Rules For Converting Your RRSP To A RRIF

by Mike Holman

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My parents are in the process of getting their RRSP accounts converted to RRIFs (Registered Retirement Income Fund) since they are turning 71 this year.  After answering a few of their questions I thought I would do a post covering some of the basic rules and strategies of converting a RRSP account to a RRIF account.

For the majority of readers who are nowhere near the age of 71 I suggest you read this anyways.  If you have any of your money in RRSPs then one day you probably will have a RRIF and it makes sense to understand all the rules since a RRIF account is basically the sequel to your RRSP account.  There are a lot of similarities between a RRSP account and a RRIF account.  The main difference between the two is that the RRSP account is used to accumulate money via contributions whereas the RRIF account disperses money via withdrawals.

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Rules for converting RRSP to RRIF

  • You have until Dec 31 of the year when you turn 71 to convert the account to a RRIF.
  • Some institutions will do it automatically so even if you don’t do anything – you will be the proud owner of a RRIF account on Jan 1 of the year you turn 72.
  • You can convert your RRSP to a RRIF anytime you want before the deadline.  One reason someone might convert early (ie at age 55) is so they can set up regular withdrawals from the account which most institutions won’t allow for RRSP accounts.
  • Mandatory or minimum payments – these start in the year after you set up your RRIF account.  There is a set minimum percentage amount determined by the government that you have to withdraw each year.  The percentage withdrawal amount increases as you get older.
  • There is no maximum withdrawal amount except for the amount of money you have in the account.
  • All withdrawals from a RRIF count as taxable income (including the mandatory withdrawal).
  • A RRIF account can hold the same investments as an RRSP account.  Most financial institutions that offer RRSP accounts also offer RRIF accounts so you shouldn’t have to switch institutions.
  • Money in a RRIF account is still “registered” so you don’t pay any tax on any income and there is no capital gains/losses.  Same as your RRSP.
  • You can’t make any contributions to a RRIF account.
  • You don’t have to spend all of your RRIF withdrawals.  You can save the money.
  • You don’t need to sell the actual investments in your RRIF to complete a withdrawal.  Most institutions will allow you to transfer your investments “in kind” to an non-registered account or TFSA account.
  • You can have more than one RRIF account.
  • Some people create a small RRIF account at age 65 in order to make annual $2,000 withdrawals which will qualify for the pension credit.
  • You can make multiple transfers to the same RRIF acount from your RRSP account.

What to do with your new RRIF account?

One of the main differences between a RRIF and an RRSP is that you have to make at least one withdrawal per year from your RRIF account starting in the year you turn 72.  To make that happen you have to set up some sort of payment method for your RRIF account.

Some RRIF payment options:

The government rules say that you have to withdraw the mandatory amount from your RRIF by Dec 31 of that year.  How you get your payment is up to you.  You should check with your financial institution but here are some options that you will probably have available to you:

  • Payment frequency – Do you want 1 lump sum payment at the beginning of the year?  Or 1 payment on Dec 31?  Would you like 12 monthly payments or some other option such as weekly payment?  Just ask.
  • Payment form – You can get the money as a cheque or EFTed to your bank account.  You can also get it transferred to an open or TFSA account in the same institution.
  • Withholding tax – Unlike a RRSP where there are set minimum percentages for the withholding tax depending on the withdrawal amount, there is no minimum withholding tax on the mandatory withdrawal amount, so you can elect to not have any withholding taxes taken from the withdrawals.  If you take more than the mandatory amount then there are minimums, which is the same as a RRSP withdrawal.  In either case you can (and probably should) ask the company to withhold a higher percentage.  The amount withheld will create a tax credit on your next tax return but you could still owe more money on it especially if you have other income sources.

More than one RRIF account

If you have more than one RRIF account, the mandatory amount has to be taken out of each account.

What if I don’t want a RRIF account?

No problem – just use the money in your RRSP to purchase an annuity before the end of the year you turn 71 and you will be good to go.

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{ 100 comments… read them below or add one }

51 Richard

Someone at a retirement planning seminar my wife attended said that all funds left in RRIFs after the holder’s death is claimed by the government. Could this possibly be true? Don’t RRIFs have beneficiaries like RRSPs?

52 Mike Holman

@Richard – That is definitely not true.

53 Cathy Munroe

How much can I withdraw from a RRIF if im still working, and how much can i make before im tax on this amount..I am 65 and still working part time?

54 Mike Holman

@Cathy – You can withdraw as much as you want from the RRIF account anytime you like. All withdrawals are taxable income.

Check out the tax calculators over at taxtips.ca to find out how much money you can make before paying tax.

55 Graham

RE: Income Splitting and RRSP/RRIFs

I converted my RRSP to a RRIF in Dec 2010 at age 71. My wife still has two years before she has to convert. (her RRSP is about 1/2 of my RRIF) I therefore have no RRSP room, but my wife could still make contributions.

If I understand the rules, I could contribute to my wife’s RRSP. But would that make sense? I would be using money that has just been taxed when I withdrew it from my RRIF and then it would be taxed again when she withdraws it.

We can use the new income splitting rules. Is that the best way to try and even out our taxable income?

I presume that there is no way to transfer directly from my RRIF to my wife’s RRSP?

56 Mike Holman

Graham – You can’t contribute to your wife’s RRSP. It’s not allowed. The money for contributions has to come from her earned income.

As you point out, it probably wouldn’t make much sense to withdraw from the RRIF and contribute to her RRSP anyway.

I would definitely suggest using the income splitting rules – that’s what they are for.

No, you can’t transfer from your RRIF to your wife’s RRSP.

57 Graham

Mike,
There are spousal RRSP contributions. This link explains how these can be used for income splitting:

http://www.tdcanadatrust.com/planning/investing/spousal.jsp

This except implies that even if you are too old?? you can still contribute to your spouses RRSP. But I don’t know where too old comes in.

However, I would think that even for a spousal contribution, I would have to have earned income and this RRSP room, which I don’t have.

We will continue using pension splitting , but perhaps the spousal contribution may be of interest to couples where high earner is still working.

58 Verna

Mike, my husband and I set up a spousal RRSP several years ago. We wanted to transfer part of it to a RRIF as we are both 60 and have just retired. My investment firm says that the whole amount of the RRSP must be rolled into a RRIF and then if we want we can roll a portion of the RRIF back to a RRSP. The first deposit to the RRSP was made in 2005, so this money is not subject to withdrawal fees. Rolling the whole amount to the RRIF and back to a RRSP means we start all over again with the withdrawal fees. Is this the way all companies operate?

59 Vendi

I’m now a US resident. Can I elect to have no withholding tax or at least a lower withholding tax than the 25%? What is the max amount I can withdraw from a RRIF? And how often can I do that?

60 Kaye

When you transfer stocks from a lif or rrsp account to a tfsa or non-registered account how do you declare the value for taxation purposes? What is involved in transferring stocks rather than selling them from a registered to a non-registered account?

61 Frank

I have a REGOP pension plan, and was wondering when I should transfer my RRSP to an RRIF if I forsee getting 65 to 70% of my salary when I retire in a few years? I am presently 51 years old and will probably retire in 12 to 14 years.

62 Brian

What is better, a LIF or RIF ?

63 diane

I am turning 65 this year and would like to transfer money from my rsp to a rif to be eligible for pension credit. How much should I transfer- $14,000 which equals 2000 a year for 7 years . Can I transfer smaller amount and just keep adding to it.
thanks

64 Mike Holman

@diane – You can do it either way, but watch for potential transfer fees.

If it was me, I would just transfer $14,000 and be done with it.

65 John Edwards

I am now receiving money from a RRIF. However my bank no longer provides me with monthly statements of its value or the mix of investments. Nor do I have a contact name to get information from.

I would like to change the investment mix. Can this be done?
In future I may change the withdrawal amount and frequency. Is this somehow done through my bank?

Why has my bank suddenly gotten so silent because it is now a RRIF? When it was an RRSP they were all over me to invest more and provided me with all the details on line, but no more.

I assume they are still charging me for the privilege of having one? I don’t know. I’m a mushroom.

66 Mike Holman

@John Edwards – You should still be receiving statements from the bank.

They would have transferred your RRSP to a different RRIF account, so perhaps you just need to get the new account setup online.

I would call the bank you deal with. Go to their webpage and call their main contact number. You don’t need a specific person to talk to.

67 e schembri

People use RIF and RSP as a substitute for RRSP and RRIF but CCGA does not use those terms. Is it possible they might have different connotations than their counterparts?

68 Mike Holman

@e schembri – No. RIF = RRIF and RSP = RRSP.

69 John

What happens if I want to open an RRIF with some of the funds I currently have in a LIRA, being a non-resident and over 55? Can you give me options of how I could qualify for either no witholding tax or, witholding of less than 25%?

70 Anne

I turned 65 last year and have RRSP’s; my husband will be 65 next year and also has RRSP’s. What would the benefit be for us to transfer to RIF’s now as opposed to waiting until we are 71?

71 Herman

I have 2 different RRSP`s Do I need to transfer them both to RRIF`s the same time or year? What do I need to take out every year? I am 66 now and would like to leave it or them as RRSP as long as I can, and then take out as little as possible every year.

72 Lynn

I note that withdrawals from an RRIF can be made in many ways, ie weekly, monthly, annual lump sum, transfer to TFSA, etc. Does an institution charge every time you make a withdrawal or transfer from your RRIF?

73 Mike Holman

@Lynn – It depends on the institution. Some charge for every withdrawal, some allow a certain number of free withdrawals.

There is also a difference between scheduled and unscheduled withdrawals. If you set up a withdrawal schedule for say twice a month – there (hopefully) won’t be any charges. If you put in a manual request (ie a letter) asking for two withdrawals per month, then you might be more likely to be charged.

Best thing is to contact your institution to learn their fee schedule.

74 Patti

When I early retired At 54 from BC government I transferred my pension to my bank & it went into a “locked In LIFs”. So when I turned 55 I thought I could start drawing enough to contribute towards my living. Not so. I could only take out 6% which was a measly $4000 a once a year. Had I known this was going to happen I would have left it in my BC Pension as did other people who retired at the same time. They are getting a fair draw every month-a lot more than me! So I had ended up with 3 LIFS and every year they send my stipend in June.

I noticed this June they had changed all 3 Lifs into RIFFS and I am now 59. When can I have access to enough to make a difference in my living? I had no idea these funds would be doled out to me by my bank. Money I had earned and worked a long time for. My pension was lower than it should have been because I had gone on part-time. When I left my job I recd a check for $48,000 for time served and $80,000 was put in my bank. I hate all the LIFS-LIRAS-RIFFS etc I know the LIFS & LIRAS are locked in. Are RIFFS? Thank you

75 Mike Holman

@Patti – RRIFs are not locked in.

76 Patti

Thanks for your quick response Mike. Does that mean I can begin drawing from them?

77 Mike Holman

@Patti – Yes, it does. Don’t forget there will be withholding taxes and those taxes don’t necessarily correspond to the rate of tax that you will eventually owe on the withdrawals.

78 Judy

I turned 65 in June this year, but plans changed and I continued working until Oct. I had my CPP payments postponed, and plan to have them start in Jan. 2013 (so I don’t add to my 2012 taxable income). Would it be wise to convert my RRSP’s to RRIF’s now (I understand the investments within them doesn’t change), and start withdrawing some of the money from the RRIF’s in 2013 when my income will consist of OAP and CPP payments only. I understand that there will be withholding tax depending on the amount I withdraw. Since I won’t be withdrawing all of the funds in the RRIF’s, would I be able to take advantage of the Pension Credit?

79 Jack

I will turn 71 in 2014 and will convert my RRSP into a RRIF. My wife will turn 61 in 2014 and will continue to work. Are there special rules regarding the minimum withdrawal from my RRIF because of our age difference?
Thank you

80 catherine

Mr Holman:
Thanks so much for your very educational and informative article : Rules for converting your RRSP to a RRIF. I learned so much from that.
My question is:
You noted that “you don’t have to sell the actual investments in your RRIF to complete a withdrawl from your RRIF”
If I hold stocks/equities in my RRSP and at age 71 transfer to a RRIF account, how would I be able to withdraw the minimum payment from my RRIF annually without having to sell some of my stocks? Where would that minimum amount of money derive from without selling some units of some of my equities? Of course I wouldn’t want to sell the stocks at a less than optimum time during the course of the year?

Thanks for the information
Catherine

81 Freda

I am 66 years old, I used $20,000 of my rrsp to purchase a home in 2008
I understand that I have 15 years to pay that back, how does that affect the RRIF if I have not paid the full amount back to my RRSP?
Thanks

82 William

Hello,
I will be 71 this year and my wife will be 4 years later. What would be pro and cons to convert our RRSP to RRIF this year or 4 years later? Thanks.

83 Mike Holman

@William – If you want to keep more money in the RRIF longer, than wait 4 years.

It really depends on your financial and tax situation and what you want to do.

84 Mike Holman

@Freda – At the end of the year you turn 71, you have to convert your RRSP to a RRIF. You can either pay off the outstanding rrsp home buyers loan before that happens or you will have to declare the entire outstanding home buyers amount as income in that year.

85 Mike Holman

@Jack – Yes, when making RRIF withdrawals you can elect to your own age or your spouses age to determine how much the minimal withdrawals are. Do this when you set up the RRIF account.

86 Mike Holman

@Catherine – Some institutions will allow you to do a transfer-in-kind of assets from a RRIF account to a non-registered account or even a TFSA account. This works fairly well if you have mutual funds in your RRIF.

Check with your financial institution to see if they have something like this set up.

http://www.abcsofinvesting.net/transfer-in-kind/

87 Mike Holman

@Judy – I can’t answer your main question. It might be a good idea or it might not be.

You can take advantage of the pension credit by withdrawing $2,000 from your RRIF account each year. It doesn’t matter if you aren’t withdrawing all the RRIF money or if you still have some money in an RRSP.

88 Mike Holman

@Lynn – There are different withdrawal fee schedules for different institutions. You will have to check yours. I would suggest that you should be able to make at least one free withdrawal per year and hopefully more, especially if they are scheduled (ie once a month).

89 Mike Holman

@Herman – You can convert your RRSPs to RRIFs anytime you like and they don’t have to be done at the same time. At the end of the year you turn 71, your financial institution will likely force you to convert any remaining RRSP assets to a RRIF.

There are minimum amounts that have to be withdrawn – your financial institution will let you know what they are. You should be able to choose the ‘minimum’ or ‘mandatory’ payment option when you set up your RRIF.

90 Mike Holman

@e schembri – No – RRIF = RIF and RSP = RRSP.

@John – You should check with your financial institution.

@Anne – If you don’t have any pension income that qualifies for the pension credit, then having some money in a RRIF and withdrawing $2,000 per year can save some taxes. Another benefit is that if you are planning to make regular withdrawals – most institutions will allow you to do this from a RRIF, but not an RRSP.

91 researcher

Thank you very much for this informative article.
I require clarification :
You stated ” Rules for converting RRSP to RRIF
You have until Dec 31 of the year when you turn 71 to convert the account to a RRIF. ”
Then in response in number 84 you state ” At the end of the year you turn 72, you have to convert your RRSP to a RRIF. ”

Is 72 years of age only applicable when money was used from rrsp to purchase a home ?

Thank you

92 researcher

You stated “If you have more than one RRIF account, the mandatory amount has to be taken out of each account.”
The above causes me concern due to my lack of knowledge regarding RRSPs.

I have numerous separate no risk type RRSPs with different maturity dates ( ie year 2014, 2015, 2016, 2017 ) which are all held within one in Financial Institution member account.

I will be 71 years of age in year 2014 , thus will be required to transfer to RRIF and mandatory withdrawal completed in 2014.

RRIF withdrawal in year 2014 as I require the income tax pension credit(s) due to year 2014 income will consist of OAP and CPP payments only

Due to the fact that all RRSPs are held under one account number under my name that this is the definition of “ one account” which will become one RRIF account upon transfer ?

Thank you in advance for your assistance

93 Mike Holman

@researcher – Sorry, I made a mistake when I mentioned year 72 for RRSP conversion. I’ve fixed the comment. The RRSP has to be converted to a RRIF by Dec 31st of the year you turn 71.

#2 – Yes, that is one account. It’s important to understand the terminology – an “RRSP” is an investment account. The investment products you buy (ie GICs, mutual funds) are not RRSPs, but can be purchased within an RRSP account.

In my article I was talking about the situation where you might have RRSP or RRIF accounts at different institutions which are considered different accounts.

94 Freda

Hi Mike,
Do you get the same tax benefits when you are putting money back into your HBPlan? as you do when you contribute to your RRSP?
Thanks
Freda

95 Mike Holman

@Freda – No, when you are repaying the HBP, there is no tax benefit like when you are making a contribution to an RRSP.

96 researcher

Thank you very much for the clarification and additional information.
Very helpful
Greatly appreciate the sharing of your knowledge/expertise.

You have provided information which has saved money, time ,the income taxation legislation and the ability to make the correct decision(s) applicable to this individual which affects financial situation for future years.

I realize the RRIF mandatory withdrawl must be as first payment is December 31st in the year you turn 72.

Again, thank you very much
(Also, it is appreciated that other individuals post comments with suggestions, personal experience, etc.)

97 Larry

I have to convert all my RRSP,s to RRIF,s this year. The spousal RRSP,s that I contibuted to are in my wifes name. These can be converted to RRIF,s when she turns 71. Is this correct?

98 Dave

I understand that it is beneficial to have three non-contributing years before withdrawing money from an RRSP. Does the same rule hold if one rolls the RRSP into a RRIF, or by doing so can one avoid the need to wait three years?

99 Abe Paul

I was born in 2943. I assume that means I need to transfer my RSP funds to a RIF by end of next year and make my first mandatory withdrawal by end of 2015. Is that right?
I will also have about 4 payments left under my HBP at $1333 per year.
My intention was to withdraw about $5000 each year from RIF, which presumably is taxable income.
If I do nothing in 2015, would this be considered the equivalent of withdrawing $5333 from RIF, or do I need to deposit the $5333, before making a mandatory withdrawal, even if it happens to be the same $5333 amount?

100 Ron

My mom has been called into the bank to meet with a FA, as she currently has approx $29,000 in RRSP’s. She turned 65 back in Feb. When she divorced with my dad she was given ownership of the house. So years back she made a large RRSP withdrawal and paid off the rest of the existing mortgage. I guess she got tired of making the mortgage payments on her own. My question is with regards to the $29,000 left in RRSP’s. Would it be a wise move to transfer all in-kind into a RRIF, TFSA, or just leave the RRSP until 71. She still works part-time and making less than $19,000.

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