What is Retirement Income Fund (RIF)?
You are now at the age of your retirement and want to start withdrawing from the RRSP (retirement savings account Plan) that you have contributed for years. It is now time to get the fruit of forty years of hard work and dedicated saving.
You will have 2 main options: 1) cash the entire RSP 2) Transfer the RRSP into an RRIF and withdraw the savings in installments.
While Canadians have both options available to them, the majority will choose to transfer their RRSP into an RRIF for income tax purposes. Imagine you have saved over $300,000 into your RRSP and then think about the income tax you will have to pay if you withdraw the entire amount in one year; not the best option unless you really need to have access to all that cash.
Once your RRSP is transferred into your retirement income fund account, you will be able to make withdrawals and use the money during your retirement. The amount saved in RIF can still be investmented to grow further in different investment vehicles such as GICs, bonds, stocks, mutual funds, segregated fundss, etc. Remember, that as long as the money is within RIF, it will grow on a tax-deferred basis.
The only way to open a RIF is to transfer your RRSP into this account; hence contributions cannot be made. It goes without saying that you must also be a Canadian resident.
It is important for you to know that once you have your RRSP in a retirement income fund, you must take out a minimum amount each and every year called minimum income.
How is the minimum retirement income fund withdrawal determined?
Here’s the formula for the minimum income on the RRIF:
1 / (90- age)
For example, if you are 65 years of age, 90 minus 65 is 25. One over 25 is 4%. At 65, you must take out at least 4% of the RRIF balance at the beginning of the year in income. If you had $100,000 in the RRIF, you would need to take out at least $4000.
| Age | 2015 and later | 1992 to 2015 | Pre 1992 |
| 65 | 4.00% | 4.00% | 4.00% |
| 66 | 4.17% | 4.17% | 4.17% |
| 67 | 4.35% | 4.35% | 4.35% |
| 68 | 4.55% | 4.55% | 4.55% |
| 69 | 4.76% | 4.76% | 4.76% |
| 70 | 5.00% | 5.00% | 5.00% |
| 71 | 5.28% | 7.38% | 5.26% |
| 72 | 5.40% | 7.48% | 5.56% |
| 73 | 5.53% | 7.59% | 5.88% |
| 74 | 5.67% | 7.71% | 6.25% |
| 75 | 5.82% | 7.85% | 6.67% |
| 76 | 5.98% | 7.99% | 7.14% |
| 77 | 6.17% | 8.15% | 7.69% |
| 78 | 6.36% | 8.33% | 8.33% |
| 79 | 6.58% | 8.53% | 8.53% |
| 80 | 6.82% | 8.75% | 8.75% |
| 81 | 7.08% | 8.99% | 8.99% |
| 82 | 7.38% | 9.27% | 9.27% |
| 83 | 7.71% | 9.58% | 9.58% |
| 84 | 8.08% | 9.93% | 9.93% |
| 85 | 8.51% | 10.33% | 10.33% |
| 86 | 8.99% | 10.79% | 10.79% |
| 87 | 9.55% | 11.33% | 11.33% |
| 88 | 10.21% | 11.96% | 11.96% |
| 89 | 10.99% | 12.71% | 12.71% |
| 90 | 11.92% | 13.62% | 13.62% |
| 91 | 13.06% | 14.73% | 14.73% |
| 92 | 14.49% | 16.12% | 16.12% |
| 93 | 16.34% | 17.92% | 17.92% |
| 94 | 18.79% | 20.00% | 20.00% |
| 95+ | 20.00% | 20.00% | 20.00% |
You can see that at age 71, the minimum income changes and no longer follows the formula 1/(90-age) formula. At 71, the minimum income amount is predetermined by the government. Generally, as you grow older, the minimum income amount increases.
| Amount of withdrawal | Tax Rate |
|---|---|
| $0-$5,000 | 10% |
| $5,001-$15,000 | 20% |
| $15,000 + | 30% |
The money saved into a retirement income fund (RIF) can be invested in various portfolios and investment strategies to increase the growth of the savings. Finding the right investment strategy and funding can be complicated and overwhelming. Our expert investment advisers are fully qualified to help you plan for your investment goals. By taking your short-term, long-term, retirement, liabilities, and other financial goals into consideration.
At Apluswealth, you can find what investment options are available to you, what strategies are suited for your needs, and how you should take advantage of the RDSP for yourself or your child or your loved ones.
Contact our expert advisors and start your Registered Disability Savings Plan with us today.
Email: Contact@AplusWealth.com