RRSP

RRIF 101: Setting Up a Registered Retirement Income Fund

The Registered Retirement Income Fund (RRIF) is an income option that gives you control over your retirement savings and keeps it tax-free until you are ready to withdraw the money. If you have a Registered Retirement Savings Plan, you will have to convert it to an annuity or transfer it to an RRIF plan at retirement. “After 71 you can no longer contribute to your RRSP,” explains France Tisi, branch manager for the National Bank Financial Group in Welland, Ontario. “After that (age), the government requires that it must be transferred into an RRIF the same year you turn 71.”

Creating an RRIF

Opening an RRIF is fairly straightforward, according to Tisi. “Come into your financial institution, fill out the paperwork, and set up a payment schedule. The amount that you withdraw can be changed at any time, provided it’s at least the minimum as set out by the government. But the payments from the RRIF are taxable and must be claimed as income.” Canada Revenue Agency allows you to have more than one RRIF, and if you choose, the funds can be self-directed, similar to an RRSP. The financial institutions where you choose to open your RRIF include banks, insurance companies, credit unions, or trust companies.

Transferring to an RRIF account

You can contribute to your RRIF account by transferring funds directly from your unmatured RRSP or PRPP, matured RRSP, RPP or DPSP, or from another RRIF account.

You can also transfer amounts received from another RRSP or RRIF account upon the death of the annuitant. You have to be either the spouse of the deceased or a financial dependent of the deceased annuitant.

Self-Directed RRIF

A self-directed RRIF allows you, rather than the financial institution, to make the decisions about where your money is invested. The assets must be invested in a qualified investment as deemed by CRA or there may be tax implications. Qualified investments include mutual funds, stocks listed on a designated stock exchange, government and corporate bonds, and government-invested certificates. Self-directing your RRIF may be useful if you’re knowledgeable about investments if you like the convenience of one simplified plan or you’d like to diversify your investments.

Required Withdrawal Amounts

It is mandatory to withdraw funds from your RRIF each year as set out by the CRA. The amount changes annually and is calculated using a CRA formula by multiplying the fair market value (FMV) of the property held in the RRIF at the start of the year by a prescribed factor. The prescribed factor is determined by the age of the annuitant (you or your spouse or common-law partner). The fund can be taken out all at once, or you can take it monthly, bimonthly or quarterly.

Death of an Annuitant

A person who owns an RRIF is considered the RRIF annuitant. Any money taken from the fund is considered taxable income if the annuitant dies. However, there are options to reduce or defer these amounts. The carrier of the RRIF prepares a slip showing the date of death of the annuitant for a period from the day of the death to the December 31st of that year plus one more year. Included is the fair market value amount and the income earned in the RRIF. This slip is used to report the amounts in the RRIF to CRA for the year prior to the death of the annuitant. The RRIF is paid to the beneficiaries or, where none are named, to the estate. If the spouse or common-law partner is named as the sole beneficiary and the amount is transferred to an RRSP or RRIF, the amount is not taxable.

Reporting Income from an RRIF

Your carrier will calculate the minimum RRIF amount you are required to withdraw. This amount has to be withdrawn no later than one year after you establish the account. You can elect to withdraw the amount based on your age or your spouse’s age. You can withdraw more than the minimum amount but not less. You will receive a T4RIF slip after the end of the tax year to indicate the amount and type of income you got from the RRIF.

If you have received an RRIF annuity, it will be reported in Box 16 of the T4RIF. If you received RRIF income upon deregistration of the plan (canceling the plan), the amount will be reported in Box 20 of the T4RIF. If you have received RRIF from a deceased annuitant, the amount will be reported in Box 22. You claim any of these amounts on line 11500 of your income tax return if you are 65 of age or older, or if you are under 65 years old but receive a pension due to the death of your partner. Otherwise, you claim the income on line 13000, if you are under 65 years of age and don’t receive any other benefit due to the death of your partner.

If you want to know if you have received more than the minimum RRIF amount, check Box 24 of your T4RIF. The amount will be reported as an excess amount and is already included in Box 16 so you don’t need to report it again.

Transferring RRIF To Other Accounts

If you are transferring the RRIF to your RRSP, you will need to report it on schedule 7, and deduct the amount on line 208000 of your income tax return. If you are transferring the amount to another RRIF account, you deduct it on line 23200.

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References & Resources

  • France Tisi; Branch Manager; National Bank Financial Group; Welland; Ontario