What is a RRIF?

A RRIF is the logical successor to an RRSP both as a tax shelter and as a continued growth investment. It makes your investment grow tax-free while giving you access to the money saved in your RRSP in the form of retirement income. You may withdraw funds according to your needs, however, a minimum amount must be withdrawn every year. All withdrawals from a RRIF are taxable and considered income.

When you turn 71, you will need to convert all of your RRSP`s – This is when a RRIF comes into play. It affords you total control of your capital and has flexible withdrawal terms.

PARTICULARITIES OF A RRIF

There is no age limit to open a RRIF.

Transferring an RRSP to a RRIF does not influence your investments, their related interest rate or maturity date.

RRIF s are a means to receive periodic income during retirement, on a monthly, quarterly, semi-annual or annual basis. Withdrawals from a RRIF must be added to your annual income and are taxable in the year they are received. (Click on table to enlarge >>>>)

RRIFs are subject to an annual minimum withdrawal. The amount is based on your age, or that of your spouse, and on the balance.

RRIFs allow you to withdraw funds at any time, over and above the minimum required withdrawal. Of course, the more you withdraw, the more you deplete your RRIF .

RRIFs afford protection for your spouse whereby, in case of death of the participant, the funds are transferred to the RRSP or RRIF of the surviving spouse.

OTHER CHARACTERISTICS

Converting an RRSP into a RRIF – No minimum age to convert an RRSP into a RRIF.
The conversion must be completed before December 31st of the year you turn 71.
Liquidating a RRIF – There is no maximum age to liquidate a RRIF. It carries on until funds run out.
Eligible investments – GIC, TD, mutual funds, stripped coupons, etc.
Contributions – It is not possible to contribute to a RRIF. Only funds from an RRSP can be transferred to a RRIF.

Minimum withdrawal

Assessing the minimum withdrawal: the amount is based on your age, or that of your spouse, and on the RRIF balance. An age-related multiplication factor is assigned to the RRIF balance to determine the minimum amount. Calculations based on the age of the youngest between you and your spouse will result in a lower minimum amount, therefore with less taxable income in the year and more tax-sheltered money in the RRIF.

The minimum withdrawal is not mandatory during the first year of the RRIF. There are no tax deductions at source on the minimum amount. However, taxes will be levied on all other income over and above the minimum amount.

Maximum withdrawal – No limit.

Foreign content limit – Since June 28, 2005, the investment cap on foreign content has been lifted for registered accounts.

Summary

This investment product is suited for you if:

You prefer a self-directed investment;

You want your investment to grow tax-free;

You wish to withdraw any given amount at any time (subject to a minimum amount).

This investment product is not suited for you if:

You have only a supplemental pension plan.

You have never contributed in a RRSP.