What Is a Registered Retirement Income Fund (RRIF)?


Introduce Registered Retirement Income Fund (RRIF)

An annuity contract is one type of retirement fund that can be compared to a registered retirement income fund (RRIF), which pays out income to one or more beneficiaries. The owners of registered retirement savings plans (RRSPs) will frequently roll over the balance from their RRSPs into a registered retirement income fund (RRIF) to finance an income stream during retirement.

The Canada Revenue Agency (CRA) will tax the beneficiary of an RRIF payout according to the beneficiary’s usual tax rate in the year that the payout is received, even though earnings on RRIF investments are not subject to taxation. The “carrier” of the plan is the organization or firm that carries the RRIF and is referred to by that name. Carriers may be financial institutions such as banks, insurance firms, or any other sort of regulated financial intermediary. The Canadian government does not carry RRIFs, but it is responsible for registering them for taxation reasons.

How do you convert your RRSP into RRIF, and what are the rules?

Your circumstances are the most important factor when determining the right time to switch from a registered retirement savings plan (RRSP) to a registered retirement income fund (RRIF). You are free to convert your retirement assets in an RRSP into an RRIF whenever you see fit, but you must do so by December 31 of the year you turn 71. Once you have stopped working and making contributions to an RRSP and are planning to draw an income from your savings during retirement, it is typically in your best financial interest to convert your RRSP into RRIF instead.

It is important to remember that after your assets are moved, you will no longer be able to contribute to that policy as long as the RRIF account is operational. However, if you still have an RRSP, you can keep making deposits into that account even after the contribution limit has been reached.

How does RRIF work?

  • You have until December 31 of the year you turn 71 to convert your RRSP to RRIF, but you can do so whenever you like.
  • Decide how you want to invest your money.
  • The government sets the required minimum amount to be withdrawn from your account each year.
  • On the other hand, you have some leeway in terms of how much more than the minimum amount you can withdraw, as well as when you get it.
  • All the money you take out of your RRIF must be reported and taxed as employment income.
  • Use our handy calculator to estimate the amount of money that will come from your savings when you reach retirement age.

Key features of RRIF

  1. A Canadian retirement vehicle known as a registered retirement income fund (RRIF) is comparable to an annuity in the United States.
  2. RRIFs are contracts between the insured individual and a “carrier” that the government of Canada recognizes.
  3. RRIFs are designed to give retirees a steady income from their Canadian savings vehicles, such as RRSPs. This benefit is intended to be provided through RRIFs.
  4. Life income funds, also known as LIFs, are a special kind of RRIF qualified to keep the money already locked up in a pension account.

What-Is-a-Registered-Retirement-Income-Fund-RRIFAcquiring knowledge of Registered Retirement Income Funds (RRIF)

Registered retirement income fund programs are intended to give retirees a steady income from their RRSP investments. By turning an RRSP into an RRIF, persons can preserve their investments under tax protection while still having the opportunity to distribute assets per their requirements. Before the contributor turns 69, RRSPs must be rolled over.

The insured person and a carrier—an insurance firm, trust business, or bank—that the Canadian government registers agree, according to the government’s description of RRIFs. From an RRSP, another RRIF, or any other Canadian retirement plan, you transfer assets to the carrier, and the airline pays you. Self-directed RRIFs and multiple RRIFs are also possible. Self-directed RRIFs must abide by the same regulations as RRSPs in most cases.

Life Income Fund (LIF)

A locked-in pension fund and other assets can be held in a life income fund (LIF), a type of RRIF available in Canada, for an eventual payout as retirement income. Financial institutions in Canada provide life income funds. They give people a way to manage the payouts from locked-in retirement accounts (LIRAs) and other assets through investments. If an employee leaves a company, pension assets may be held but not accessible. These assets, typically locked-in assets, can be managed through other investment vehicles, but when the owner is ready to start making withdrawals, it may be necessary to convert them into a life income fund.


Can RRIF help you save on taxes?

Your RRIF maintains the tax-deferral* that you received from your RRSP.

Additionally, once you retire, your chances of being in a lower tax bracket increase. This implies that you’ll pay less tax when you take money out of a tax-deferred account like RRIF.

How much must you take out of RRIF annually?

The minimum annual withdrawals from RRIFs depend on your age or your spouse’s age. These minimum withdrawals must be made every month until no money is left.

Examine the Canada Revenue Agency (CRA) table that displays the minimum withdrawal criteria for RRIFs. We will assist you in determining your annual minimum withdrawal amount if you have RRIF through Sun Life. The remainder of your funds can grow tax-free in your RRIF as you withdraw from them.

When must an RRIF withdrawal be made?

According to the CRA, you must convert your RRSP to a RRIF by the end of the year in which you turn 71. Your RRIF must be used to withdraw within one calendar year of opening. For instance, if you open aRRIF in 2022, you must begin making withdrawals from it by 2023.

What if you don’t require the funds from RRIF immediately?

There are ways to make the most of your required RRIF withdrawals if you don’t need the money immediately. For instance, if you have the contribution room and have already paid tax on your RRIF withdrawal, you can put the after-tax money into a tax-free savings account. In this way, it can grow further and be withdrawn at any time tax-free.

The post-tax funds could also be invested in unregistered securities. On the other hand, be ready to pay tax each year on the increase in investments in the non-registered account.

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