What is a RRIF
A Registered Retirement Income Fund (RRIF) is a plan that is designed to provide a steady stream of income during retirement. Similar to an RRSP, a wide range of investments can be held in a RRIF and the income on the balance accumulates tax-free. However, a specific percentage of the plan's assets must be withdrawn each year as income.
An RRSP must be collapsed by the end of the year in which you turn 69. There are a number of options to choose from when managing your accumulated retirement funds:
- Convert your RRSP to a RRIF. A RRIF offers the flexibility to choose your own investments, while continuing to enjoy tax-sheltered growth. You will also receive an income stream that's based on a pre-determined percentage of the plan's assets each year, plus you can withdraw extra cash when needed (subject to withholding tax).
- Purchase an Annuity. Roll your RRSP into an annuity and receive a fixed or indexed to inflation income stream. Keep in mind that the money will be locked in at current interest rates and you will have no control over how it's invested.
- Cash in your RRSP. This is an unsuitable option for most individuals since the entire amount is subject to taxation in the year of withdrawal.
RRIFs are the most popular choice among retirees.
Minimum Withdrawal
The government stipulates that a minimum payment must be withdrawn from your RRIF each year and reported as income. This minimum annual payment is taken from a government schedule that is based on your age or the age of your spouse. You must receive your first payment no later than the end of the year in which you turn 70.
