrawals in your annual tax planning to avoid unexpected liabilities.
Investment Options Within a RRIF
It’s important to note that you can hold the exact same investment portfolio inside your RRIF as you held inside your RRSP. Think of it as simply a different container with different rules, but the contents inside that container can remain the same.
RRIFs can hold a variety of investments, including:
- Cash
- Guaranteed Investment Certificates (GICs)
- Bonds
- Mutual funds
- Exchange-traded funds (ETFs)
- Individual stocks
This diversity allows you to tailor your investment strategy to your retirement income needs and risk tolerance. DIY investors can consider my easy two-fund solution for investing in retirement.
Strategies for RRIF Withdrawals
1). Melt Down Your RRSP/RRIF Early
Consider withdrawing aggressively in your 60s to delay taking CPP and OAS. Why? Because waiting until 70 to claim CPP means up to 42% more income, guaranteed for life.
2). Maximize the Pension Income Tax Credit
If you’re 65 or older, the first $2,000 of RRIF withdrawals qualifies for a tax credit—easy money in your pocket.
3). Pension Income Splitting
Got a partner? RRIF withdrawals at 65 and older qualify as eligible pension income, which means you can split up to 50% with your spouse to reduce your overall tax bill.
4). Minimize Estate Taxes
Large RRIFs left untouched can become a tax nightmare for your beneficiaries. By withdrawing earlier, you can reduce the size of your estate and the CRA’s cut.
Melting Down a RRIF Early for Bigger CPP and OAS Benefits
Here’s the deal: the longer you delay taking CPP and OAS, the bigger your monthly cheques. (I’m talking up to 42% more CPP if you wait until 70.)
To make this delay work, some retirees choose to “melt down” their RRIF early – making aggressive withdrawals in their 60s to bridge the income gap.
The strategy has its perks:
Higher government benefits: CPP and OAS are inflation-adjusted and guaranteed for life – benefits no investment portfolio can match.
Lower (or smoother) lifetime taxes: By draining your RRIF more significantly in early retirement, you could reduce your taxable estate later and avoid higher tax brackets (and potential OAS clawbacks) as mandatory withdrawals ramp up.
The downside? You’ll pay more taxes on withdrawals now. But if you’ve done your math (or hired a pro), the long-term benefits often outweigh the short-term sting.
Pension Income Splitting: A Tax-Saving Power Move
If you’re 65 or older, RRIF withdrawals qualify as pension income for tax purposes. That means you can split up to 50% of your RRIF income with your partner, potentially saving thousands in taxes if one of you is in a lower tax bracket.
For example, say you’re withdrawing $40,000 a year from your RRIF, but your spouse only has $10,000 in taxable income.
No money actually changes hands, but when you file your tax returns the higher income spouse can elect to transfer $15,000 of their RRIF income to the lower income spouse so they each have taxable income of $25,000.
By splitting the RRIF income, you reduce your overall household tax bill.
RRIF vs. RRSP Withdrawals
If you’re still holding onto your RRSP, you might wonder, “Why not just withdraw from it instead?”
Good question! Here’s the difference:
Withholding Tax: RRSP withdrawals face withholding tax of up to 30% (depending on the amount withdrawn), while RRIF withdrawals only count as taxable income, without immediate withholding for amounts at or below the minimum.
Partial Deregistration Fees: Many financial institutions charge a fee – often $35 to $50 – for each withdrawal directly from an RRSP. These partial deregistration fees can add up quickly if you’re making frequent withdrawals. RRIFs, on the other hand, typically don’t have these fees, especially if withdrawals are set up as scheduled payments.
Regular Income: We know retirees have a hard time spending their money. RRIFs are designed to provide predictable income, with minimum withdrawal amounts calculated annually. This makes them ideal for retirees looking for a steady cash flow.
Flexibility: While RRIFs impose minimum withdrawals, you can always withdraw more if needed (though additional amounts are subject to withholding tax). RRSPs, in contrast, allow total flexibility but at a potential administrative cost (see those pesky fees above).
Pro Tip: If you plan to make several withdrawals, converting your RRSP to a RRIF could save you from partial deregistration fees, while also setting you up for a tax-efficient retirement income strategy.
What Happens to a RRIF When You Die?
Estate planning isn’t fun, but it’s essential. If you die with a RRIF:
With a spouse: The RRIF rolls over tax-free to your spouse, who continues the withdrawals.
Without a spouse: The entire RRIF balance is taxed in the year of your death, often at the highest marginal rate. Your beneficiaries will receive what’s left after taxes, but depending on the size of your RRIF, that could be a big hit.
Make sure to designate beneficiaries on your RRIF account and consider strategies like charitable giving or early withdrawals to reduce the size of your RRIF balance and, ultimately, the CRA’s bite out of your final estate.
RRIF Pitfalls to Avoid
Even the savviest retirees make mistakes. Here are the big ones to avoid:
1). Withdrawing too much, too soon: Nothing says “oops” like running out of money in your 80s.
2). Forgetting about taxes: Every dollar withdrawn is taxable, so plan ahead.
3). Converting an RRSP to a RRIF incorrectly: Believe it or not, some people accidentally withdraw their entire RRSP while trying to convert it to a RRIF. Yes, this has really happened, and yes, the CRA will happily take their cut. Don’t be that person – get professional advice.
Finally, this is more of an FYI than a pitfall to avoid:
If you transfer a RRIF from one financial institution to another then the mandatory minimum withdrawal must be made before the transfer can be completed.
Final Thoughts
A RRIF isn’t just about following government rules; it’s about using those rules to your advantage. By understanding the ins and outs of RRIFs, you can maximize your retirement income, minimize taxes, and avoid common mistakes.
Whether you’re an early retiree strategizing withdrawals or just trying to figure out what happens to your RRIF after you’re gone, the key is to plan ahead.
And hey, if you’re not sure where to start, an advice-only financial planner can help you nail down a strategy – no hidden agendas, no sales pitch, just smart advice tailored to your goals.
Here’s to a retirement that’s as smooth (and predictable) as your RRIF withdrawals!
Hi Robb,
Thank you for this – a useful primer!
I have a question about partial conversion, so that my spouse and I can split income, but also leave a portion to contribute to in a high income year (i.e. selling a rental property).
Are there any specific restrictions to this? is there a certain percentage or amount that should be converted?
with thanks!
Hi Mary, thanks for the kind words.
Yes, it’s a smart idea to think ahead to managing future capital gains. I’ll often have clients leave some RRSP room unused and either do a partial RRIF conversion with a small amount of their RRIF, or leave the RRSP intact (depending on age) until a second property is sold.
So, if you are 65 or older then withdrawals from a RRIF are eligible for the pension income tax credit and for pension income splitting. Ideally you’d each want at least $2,000 from the RRIF to max out the tax credit.
I’ve found that financial institutions don’t like it if you set up a small RRIF and then completely drain it in a single year, and so I think you’d want to convert at least enough to give you a few years’ worth of expected withdrawals from the RRIF.
I’ve seen as little as $12,000 in a partial RRIF for a single who planned to withdraw $2k per year from age 65 to 71.
Very timely info for me, Robb – thanks! But I noticed you referred people to your 2023 article for a two-fund solution, which uses XBAL or VBAL as an example for the non-cash fund. Don’t you now recommend the seemingly-riskier VEQT instead, as per your Dec 7/24 article (assuming one is brave enough to ride the waves without panicking)?
Hi Terry, I find the two-fund solution (a risk appropriate asset allocation ETF + a HISA ETF) to be the most “practical” set-up for a self-directed investor in retirement. Even though the cash wedge is sub-optimal, it’s helpful from a psychological perspective to meet and maintain withdrawal needs in the face of poor market conditions.
What I recommend is that investors should stick to the same asset mix that got them to retirement in the first place (be it balanced, growth, or all-equity) and then pair that with a HISA ETF to help ease concerns around withdrawals.
Most investors are NOT cut out for an all-equity portfolio, so a balanced or growth portfolio is perfectly sensible. They’ll have to save a bit more, and perhaps spend a bit less in exchange for the lower expected returns from a more conservative portfolio, but if that helps them sleep at night and stick to their plan then it’s a fine strategy.
Terry, there is no one-size-fits-all solution for every investor. Your preferences, fears, spending needs, and money mindset are different than mine. Asset allocation ETFs are the most sensible solution for most DIY investors but the one best suited for you is going to be the one that keeps you in your seat during good times and bad.
Finally, yes, there is new and compelling research that suggests holding a 100% global equity portfolio all throughout your investing life is going to lead to better outcomes (save less, spend more, leave more to your heirs), even in poor return environments, than a 60/40 portfolio or a target date fund approach.
The optimal portfolio was 1/3 in domestic stocks and 2/3 international stocks. That happens to align pretty closely with VEQT (30% Canadian and 70% international), which happens to be my investment vehicle of choice across all accounts.
I am not suggesting that everyone becomes a 100% global equity investor like me, and I’m certainly not suggesting that you continue to hold that aggressive mix in retirement.
I often describe myself as an emotionless robot when it comes to investing, and so I feel like I can stick with the 100% equity portfolio throughout my lifetime and simply make withdrawals directly by selling units of VEQT as needed in retirement.
But I’ve worked with enough retirees to know how difficult that is in practice. In 2022, for example, people wanted to abandon their sensible portfolios and move to GICs after just nine months of poor returns.
Your mileage may vary.
Well-explained, Robb. Thank you.
Thank you.
No mention of a LIRA… are the rules completely the same as with RRSP to RRIF? I understood you could take out a one time chunk that I guess would not be applicable to the min/max rules? Any details you could provide there?
Hi Steve, the LIRA/LIF deserves its own post. A LIF is a cousin to the RRIF, but there are different rules depending on the jurisdiction (provincial/federal).
You have to be at least 55 to convert your LIRA to a LIF.
At the time of converting a LIRA to a LIF you can “unlock” either 0%, 50%, or 100% of the LIRA and move it into your RRSP or RRIF.
The same minimum withdrawal percentages apply, but there are maximums as well.
There are also provisions to fully unlock small balances (under $25k), or to unlock due to financial hardship.
Oddly, the maximum LIF payment for Alberta, British Columbia, Newfoundland, and Ontario is the greater of the maximum percentage or the previous year’s investment return.
“Oddly, the maximum LIF payment for Alberta, British Columbia, Newfoundland, and Ontario is the greater of the maximum percentage or the previous year’s investment return”
Really? Heard about maximum percentage, but never heard that it also depends on previous year’s investment return.
Is it really true? Any reference? Searched web, but couldn’t find anything.
Very good information about RRIF BTW
Hi Jay, thanks! Check the footnotes on this BMO Nesbitt Burns LIF withdrawal chart and you’ll see that information about basing the withdrawal percentage on the investment return: https://nesbittburns.bmo.com/documents/123514/387076/LIF+Withdrawal+Schedule_Ev2_ACC.pdf/56376365-fbe9-49d3-9d36-5a65d0502dbe
Good to know after a year of strong returns!
Wow, Thanks. Looked at chart many times before, but never looked at the footnotes. I guess, better to make a habit to read footnotes on anything without fail. Thanks once again
Can I donate shares out of my Riff account to my charity directly by means of Canada helps ?
Hi Leo, I can’t speak for Canada Helps but other charities certainly can do this. It’s not really beneficial from a tax perspective, though.
More information below (sourced from RBC):
You may donate the assets in your registered account, such as your RRSP/RRIF to a qualified donee during your lifetime or upon death.
However, the assets in your registered account will not benefit from the zero capital gains inclusion treatment, as the value of the securities in your registered plan is considered income on your tax return, not a capital gain.
If you withdraw securities from your RRSP/RRIF, the amount you withdraw is taxable to you as income.
You could choose to donate the securities after withdrawing them from your RRSP/RRIF which allows you to benefit from the donation tax credit.
Given there’s no special exemption on the donation of registered assets, if you have a registered account and a non-registered account, you may want to consider making an in-kind donation of securities with accrued capital gains rather than donating your registered assets.
Thanks Robb your info was helpful and very clear.
Great information, thank you! Will be sure to convert when the time comes, not withdraw accidentally – sheesh!
Hi Phyllis, thanks! If you’re a self-directed investor I’d suggest taking the extra step after you’ve opened your new RRIF account and calling the brokerage to ask for assistance with the transfer.
Hi Rob,
Thank you for providing this information about RRIF’s. I have been reading financial literature for nearly 20yrs and have not been able to come across an article that is easy to read, understand and concise. I appreciate what you are doing in your blogs.
Hi Tom, thanks for the kind words – it means a lot.
Part of my mission here is to act as a plain language interpreter of financial jargon so that regular Canadians can understand and navigate this often complex system.
It gives me great satisfaction to hear that my writing is hitting the mark – so thanks again!
Great article. Great Q&A.
I intend to delay both CPP and OAS. So this means a somewhat aggressive RRSP meltdown before age 70 while still being aware of my tax brackets. I currently have a DB company pension that I’m income splitting with my wife. I turn 65 in July of 2026, so I can then income split my newly created RRIF at that point. With that in mind, here are questions that I cannot find answers to……Since I do turn 65 in the “middle of the year”:
1. Can I create that RRIF and start withdrawing the day after I turn 65, or can I create/withdraw anytime during the year – perhaps even in January, half a year before I even turn 65? Or can I only open it up in July 2026 (age 65), and have to wait until Jan. 2027 to withdraw?
2. With income splitting in mind, assuming I can only open it up one year and have to wait the next to withdraw, could I open one up any time in 2025 ( the year I turn 64) and then withdraw after July 2026 claiming the split income after that date?
2. Or, assuming that I can set it up in July 2026 (age 65) and withdraw immediately, am I able to split the full amount with my spouse that I withdraw during the last half of 2026, or is there some magic formula limiting that amount to split because I only turned 65 halfway through the year? (That would seem odd, so I am doubtful).
Sorry for the wordy question, I just want to prepare in advance and do this correctly. Much appreciated as always !
Hi James, thanks for your question because it’s not obvious what to do when you turn 65.
If you think about it, everyone will turn 65 at some random date in the calendar year.
So the rules are that withdrawals from a RRIF qualify as eligible pension income if the transferring spouse is 65 years of age or older at the end of the year.
Translated into plain English:
You turn 65 in the calendar year 2026.
You can open a RRIF at any time in 2025 and transfer all or a partial amount of your RRSP to that RRIF in 2025.
Go ahead and make your planned withdrawals starting as early as January 2026.
You are not required to withdraw the minimum amount until the end of 2026 (that’s why it matters what your age is at the END of the year).
You don’t HAVE to set up your RRIF in 2025 in order to make withdrawals in 2026. You can in fact open the RRIF and transfer all or a portion of your RRSP in 2026. But then, since you’re not REQUIRED to withdraw until the year after setting up the RRIF, you’ll have to make arrangements with your financial institution to withdraw funds that year.
So it’s cleaner to set this up a year in advance (2025 in your case).
Finally, and you know this already if you’re splitting DB pension income but others lurking in the comments might be curious:
To be able to split your pension income, you and your partner must make a joint election on your income tax returns using Form T1032 ‒ Joint Election to Split Pension Income.
On line 21000 of your tax return, you would claim a deduction for elected split-pension amount, which may be up to 50% of your pension income.
This elected split-pension amount would be added to income on line 11600 of your partner’s return.
The election is made annually and is optional, so each year you can choose whether or not to split your pension.
Hi Rob,
If I partially convert an RRSP to an RRIF, can I, in a future year, transfer more of the funds or assets from the same RRSP to the same RRIF? I understand one cannot contribute new funds to an RRIF, but I take this to mean previously non-registered funds. Thanks for any clarity on this.
Hi Dawn, yes you can continue to add to the same RRIF from ANY RRSP and this is a perfectly sensible strategy to start with a partial RRIF and then add funds regularly.
As long as it’s coming from an RRSP it’s all good.
Robb, I’m pretty sure I know the answer to this question, but I just want to confirm.
Once I convert some – or all – of my RSP to a RIF – if I happen to have remaining RSP contribution room from previous employment income am I still eligible to make an RSP contribution prior to age 70?
I believe the answer is yes, but I’d like to confirm.