What is a Registered Retirement Income Fund (RRIF)?

A RRIF is essentially the reverse of an RRSP. While an RRSP helps you save for retirement by allowing contributions, a RRIF is designed for retirement income, letting you withdraw funds from your savings.

A RRIF requires you to take minimum annual withdrawals to support your retirement, creating a predictable income stream. It also keeps your remaining savings invested in a tax-deferred plan until withdrawn.

Key points to remember about a RRIF:

• It converts your RRSP savings into a source of retirement income while allowing your investments to grow tax-deferred.
• You’re required to withdraw a minimum amount each year, but there are no upper limits on withdrawals.
• The balance of your RRIF can continue to grow tax-free until it’s withdrawn.

Benefits of a RRIF:

• Functions like a “Reverse RRSP,” where you make withdrawals instead of contributions.
• Your investment earnings remain tax-sheltered.
• You can consolidate multiple RRSPs into one RRIF, simplifying your retirement planning.
• You must convert your RRSP into a RRIF by age 71.
• Any remaining funds in your RRIF can be passed on to beneficiaries or your estate, subject to applicable taxes and legislation.

Are RRIF Withdrawals Taxable?

Yes, RRIF withdrawals are taxable. While your funds grow tax-free within the RRIF, you’ll pay tax on the money you withdraw, which is treated as income. If you withdraw more than the minimum amount, taxes are withheld at the time of withdrawal. The withholding tax rate varies based on the amount withdrawn and your province of residence.

Minimum withdrawal rates increase as you age and are recalculated annually. You can set your withdrawal schedule to suit your needs, whether monthly, annually, or as lump sums.

What is a Lifetime Income Fund (LIF)?

A LIF is a retirement income vehicle similar to a RRIF but is specifically designed for funds from a locked-in retirement account (LIRA) or pension plan. A LIF provides retirement income while keeping your funds invested in a tax-deferred plan.

LIF rules vary by province, so it’s important to check the regulations that apply to you.

Benefits of a LIF:

• Uses locked-in savings from your pension plan to provide retirement income.
• Keeps your investment earnings tax-sheltered.
• Requires both minimum and maximum annual withdrawals.
• If any funds remain in your LIF upon death, they pass to your spouse or common-law partner first, then to beneficiaries or your estate, subject to applicable legislation and taxes.

Are LIF Withdrawals Taxable?

Yes, LIF withdrawals are taxable. While your investments grow tax-free, you pay tax on the money you withdraw, which is treated as income. Like a RRIF, taxes are withheld at the time of withdrawal if you exceed the minimum amount, and the rate depends on your province and the withdrawal amount.

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