At the end of the year you turn 71, your RRSP matures and you must convert it to a Registered Retirement Income Fund. Withdrawing from a RRIF is based on a minimum percentage that would increase each year.
If you’re withdrawing the minimum from the RRIF each year, there is no tax withheld at the source. However, all withdrawals are fully taxable and must be declared. Your institution will issue your a T4-RIF detailing the withdrawal amount and any taxes withheld.
If you’re planning on withdrawing above the minimum, then withholding tax rates below would apply. There is no limit on how much you can withdraw. You may wish to increase the withholding tax rate in order to reduce future tax payable. This would all depend on your marginal tax rate.
| Withdrawal Amount | Up to $5,000 | Between $5,000 and up to $15,000 | Over $15,000 |
| Tax Rate withheld for Canadian residents | 10% | 20% | 30% |
| Tax Rate withheld for the province of Quebec | 5% | 10% | 15% |
When you file your tax return, the withdrawal income may be subject to a lower or higher tax rate which could result in a refund to you or a balance owing. The tax rate would depend on your sources of income, tax deductions and tax credits for that tax year.
How Much Do I Withdraw?
Your RRIF minimum payment withdrawal is pre-determined by a percentage of the market value of the RRIF on December 31st of the previous year. This minimum percentage has been established by the CRA and is detailed below. The withdrawal rate could be based on your age or the age of your spouse.
| Age At Start Of Year | RRIFs Set Up After The End Of 1992 |
|---|---|
| 65 | 4.00% |
| 66 | 4.17% |
| 67 | 4.35% |
| 68 | 4.55% |
| 69 | 4.76% |
| 70 | 5.00% |
| 71 | 5.28% |
| 72 | 5.40% |
| 73 | 5.53% |
| 74 | 5.67% |
| 75 | 5.82% |
| 76 | 5.98% |
| 77 | 6.17% |
| 78 | 6.36% |
| 79 | 6.58% |
| 80 | 6.82% |
| 81 | 7.08% |
| 82 | 7.38% |
| 83 | 7.71% |
| 84 | 8.08% |
| 85 | 8.51% |
| 86 | 8.99% |
| 87 | 9.55% |
| 88 | 10.21% |
| 89 | 10.99% |
| 90 | 11.92% |
| 91 | 13.06% |
| 92 | 14.49% |
| 93 | 16.34% |
| 94 | 18.79% |
| 95 and older | 20.00% |
The formula used to calculate the minimum withdrawal percentage is 1 ÷ (90 – Your Current Age)
Withdrawing from a RRIF -Calculation Example
Example: On January 1st, 2020, you were 72 years old. The value of your RRIF on December 31st, 2019 was $100,000. For 2020, your minimum RRIF payment is $5,400. As you get older, the minimum withdrawal amount gets larger.
Withdrawing from a RRIF – Example Based on Spouses’s Age
Example: On January 1st, 2020, you were 72 years old but your spouse was 69 years old. The value of your RRIF on December 31st, 2019 was $100,000. For 2020, your minimum RRIF withdrawal is $4,760. As you get older, the minimum withdrawal amount gets larger.
Withdrawing from a RRIF Example – Above the Minimum
For example, your yearly minimum RRIF withdrawal for the year is $5,000. You decide to withdraw $12,000 from the account monthly at $1,000 a month using a pre-authorized withdrawal program.
The additional amount that you are planning to withdraw over the minimum is $7,000. ($12,000-$5,000). According to the table above, the portion of each monthly payment that is in excess of the minimum is subject to 20% withholding tax and not 10% which would apply to a $1,000 withdrawal.
Withdrawing from a RRIF – Blended Payments
When withdrawing from a RRIF, your payments may be blended. Blended payments are part minimum and part excess amount. The excess portion of each installment payment would be subject withholding tax. The excess amount would be subject to withholding tax. The withholding tax is determined as if you were to withdraw the excess amount at one-lump sum payment instead of a series of payments.
T4-RIF Tax Slip
The tax slip is issued by end of February by your financial institution. The T4-RIF will report the income that has been paid out to you in addition to any federal and provincial taxes that have been withheld.
Quebec Residents
For residents of Quebec, T4-RIF will not show your provincial taxes withheld as in addition to a T4-RIF, residents in Quebec will also receive a Releve 2 slip for provincial income purposes. Releve 2 will state the gross income plus any Quebec withholding tax.
Frequency of RRIF Withdrawals
One of the decisions individuals have to make is how frequent they wish to have the minimum RRIF payment sent to them. The options are:
- Monthly
- Quarterly
- Semi-Annually
- Annually
Each individuals circumstances are unique and you would choose a frequency that would meet your needs.
What If You Don’t Need The Income?
If you aren’t in need of the income that a RRIF provides, you can do an in-kind withdrawal to your Non Registered Cash Account or TFSA. For example, say you’re holding 50 shares of RBC in your RRIF and you don’t wish to sell them to cover your RRIF payment. You can transfer these 50 shares in-kind to your Non-Registered Account or TFSA, as part of the minimum withdrawal. Your shares stay invested and you’ve satisfied the requirement of withdrawing the minimum from your RRIF.
If you don’t need the income from the RRIF, it’s recommended to elect an end of year annual frequency in order to maximize the tax-deferral benefits of the RRIF. Be aware of any associated fees that the investment company would charge when withdrawing from a RRIF.