Mandatory Withdrawals – RRIF 101

Mandatory account withdrawals – sounds fierce but that’s what a Registered Retirement Income Fund (RRIF) is partly about.  This is my favourite definition for a RRIF:  it’s like a Registered Retirement Savings Plan (RRSP) in reverse.

Here’s my primer for Registered Retirement Income Funds (RRIFs):

  • You can choose the types of investments to hold in a RRIF; individual stocks, Exchange Traded Funds (ETFs), mutual funds and more.
  • You don’t have to start a RRIF when you retire but you must collapse your RRSP in the year you turn age 71, so rolling RRSP investments into a RRIF is one option for you.
  • Like the RRSP, you don’t pay any tax on the money earned from investments inside the RRIF.
  • You pay tax on the money withdrawn from a RRIF.
  • You cannot contribute money to a RRIF; it’s a money-goes-out account.
  • Once the RRIF is established you are forced to make minimum withdrawals, meaning you may need to sell investments inside the account to meet those minimum withdrawals.  At the time of this post (2014) here are the requirements:


RRIF Withdrawal*


RRIF Withdrawal*





























































*Different rules applied to RRIFs established before 1992.

**You can use $2,000 associated with the pension income tax credit after age 65.

***Thinking about rolling over your RRSP to a RRIF?  That could work but let’s look at an example.  For a newly minted $500,000 RRIF you’ll be forced to withdraw a minimum of $37,400 and you’ll be taxed on that income.    The following year, you’ll be forced to withdraw more money and you’ll be taxed on that as well.

  • You can decide the frequency at which you want money withdrawn from your RRIF.
  • By design, RRIFs provide income for both the annuitant and his/her spouse.  This means the minimum withdrawal percentage can be based upon the younger spouse’s age to reduce the required minimum withdrawal percentage.
  • Referenced above, you must pay tax when you take money from your RRIF; money is considered taxable income in the year it is withdrawn and must be added to your income for tax purposes.
  • You can withdraw more money beyond the minimum forced amount but you’ll be taxed on that money as well.
  • Consider income-generating investments inside your RRIF; because you’re forced to withdraw money from this account.
  • Money left in your RRIF when you die can go to a *beneficiary.  *Read more here.

Thoughts from My Own Advisor:

I think RRIFs fill a great space in many retirement plans but I’m far from sure how I will use this account decades down the road.  This is my current thinking:

  • Mid-50s, early retirement if possible, withdraw some money out of RRSP.
  • Use tax-inefficient money in retirement first (withdrawals from registered accounts like the RRSP), 2) use pension income for living expenses, and 3) keep tax-efficient investments intact for as long as I can (investments inside non-registered and Tax Free Savings Accounts (TFSAs)).
  • Keep some investments inside RRSP, move assets into RRIF, use this money for pension income tax credit (if still available) after mid-60s.

I’m taking some time this year to learn more about RRIFs to help my parents make some decisions.  As I get older and my understanding about taxes and investments matures hopefully this knowledge can apply to us.

Do you have plans to use a RRIF in retirement?  Are you using a RRIF now?  If so, how?

30 Responses to "Mandatory Withdrawals – RRIF 101"

  1. I think the overall goal is always to reduce your tax bill without sacrificing your standard of living. If you know you’re going to be receiving lots of taxable income in retirement from CPP, OAS, RRSP, pension plans, then you can look at withdrawing from the RRSP before all that income kicks in, to lower your overall tax liability in retirement.

    Don’t forget about clawbacks either. You can forget about avoiding GIS clawback since that’s for seniors with no income, but you can try to withdraw amounts from the RRSP so that your total income is below the clawback level for the OAS from age 65-70.

    I think you’re on the right track with your thoughts at the end.

  2. Mark, nice summary.

    You say you plan to “Use tax-inefficient money in retirement first (withdrawals from registered accounts like the RRSP)”. However, that money is only inefficient in the sense your TFSA and non reg accounts are not subject to tax. However, the key is to manage your tax rate throughout retirement and it may be more efficient to mix and match to smooth your retirement tax rate depending upon your other pension income sources.

    1. Thanks for the great comment Mark.

      I now see I probably could have worded that differently. I guess I’m implying that my TFSA is very tax-efficient and my non-reg. holdings are fairly tax-efficient, since it will be mostly dividend income, so next to capital gains it’s almost as good as it gets using a non-registered account and the investments in it.

      Your point about managing my tax rate throughout is exactly my goal, so you read my mind, just not sure how to do it all yet 🙂

      I do see a mix-and-match strategy for me but I’ve got a few decades and so much could change in the meantime.

  3. My mom is nearing retirement age (she plans to retire early), so I’ve been looking more into all of her options. Thanks for the post about RRIFs. I don’t know what I’ll do because I still have 30-40 years in the working world. Things could change drastically by then.

  4. thanks for the post mark. my wife and i converted our rrsp’s to rif’s in january. we don’t have pensions other than oas and cpp. we are trying to live off the dividends and our main reason for converting was to income split.( only withdrawals from rif’s can be income split). i was converting just part of my rrsp at first — just the amount i was withdrawing but i made a mistake. i was withdrawing capital instead of converting it all and withdrawing only the income. live and learn!

  5. Tall_Gal_in_Toronto · Edit

    REF: **You can use $2,000 associated with the pension income tax credit after age 65.
    Can someone explain how this works? (I have several years till age 65, so I’m not familiar with this. Thanks.

    1. Thanks for your question.

      Although I’m no tax pro, I believe using a RRIF, you can withdraw $2,000 per year essentially tax-free (via the pension tax credit used at the time of tax filing). This is because the RRIF withdrawal is considered pension-like income.

      1. The Blunt Bean Counter · Edit

        Mark, not exactly right. The $2k RRIF income is taxed at marginal rates, the $2k pension credit is a credit not an expense.Thus you would be taxed on the $2k at the diff between your marginal rate and the credit, in Ontario, could be up to 25% or so diff

        1. Thanks for correcting me. I thought if you were in a low tax bracket, even when RRIF withdrawals are income, you would be close to zero tax? Maybe it’s only the federal tax that’s returned and some provincial tax? If you’re in a high tax-bracket that credit wouldn’t be very much based on your MTR. All this to say, I have much more to learn 🙂

          1. in simple terms does this essentially mean that your individual exemption is increased by $2,000. if you the income is from a pension? (i.e.: a rif ) or does it mean the first $2,000. in pension income is tax free? i am having trouble wrapping my head around this!

          2. My understanding is the credit applies to the first $2,000 Gary or this:

            You (the pensioner) will be able to claim whichever amount is less: $2,000 or the amount of your eligible pension income, after excluding amounts allocated to your spouse or common-law partner (the pension transferee).


            If you are 65 or older, RRIF withdrawals are eligible for the pension amount tax credit.

            Taxpayers receiving certain pension income may claim both a federal and provincial/territorial pension income tax credit. This is a non-refundable credit, but can be transferred to a spouse or common-law partner if it is not fully used by the taxpayer.

            So…because RRIF withdrawals are eligible for the pension income tax credit, it may be useful to convert at least a portion of RRSPs to a RRIF in the year in which the taxpayer turns 65. This means the amount converted from RRSP to RRIF should be sufficient to allow withdrawals of at least $2,000 per year for 7 years (age 65 to 71 inclusive), until all RRSPs must be converted to RRIFs.

            The min. RRIF withdrawal at age 65 = 4%. So to get that $2,000 out of your RRIF at age 65 AND apply the credit, the math says you need $50,000 in your RRIF. (4% min. x $50,000 = $2,000).


  6. Tall_Gal_in_Toronto · Edit

    Subject:” You can use $2,000 associated with the pension income tax credit after age 65″
    I still don’t get it either. Is there a tax professional out there who can clarify this? Thanks.

    1. I will try and explain, even though I’m not a tax pro 🙂

      You know from my post that RRIF withdrawals are income. Income is taxed at your MTR (Marginal Tax Rate). CRA treats money out of a RRIF or an annuity as pension income. So, the first $2,000 pension income is available for a tax credit when you file your taxes.

      So far so good I hope…again, I’m not pro so hang with me.

      This pension tax credit means (with Mark Goodfield’s help) that I believe you earn a 15% credit against your federal taxes (worth $300; 15% of $2,000) plus whatever provincial/territorial credit applies.

      I hope that helps?

  7. Yikes, mandatory 20% withdrawal at 94+! This makes tax planning (ie. allocation to TFSA) even more important. In some cases it may make sense to take withdrawals in your 80s simply to be taxed in that year (lower rate) and then put into TFSA rather than to leave in the RRIF and face higher marginal rates.

    Regarding the $2K, I believe it works like this: $2k is taxed at your marginal rate as income (more if your marginal rate is higher) and then there is a credit (ie. 15% x $2k = $300). Net tax is the difference between the two. The higher the marginal rate, the more you’ll pay. Mark mentioned the big difference in Ontario – I believe this would only be if you were in the highest marginal rate and live in Ontario

    Hope that makes sense

    1. That’s the way I see it as well Dan – $2k is taxed at your MTR but then you get a federal credit PLUS a provincial/territorial credit. Mark provided some help below as well.

      I think I’ll keep some money in RRSPs until age 71, but not much!

  8. Tall_Gal_in_Toronto · Edit

    Great posts. So, does this mean that it is best to open a RIF at age 65 (and not wait till age 71) and transfer $50K (or more) of your investments to it? Then, at age 65 start taking the minimum RIF withdrawals per the table in the article. (Age 65, 4.0%). The justification is the benefit of the tax credits that offset (and perhaps nullify) the income tax owing on the withdrawals? If so, then one would have to do a calculation to transfer more than $50K, so as to cover planned 7 years of withdrawals. Or, can one, each year transfer some funds to the RIF to that that year’s min. withdrawal is exactly $2K?

    1. In all depends on the math….

      I would say if you’re in a low- to modest-tax bracket, there is little point in keeping RRSPs in tact until age 71 when you’re forced to convert the account into a RRIF.

      Take a $400,000 RRSP at age 65 and based on growth, a $500,000 RRSP at age 71 in my example below.

      RRSP > RRIF age 65 = $16,000 RRIF mandatory withdrawal. A modest RRIF income but combined with CPP and OAS, and maybe a pension, not a big tax hit depending upon on how that all adds up in an income year.

      RRSP > RRIF age 71 = $37,400 RRIF withdrawal. A higher RRIF income but combined with CPP and OAS, and maybe a pension, likely a larger tax hit since this investor might be in a higher tax bracket.

      The justification of a RRIF around age 65 is to get the money out to avoid moving into a larger than necessary tax bracket. A side-benefit is the application of the pension tax credit for RRIFs at age 65. This means, as you state, one would have to do a calculation to transfer more than $50K from RRSP > RRIF.

      See Don’s comment for this post: “I also decided to convert $120k to a RRIF at age 65 and withdraw $20k/yr. This ambitious withdrawing will ensure I shouldn’t have any OAS clawback and have a lower net income later to also protect some of the old age deduction.”

      Again, just some thoughts, certainly not a plan for you or to be taken as gospel!

  9. I found a really cool tax calculator that has really helped me out in my RRSP withdrawals and converting to a RRIF planning. It doesn’t have all the deductions like charity and medical but it is really easy to fill in to do relative comparisons. It can also be used to see the effect of the $2k pension income credit.

    I ran a number of iterations with different RRSP/RRIF amounts changing my date of birth to simulate the various key ages. As a result of this, I decided to withdraw quite a bit more from my RRSPs in the next 4 years (I’m 61 years old) and take the tax hit now ($27k/yr from my RRSP and $41k/yr from spousal). I also decided to convert $120k to a RRIF at age 65 and withdraw $20k/yr. This ambitious withdrawing will ensure I shouldn’t have any OAS clawback and have a lower net income later to also protect some of the old age deduction.

    Very interesting exercise and really worth doing. Here’s the link:

    1. Thanks for the great comment Don G. has a few calculators I recall, they work very well.

      Although the math will provide the truth, I suspect most retirees are better off winding down their RRSP before the RRIF age requirement, and converting to the assets into non-registered and TFSA income.

      Avoiding OAS clawbacks is a great thing. Smart stuff.


      1. Hey Mark

        Unfortunately/fortunately (depending upon how you look at it), I currently have over $400k in my RRSP and over $540k in the spousal. They’re both heavy on dividend income with a 5% overall yield. Throw in some capital gains (which have been quite large lately) and it’s really hard to get ahead on the winding down.

        All in all, a great but really interesting problem to have 🙂


        1. Sounds like you have a GREAT problem to have, a high bracket tax in retirement. 🙂

          We’ll see what the future holds, but I hope to have a couple hundred thousand in the RRSP before my mid-50s and around that time, I can retire early. The pension plan will kick-in with a bunch of early withdrawal penalties around 55 or 60, but then again, I won’t be working. I will wind down the RRSP early, moving some assets to a RRIF. I’ll keep some assets in a RRIF until age 71. Basically, spread money across accounts.

          I basically want to design the withdrawals such that there is no OAS clawback, even though I struggle with this account for some retirees. It should be exclusively reserved for seniors needing security. So, I’m not convinced OAS the way it is structured today will be around in another 25 years when I want to draw on it, so I’m trying to save and invest by not counting on any CPP and OAS payments.

          Are you invested in many dividend paying stocks Don? US stocks and CDN stocks? Curious how you’re structuring your assets to keep income flow for retirement and gather some capital appreciation as well.


          1. Tall_Gal_in_Toronto · Edit

            This strategy of setting up a RIF early, at age 65, makes perfect sense. It’s a wonder that it’s not promoted widely to the masses. I’ll also look forward to Don G.’s response.

          2. I think setting up a RRIF early (65) will make sense for my parents as well. Need to talk to them about that, hence all the articles about RRSP > RRIF, RRIF 101, Cashing out your RRSP…of late. Lots to know and consider! Thanks for being an avid reader.

          3. Hey Mark

            Thanks for the comments. Definitely a nice problem for me to have.

            I’m collecting CPP and it looks like it will be around for a while. I’m also thinking OAS will still be around for at least a few more years. I can actually survive without it so it’s a nice bonus.

            I just invested in mutual funds until 2009 and didn’t pay much attention before 2002. I concentrated on maxing out my RRSPs since 1984 and paying off the mortgage (done in 1992). Most of my serious saving was done since 2000 and it really snowballed since 2009. (a 2.5 to 3 times increase since then).

            I’m a DIY investor so everything I’ve come up with is from what I’ve read. I suspect it is a bit “unconventional”, I’m actually thinking about doing a review with an independent fee only advisor.

            Anyway, here’s some details on my investments. I’ve gone all in on Canadian dividend paying stocks that generate $81.6k of dividends per year. I sold all my regular bond funds and ETFs in 2012 and just hold the PH&N high yield bond fund.

            I’ve got a total of 4 mutual funds, 24 stocks, and 1 ETF (ZWB). The stocks are a mix of dividend growers (eg: ALA, AQN, BCE, BNS, BTE, EMA, ENF, GEI, IPL, KEY, PPL, etc) and high yielders (AX.UN, CPG, DIR.UN, HR.UN, LRE, REI.UN, WCP, etc). Of the 24, 18 have had a dividend increase in the last year.

            I also have a non-reg account for both me and my wife and of course, a TFSA each (love those things. I wish they would have been around earlier as it would have made things easier on the planning side).

            The plan for cash flow is to live off the dividends and CPP and not touch the principle (I don’t have any company pension plan) I am just going to juggle the RRSP cash withdrawals as well as some in kind transfers to the non-reg accounts starting with the REITs (I like the no tax on Return of Capital) and some in kind transfers to the TFSAs (higher yielding stocks).

            I think that does it but let me know if you have any questions.


          4. That’s what I’m planning to do, save and invest so CPP and OAS are bonus income streams in retirement for us. That’s the goal anyhow for the next 20 years of saving and investing.

            That’s the thing about investing isn’t it, nobody wants to save you money, nobody wants you to save your money (just spend) so by default, most of us have to go DIY. Sucks really!

            I sold my bond ETFs a few years ago, thinking they would go nowhere. I was right so far.

            I too, invested in and continue to invest in CDN and US dividend paying stocks. I only generate 1/10th of your income though right now. Wow, $81.6k of dividends per year…..I can dream can’t it? Maybe in another 20 years I can catch up!

            We have many of the same stocks in common: BCE, BNS, EMA, IPL, CPG, HR.UN, REI.UN. I also own all big banks in Canada and DRIP about 6 U.S. stocks. Everything else is indexed. I figure it’s a great one-two investing punch, dividend paying stocks and indexing.

            My wife and I try to max out our TFSAs every year, my is done and now we’re working on my wife’s.

            Based on what you wrote above, I have no doubt you’ll miss a company pension plan in retirement given you’re making $80k + per year in dividends and still some money to withdraw from your RRSP. Very well done Don.

  10. Tall_Gal_in_Toronto · Edit

    Thanks Don G. and Mark for sharing your strategies and specific securities. Achieving $81.6K/yr. in dividends is truly impressive. (Have you considered writing a book?) I just learned something new again! BMO Covered Call Canadian Banks ETF (ZWB) certainly seems like an etf to consider; Excellent performance. Thank you.

    1. Hi Tall Gal

      You’re welcome and thanks for the nice words.

      I think my best move was going heavily into the oil & gas infrastructure companies starting back in 2010 and then adding more last year after the unwarranted spanking with the interest rate talk – ALA, ENF, GEI, IPL, KEY, PKI, PPL. They are all great div payers and most have had huge capital appreciation. I suspect they are due for a correction but something to think about getting into if they do. (if you don’t already hold them)

      I also hold utilities, telecom, banks, and O&G div payers. Basically, I think I would qualify as a “widows/orphans” type investor. Steady as she goes. I’ve went through a trading phase. It was fin and I did well but it’d too much work to do all the time. I am now planning on just holding all of the current mix.

      Good luck with all your investing.


  11. Tall_Gal_in_Toronto · Edit

    I found 2 articles on the Retire Happy web site regarding the $2000/year RIF withdrawal.

    Here is part of one article;

    Tax planning strategies involving the pension income credit- If you are over the age of 65 and you are not part of a superannuation or pension plan, you may be able to create qualified pension income to save taxes.

    1. Transfer RRSP to a RRIF. At age 65 transfer $12,000 to a RRIF and take $2000 out per year from age 65 to 71(inclusive). This essentially allows you to get $2000 out of your RRSP tax-free for 6 years. Whether you need the income or not, it is an opportunity you do not want to miss.

    2. Transfer Locked-in Retirement Account (LIRA) assets to a Life Income Fund (LIF) and then annuitize. In most cases, you can transfer your LIRA to a LIF or LRIF once you reach the age of 55. To make the most of this strategy, you must transfer the LIRA to the LIF and then to an annuity in order for the income to be reported as eligible pension income. If you purchase the annuity directly from the LIRA, the annuity is considered a RRSP annuity, which only qualifies for the pension income credit after age 65

    3. .Buy a GIC from a life insurance company. If you do not have any qualifying pension income, are age 65 or over, and do not want to draw down your registered assets at this time, there is a relatively easy way to make a GIC qualify for the Pension Income Tax Credit. Simply purchase a GIC through a life insurance company because it is considered eligible pension income. To determine how much principal you would require to be able to claim the full credit, divide $2,000 by the applicable interest rate for the term you want. For example if you wanted a 5-year term and the current annual rate was 4.0% you would need to invest $50,000 (2000 divided by 4.0%=$50,000).

    4. Transfer of Unused Credit to a Spouse. Unused pension income credit is transferable to a spouse or common-law partner. The ability to transfer this credit should be explored in circumstances where one spouse is earning pension income in excess of $2,000, and the other spouse is not otherwise fully utilizing his or her pension income credit.

    If you are over the age of 65, take a look at line 314 in your tax return to see if you are taking advantage of the Pension Income Tax Credit. If not, consider one of these tax savings strategies.


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