RRIF Withdrawals Explained

RRIF Withdrawals Explained
If you’re nearing retirement, you’ve probably begun to think about how to convert your Registered Retirement Savings Plan (RRSP) to Registered Retirement Income Fund (RRIF). You've saved money in your tax-deferred RRSP for years, but now it’s time to use those funds for your retirement expenses.
While you have the option of withdrawing those funds as a lump sum, you’d be wise to convert the account to a Registered Retirement Investment Fund (RRIF) instead. This is the preferred investment vehicle for retirees.
Like the RRSP, the RRIF is a tax-deferred account that can grow through investment. The difference, however, is that instead of depositing money into the RRIF, you withdraw money over time to fund your retirement.
Essentially, an RRSP is how you save money for your retirement fund, and an RRIF is how your retirement money moves back to your pocket.
Why would you want your money in an RRIF?
You don’t pay taxes on money in your RRIF as long as it stays there. You only pay taxes on what you withdraw each year.
It’s flexible. You can choose how much you withdraw and how often. This means you can change how you use your money based on your individual circumstances, even if those circumstances change.
You can hold various investments, such as Exchange Traded Funds (ETFs), Guaranteed Interest Options (GIOs), segregated funds, mutual funds, etc.
You have some creditor protections in the event of bankruptcy.
You don’t pay any taxes when you convert an RRSP to RRIF.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to schedule your confidential meeting with me.  You can schedule your meeting here: calendly.com/a...
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[@sandiguness7107]

Aaron I am learning so much from you. You do simplify things and I appreciate that. Wished my FA would explain like you. Keep the videos coming. Thank you very much.

[@AaronWealthManagement]

Thanks for your comment and for watching the video. Great feedback and thank you for sharing. I try to simply complex problems with straightforward solutions.

[@AntonioAvila-t4v]

Excellent class for me Mr. David 👍🏼👍🏼

[@marianbhim1q834]

You are superb, thank you for the information on my RRIFF and RRSP.

[@billyrock8305]

Excellent information ✅

[@jacquelinewelch7635]

🐝Thanks for the information very thorough🐝

[@vijaymalczyk946]

Aaron thank you for this information.

[@Darin.Pearson]

His name is David Aaron

[@sachi2733]

thank you David! i want to know if i take the money from RRIF, my income will go up. what do i do so that i m not taxed so much and my GIS does not get affected. very informative video!

[@EricChafe]

Thank you Aaron, great video. I have a partial dependent adult child. when my wife and I die can we transfer the remaining funds in our RRIF 's to him. That way he would have a income after our death ? Again Thank you. Eric

[@VictoriaMorhan]

Hello from Oakville, Ont.

[@celymrivera416]

How much is the maximum withdrawal under RIF❓Thank you 🙏

[@AaronWealthManagement]

Great question. The maximum withdrawal is 100%. Not recommended as that would result in a massive tax bill. Minimum withdrawals have zero withholding tax whereas anything above the minimum will incur a withholding tax. If there is anything I can help you with please feel welcome to contact me. calendly.com/aaronwealthmanagement/discovery

[@investmentinrentalproperti2163]

Hello Aaro Is the $2000 tax credit for RRIF apply if one convert RRSP to RIF at 59(Years old) or this creidt $ 2000 only apply at age 65

[@twmclean1]

Hi Aaron. I retired a year ago at 55 with a company pension and began doing monthly withdrawals from my RRSP this year. What is the advantage converting to a RRIF vs drawing direct from my RRSP keeping in mind marginal tax rate?

[@parkerbohnn]

No withholding tax and at age 65 and onward a 2000 dollar pension tax credit on your income tax.

[@AaronWealthManagement]

Hi Todd, Great question! Just went through this with a new client. A RRIF is typically setup with minimum withdrawals and at age 55 the rate is very low only 2.89% of your RRIF balance. Are your RRSP withdrawals greater than 2.89 percent? You're correct the withdrawals increase your MTR. If you're in a high tax bracket an RRSP meltdown may lessen the amount of tax you pay. It's not for everyone and with the recent volatility many people are not willing to take on the investment loan and subsequent investment deposit. The Meltdown strategy is attractive now given the borrowing cost is high providing a larger deductibility.

[@byrutesyvret890]

Why is all advice never for single seniors? I am 85 and what do I do with $100000 in Riff and taxes . I have tsfa divifends should I ĝet insurañce

[@playbak]

@AaronWealthManagement David, I'm trying to help a parent sort out GICs in their RRIF. If I have laddered multiple GICs, do they have to pay the minimum withdrawal amount on each individual GIC annually? Or can the short term GIC cover the minimum payment for the total RRIF account (allowing 2-5 year GIC's to compound untouched). Thanks!

[@APICSKH]

Did you learn how it works? I have the same question. Thanks in advance

[@playbak]

@@APICSKH Yes, this is what Tangerine told me (I assume most banks operate the same, but you should double check with yours)... Cash does NOT need to be held in RIFF to cover minimum withdrawal. Banks will automatically withdraw the minimum amount from whichever GIC was bought FIRST (the oldest GIC purchase on record), if it doesn't cover the minimum withdrawal amount, then they pull from the second oldest one. GIC duration/length and interest rate % doesn't factor in at all. There are no fees and you can set a date for withdrawal, otherwise it will be sometime near the end of each year. Your GIC's accumulated interest is not penalized from the RRIF minimum withdrawal either.

[@APICSKH]

@@playbak Thank you for detailed info.

[@AntonioAvila-t4v]

Thank you Davis

[@Darin.Pearson]

For those of you calling him Aaron, his name is David Aaron. He says so right at the start of this video. EDIT: I just noticed his name is on the lower left of the screen too

[@AaronWealthManagement]

Thanks Darin. 😀😂

[@uorhun]

Isn't the equation at 8:42 wrong? What happens at age 89 and 90?

[@janhbhugo5085]

How does receiving RRIF withdrawal impact OAS and CPP percentage wise ?

[@AaronWealthManagement]

Hi Jan, Your RRIF withdrawal does not impact CPP. Having too much taxable income can clawback OAS. This Recovery tax begins at $86,912 of taxable income. 15% tax is applied to taxable income above the threshold.

[@ryanm7171]

Withdrawals are allowed for both RRIFs and RRSPs, so what are the advantages of or why would anyone create a RRIF from the ages of 55-64? Just curious.

[@AaronWealthManagement]

Great question and thanks for watching the video. Your correct about withdrawals although the answer is in the tax treatment. RRSP withdrawals are subject to withholding tax whereas RRIF minimum withdrawals are not subject to withholding tax. RRSP withdrawals do not qualify for income splitting whereas RRIF income does. As to why someone would RRIF at an early age is likely because they need the money. During times of unexpected early retirement as we have seen during Covid, people have lost their jobs and may not be able to retool as easily as others. Another reason for starting a RRIF early is, roughly 55% of people who retired early did so because of an illness or to support a spouse who was ill.

[@JohnLi-yq2ts]

Hi David, very useful information from your talks and learned a lot from it. I believe you have to convert your RRSP to rrif by December 31 of the year that i turn to 71 and then i have to start draw the minimum % out from rrif as per the market value as of December 31 of my 71 yrs old. However, i can use my younger spouse age - say if she is only 65 yrs old and use her minimum withdrawal % for my rrif minimum draw, is it true and how do i elect this option on my tax return or some government form? Also, if i make a mistake by drawing less than the minimum % out from my rrif account as required. How will the cra know of my shortfall of my withdrawal? Do i need to declare my rrif market value at January 1 (or December 31) on my tax return? If i have several rrif accounts with several financial institutions, can i sum up the total market values and calculate the minimum % amount from the sum and tgen withdraw that calculated minimum amount from 1 of the rrif account to fulfill the minimum % have been withdrawed or i need to withdraw the minimum % from all rrif accounts? Many thanks for your guidance.

[@HepCatJack]

If you convert one RRSP to a RIF at age 55 are you under obligation to convert ALL of your RRSP accounts to a RIF on the same year ?

[@louisdestroismaisons9712]

Pertaining you stay within your tax bracket and no penalty on OAS, we should removed as much as possible from RRIF and invest in TFSA.

[@AaronWealthManagement]

Thanks for your comment Louis. I'm actually in favour of paying incrementally more tax now vs. leaving it behind for CRA and never having used the capital at all.

[@missygilly9917]

I’m thinking about transferring my financial RRSP into my online direct investing RRSP “in kind” because most of my investments are in mutual funds & MER/expenses are high vs Stocks, ETF’s in online account. That would consolidate to one account (RRSP) before it has to be converted to a RRIF. Then I’d have to decide which Stock/ETF to sell to make my % to meet CRA withdrawal amount. Thoughts?

[@AaronWealthManagement]

Thanks for your question. I'm often concerned about moving retirement portfolios to a self-directed online broker because of fees. If you have the experience, time and stomach for the volatility then go for it. However, if the problem is fees there are several areas that impact the safety and growth of your portfolio besides fees. Not to sound dismissive, fees are important, but the most common mistakes people make with their portfolio are: * Poor diversification (high percentage of overlapping securities) * Under investing - not taking on enough risk * Under contributing - no written financial plan guiding their investment decisions * No retirement withdrawal strategy

[@missygilly9917]

All very good points to consider! Appreciate you taking the time to respond & dangers of making a switch in my investments (out of mutual funds) to an online platform. It’s been so easy these past years to simply invest in mutual funds and choose my risk tolerance levels (growth, equity). Rather than picking individual stocks, ETFs for a large portfolio. I’m building up my TFSA in that fashion now, but it’s certainly not as easy as some people tell you it is! It’s nerve wracking!

[@nom5205]

New sub here. We seem to focus on tax saving. Should we not be happy to contribute to the tax stream, so that we can continue to enjoy those benefits which our tax dollars provide.. ?? ie police, hospitals, roads etc etc..

[@chrisrauschning7376]

It's about tax management. Do you want to give 50% of your income to taxes, or 30% by staging your income appropriately.

[@pilapilelizabethalfaro4141]

My advisor told me he don't want to handle my Life income fund. Can I deposit it into my bank account?will I be finalized?

[@AaronWealthManagement]

Hi Pilapil, contact me and I'll explain how to do it. 1-866-623-8368

[@pilapilelizabethalfaro4141]

@@AaronWealthManagement I will call you next week when I come home to Toronto. Thanks

[@MiySadochok]

I do not beleve seniors would ask to decrease withdrawal minimum , as on the minimum you do not pay withdrawal fee.

[@varaboichevski2381]

Yes we hear you

[@varaboichevski2381]

Are segregated funds are handled by the same bank or need to transfer the funds to Insurance!

[@AaronWealthManagement]

Hi Vara, not sure I understand your question. Segregated funds are offered by insurance companies. Mutual funds are offered through Banks

[@varaboichevski2381]

@@AaronWealthManagement Thank you for your reply, your answer is what I was looking, now in our case if we want to open segregated account do we have to move the funds from the bank ! We love listening your program you are so easy and simple to understand y and thank you .

[@AaronWealthManagement]

@@varaboichevski2381 At the branch level you won't be able to get segregated funds through the bank as they are prohibited from offering segregated funds by law. You might be able to do that through a brokerage firm. Only an insurance licensed advisor can manage and give advice on Segregated funds. Like me 😁

[@Patricia0617]

If I convert at 71 to RRIF I don't have to start taking it till 72 correct?

[@AaronWealthManagement]

Hi Patricia, Thanks for watching the video and for your great question. If you were to convert your RRSP in the year you turn 71 to a RRIF, the latest you are allowed to take your first payment is December 31st in the year you turn 72. Let me know if you need any help with this.

[@parkerbohnn]

Remember the OAS clawback so take the RRIF at age 65.

[@VictoriaMorhan]

How do you avoid probate on your RRSP when a person dies?

[@AaronWealthManagement]

Use segregated funds

[@VictoriaMorhan]

@@AaronWealthManagement what is considered a segregated fund?

[@missygilly9917]

Of the RRIF first withdrawal, I won’t be 72 until December. Or is it the year in which you would turn 72? Leaving me all year to withdraw the minimum amount required? I believe some people withdraw monthly, quarterly amounts to make up their minimum withdrawal amount.

[@AaronWealthManagement]

You must convert your RRSP to a RRIF no lather than the end of the year you turn 71. You have to start withdrawing money from your RRIF in the year after you open it.

[@nathani8260]

@@AaronWealthManagement is the minimum withdrawal based on the FMV of your RRIF as of January 1?

[@VictoriaMorhan]

Do you have an office in Oakville or Toronto?

[@AaronWealthManagement]

Yes in Toronto 3625 Dufferin St. #304

[@MiySadochok]

Only 100,000 are guaranteed per bank. Why I would need to move all money to one bank?

[@AaronWealthManagement]

I think your referring to protecting your investments in the event that a firm becomes insolvent. There is always a risk that a Canadian financial institution could become insolvent although your immediate risks are market volatility, taxation and estate transfer and ease of planning.

[@iriskramble4543]

Can I get an email for how I convert my RRSPS to segregated funds?

[@AaronWealthManagement]

Hi Iris please email me at [e-mail] thanks.

[@arlenepeligrin435]

is the RRIF still incurring interest income?

[@AaronWealthManagement]

Great question. You don’t pay tax on the growth of your RRIF. Income received from your RRIF (withdrawals) at 65 years of age or older are considered pension income and is subject to tax at your marginal tax rate.

[@lesliecarson2185]

Do you continue to make and lose money on RIF, like RRSP investments

[@AaronWealthManagement]

RRIF and RRSPs can be invested identically so if you have the same investments in your RRSP and they have negative returns, in a RIF they would also have negative returns. It’s important to minimize negative returns in a RRIF as it can seriously diminish your portfolio balance and consequently the ability to last throughout your retirement.

[@parkerbohnn]

The more you gamble the more you lose.

[@HepCatJack]

Is life insurance truely tax deductible ?

[@AaronWealthManagement]

HI Jacques, the death benefit is tax free . The cash value can grow tax free.

[@HepCatJack]

@@AaronWealthManagement agree about the death benefits and withdrawals from the sum while still alive after a certain age however are the payments into the policy tax-deductible ?

[@Patricia0617]

what happens after 86?

[@AaronWealthManagement]

Hi Patricia, in the video I discussed the taxation of a RRIF at death. I used the average mortality age in Canada of age 86 to illustrate what happens to a RRIF at death. RRIF income continues until either there is no cash left of the person passes regardless of age.

[@Patricia0617]

@@AaronWealthManagement thank you, that really helps

[@bigboybob3150]

Why don't we spend more time on telling the government to take their hand out of our pocket, they are too invasive, and take way more money they should

[@BusterDarcy]

As someone who required life saving surgery at six months of age, then had my life saved again at age four from meningitis, without costing my parents a penny (i.e. did not completely financially cripple them), I must strongly disagree. I lived because taxes paid for the healthcare I needed to survive into adulthood, and today I make six figures and gladly accept the 50% slice off the top of my salary as part of the dues I must pay as a fortunate citizen of this country where those in need are taken care of and given a chance to give back.