What is a RRIF?

A registered retirement income fund (RRIF) is a great way to use your registered retirement savings plan (RRSP) savings to generate a retirement income. It allows you to continue to have taxes deferred on your investment growth.

You may know that you’re required to move your money out of your RRSP by December 31 of the year in which you turn 71. A RRIF is a good option for those who want to continue to control how they invest their savings, while drawing an income.

How does a RRIF work?

A RRIF is one option that you can use to convert your RRSP savings to income. With RRSPs, you must choose one of three options by the end of the year you turn 71:

  1. Convert your savings to a RRIF
  2. Purchase an annuity
  3. Withdraw the funds from your account

A RRIF can hold various types of investments, including:

  • Mutual funds,
  • Segregated funds (GIFs),
  • Insurance GICs (guaranteed insurance contracts),
  • Guaranteed investment certificates (GICs), and
  • Stocks and bonds.

In many ways, a RRIF works like an RRSP in reverse. Instead of putting money in, you take income out. You do have to make a minimum withdrawal every year.

3 reasons to transfer your RRSP to a RRIF

Take out as much as you want from your savings

A RRIF provides flexibility to take out the required minimum amount or more if you ever need extra cash. There’s no maximum withdrawal limit.

Grow your investments through retirement

Although withdrawals from your RRIF are taxable, the investments inside it continue to grow tax-deferred through retirement.

Transfer your retirement savings to your spouse via a tax-free rollover

In case of your death, your spouse or common-law partner can inherit the assets inside your RRIF – tax-free. 
 

RRIF withdrawals and taxes

The tax-deferral* you enjoyed with your RRSP continues with your RRIF. 

Plus, you’re more likely to be in a lower tax bracket in your retired years. This means you’ll pay less tax when you withdraw funds from a tax-deferred account like a RRIF. 

*Tax deferral means you won’t pay tax on investments growing in an account until you take money out.  

RRIFs have minimum annual withdrawals based on you or your spouse’s age. You must continue to make these minimum withdrawals until no funds remain.

Review the Canada Revenue Agency (CRA) table showing the minimum withdrawal factors for RRIFs. If you have a RRIF through Sun Life, we’ll help you calculate your minimum withdrawal dollar amount every year. As you draw down your savings, the rest of your money can keep growing in your RRIF, tax-free. 

The CRA requires you to convert your RRSP to a RRIF no later than the end of the year in which you turn 71. You must start withdrawing money from your RRIF in the calendar year after you open it. For example, if you open a RRIF in 2022, you must start withdrawing from it at some point in 2023. 

If you don’t need it right away, there are ways to make the most of your required RRIF withdrawals. For example, after you’ve paid tax on your RRIF withdrawal, and if you have the contribution room, you can put the after-tax money into a tax-free savings account (TFSA). This way, it can continue to grow and be withdrawn tax-free when you choose.

You could also put the after-tax money into non-registered investments. However, be prepared to pay tax every year on the non-registered account’s investment growth. 

Your income needs might differ from the minimum withdrawals required by the CRA. Withdrawing too much on an annual basis could lead to outliving the savings in your RRIF. Withdraw too little, you might miss out on your retirement plans due to the fear of running out of money.

We can help you create a retirement income plan and determine how much you should withdraw from your RRIF.

How do you transfer funds into a RRIF?

You can fund your RRIF in several ways. Here are some of the most common: 

  • By transferring money from your RRSP or from another RRIF you own.
  • By transferring money from your spouse’s RRSP or RRIF at your spouse’s death, or if you separate or divorce from your spouse.
  • From your employer’s deferred profit-sharing plan (DPSP). 
  • From your spouse’s employer’s DPSP if your spouse has died, or you’ve separated or divorced.
  • By transferring unlocked money from a pension plan.

If your RRSP is with Sun Life, we’ll notify you when it is nearing the conversion deadline. At that point, we may offer you various retirement income options. 

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When should you convert your RRSP to a RRIF?

No one can own an RRSP after December 31 of the year they turn age 71. Legally, they must do something before that deadline, or risk having to take the money from their RRSP into income and pay tax on it all at once. By directly transferring their RRSP to a RRIF, they will defer tax. 

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Can you convert your RRSP to a RRIF before you’re 71?

Yes. You can open a RRIF at any earlier age.

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Already have a Sun Life RRSP or RRIF, and have questions?

If you bought a retirement plan through a Sun Life advisor, then speak to them directly to learn more.

If you have a Sun Life RRSP through your workplace, speak to your plan administrator.

If you participate in your employer’s RRIF plan or in the Group Choices Plan, contact the Client Solutions Centre at 1-866-733-8612.

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Need help getting started? Get expert advice.  

If you’re thinking about converting your RRSP assets into a RRIF, consider talking to a Sun Life advisor first.

A Sun Life advisor can help you:

  • ensure you’re not taking a huge tax hit when you withdraw funds from an RRSP or a RRIF,
  • make sure you have enough income to support your retirement years, and
  • create a plan that meets your goals and needs.

An advisor can also answer questions and address any financial concerns you may have. You can connect by phone or Zoom at a time that’s right for you.

To find an advisor near you, enter your postal code: 

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