What Happens to Your RRSP When You Retire? (Converting to a RRIF)

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Well Built Wealth: www.wellbuiltwealth.ca/
Links:
- RRSP Vid: • RRSPs: Are They Even W...
- CRA RRIF Info: www.canada.ca/en/revenue-agen...
- Retire Happy | RRIF Conversion: retirehappy.ca/convert-rrsp-t...
- RRIF Minimums: mdm.ca/investing/investment-a...
- Retire Happy | Pension Income Tax Credit: retirehappy.ca/are-you-taking...
- Planning software we use: Conquest www.conquestplanning.com/en-c...
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Intro (0:00)
What Happens & When? (0:44)
#1. Liquidate (1:28)
#2. Convert RRSP to Annuity (2:19)
#3. Convert RRSP to RRIF (3:14)
Transferring RRSPs to RRIFs (4:22)
Withdrawals (5:23)
Limits (5:45)
RRIF Minimums (6:33)
Taxation (7:21)
Pension Income Tax Credit (9:44)
Multiple RRIF accounts (10:18)
Converting Back to a RRSP(10:48)
No 1st Year Minimum (11:17)
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DISCLAIMER: All videos on this channel (including this one) are for educational or entertainment purposes only. They are not (and are not intended to be) financial, investment or legal advice. It is our firm position that everyone has a unique situation and should seek professional advice on how best to navigate it. Rhys Martell is a Chartered Investment Manager (CIM), a Fellow of the Canadian Securities Industry (FCSI), a Qualified Associate Financial Planner (QAFP) and more. However, he is not registered to provide investment advice and, therefore, does not provide specific investment recommendations. Those looking for specific investment advice should seek out a registered professional.

[@davidhughes6048]

Reese, your videos are some of the best out there. Well done, and thank you.

[@wellbuiltwealth]

Wow, thank you!😊

[@glenngardin3561]

Excellent and timely video, Rhys! Thanks and hope you have a healthy and prosperous New Year!

[@matthewfunk6658]

Love what you're teaching us, thank you so much!

[@wellbuiltwealth]

Thank you!! 🤓

[@humbleloonie]

Great content and delivery, Rhys! All the best to you and your channel!

[@wellbuiltwealth]

Thank you so much 😊

[@sunysuny3030]

Perfect explanation, concise and simple ❤

[@gerryclark4330]

Clear and straightforward. Great advice

[@wellbuiltwealth]

Thank you!

[@04forerunner]

Great info. Confirmed our plan for my wife’s RRIF for next year. It was with holding component I wasn’t clear on when using monthly payment option. Keep up the good work!

[@KP-uj1wf]

Another great video... as always. Appreciate the work you put into these video to inform us retirees! Cheers

[@wellbuiltwealth]

Thank you!!

[@billyrock8305]

Excellent clearly presented summary. ✅ Terrific graphic illustrations as well. ✅

[@wellbuiltwealth]

Thank you kindly!

[@Chucku153]

EXCELLENT VIDEO!!!THANKS

[@minimaxmiaandme.4971]

Excellent channel.....thank you!

[@msarimazi]

Thank you, I am learning so much! Your explanations are clear, simple and so easy to understand.

[@wellbuiltwealth]

Awesome :) Thanks 😊

[@rickbouwman3833]

Just came across this! Your videos are VERY well done and I love how succinct you are. Very pleasant to listen to and very good information for all. Subscribed!

[@wellbuiltwealth]

Thank you 🤓

[@garyfeser4294]

Simple and concise👌

[@neilbertram1922]

I always go straight to new videos from Well Built Wealth 🙂 That was a really comprehensive overview. Probably the best I have ever seen. At 6:50 you showed a RRIF minimum withdrawal rate chart. It started at age 55. I have found that so many websites, calculators, and charts either state (or at least imply) that a RRIF cannot be started before age 55. It is my belief that a RRIF can be started before age 55, which might be very useful for people in certain situations (e.g. disability). And that the RRIF minimum percentage can be calculated by dividing 1 by (90 - age). You accurately mentioned that the only real requirement is that you do it BY age 71. But it's worth calling out the no minimum age. You mentioned that you can use your spouse's YOUNGER age to affect the RRIF minimum. I believe you can also use your spouse's OLDER age to affect the RRIF minimum if you want. Why would you do this? Well, increasing the RRIF minimum could be good if you need to get money out of a spousal RRIF without triggering attribution rules (since attribution rules do not apply on minimum withdrawals).

[@wellbuiltwealth]

You’re hired!

[@AMG-BENZ-1]

Very happy to see that you’re now pumping out these videos almost weekly! Or perhaps I’m simply being selfish for expecting so much...😉

[@wellbuiltwealth]

Thank you! Won’t be able to do it all the time, but I’m trying!

[@jrdtheace]

no withholding is required on minimum amounts, well that's one big curveball. best part of this video!

[@JoeS1956]

l am in my third year of retirement and what l do each year is transfer around 10k from my RRSP to my RRIF account and then withdraw the entire 10k RRIF account in January. l have a Defined Benefit pension plan so the plan is to try and draw down my RRSP as tax efficiently as possible. l just prefer doing a lump sum, put the maximum back in to my TFSA and invest the remainder in a non registered account.

[@dswood302]

Smart move. I withdrew directly from my RRSP in December and paid taxes plus fees/GST to withdraw. I need to set up a RRIF and do as you do.

[@mpTraveller87]

Thanks this helps! Is there a minimum balance to keep in the RRIF? We have properties to sell and won’t always want to do this transfer

[@JoeS1956]

There is no minimum to keep in the RRIF l believe. Keep in mind that when the last surviving spouse passes, the entire amount left in the RRIF is taxable, so you don't want that to be a large sum of money going to the government. @@mpTraveller87

[@humbleloonie]

That's cool. Didn't realize you can open an RRIF account while still having your RRSP active.

[@wellbuiltwealth]

No minimum balance required. Depends on your institution I suppose, but not normally.

[@pargolf3158]

Great video. Thanks for the links. I found the pension credit link especially useful. FROM THE ARTICLE "The Pension Income Tax credit is available to you if you are 55 years of age or older. Basically, it enables you to deduct, from taxes payable, a tax credit equal to the lesser of your pension income or $2,000.00. Depending on which province you live in, this equates to $440-$720 in actual tax savings each year". COMMENT: I believe I have this right. If you retire at 55, even if you don't plan to convert your RRSP to a RRIF until age 71, you should convert (71-55)x $2,000 = $34,000 into a RRIF. Then you can pull out $2,000 per year for the next 17 years and benefit from the credit ( basically $2,000 tax free per year)

[@slyanover]

I'm 65 and I move money from my RRSP to my RRIF. When I withdraw from the RRIF I can pension split with my spouse. That reduces my income and allows us to both access the $2000 tax free pension amount. You can't pension split if you withdraw from the RRSP. Also I just move funds that I'm planning to withdraw and leave everything else in the RRSP.

[@mspeters1]

another great video rhys! Just to confirm, when you convert to a RRIF, is your money still growing within or does it just stop once you move over?

[@DoneByD]

it continues to grow with whatever you have invested it in...

[@mspeters1]

Thanks@@DoneByD

[@wellbuiltwealth]

Exactly!

[@josephkeith6954]

Great vid. One of the most comprehensive info on RRIF. Is there any benefit having RRIF before 71 other than avoiding withholding tax for the min withdrawal amount (which we may be going to get some back anyway depending on tax bracket)? It’s a sin for CRA to tax people lump sum if one forget to convert RRSP to RRIF before 71.

[@wellbuiltwealth]

Thank you! I would say the main benefits are being able to set up automatic withdrawals and not being charged any admin fees on the withdrawals.

[@dominiquetheeasyminimalist]

Excellent content, thanks! If I unlock my LIF, can I transfer it to a RRIF directly or does it have to be RRSP then RRIF?

[@wellbuiltwealth]

Usually, you can do it all at once. But double check with your institution :)

[@canadianjatti]

you can rrif at any age. that is my back up plan for if i am ever without employment for significant periods of time I will just rrif my rsp and start using that as income

[@satinderbank4607]

Thanks for the informative content. I was wondering if you have multiple RRSP accounts (at different institutions) can you convert one RRSP into RRIF and leave others as RRSP - or di you have to convert ALL of them to RRIF at the same time ? Thx,

[@wellbuiltwealth]

Thanks! And yes. You can convert one at a time. No prob.

[@lesskarasz1737]

would you happen to have a copy of the spreadsheet that you have displayed at 6:15 in your video? Great video by the way!

[@wellbuiltwealth]

Thank you! At the timestamp you noted, I’m using a software program called Conquest. It is only available via advisors/firms that buy a subscription.

[@terrykennedy3335]

Great video but what I like to know is how to find the best RRIF interest rate right now my institution only pays 2.5% annually retires need info on where and how to get the best rates after all now is the time we need the most bang for our buck!

[@wellbuiltwealth]

Well, it’s hard to answer that question since there are so many different investment options available within a RRIF. But if you are wondering what the best GIC rates are (which you can hold in a RRIF), then you can simply Google it :)

[@agis610]

Very nice support, but transfer from RRSP to RRIF must be gone till Dec.31, 2023 , if I want to transfer money from RRIF to cash and put to TAX 2023? OR is there some option to do till March 31 , 2024 and use this transaction to TAX 2023? Thank you

[@pargolf3158]

How long does your RRIF need to be in existance before you can withdraw the $2,000 to claim the pension credit. For example say I retired in 2022 and have a company pension. I then open a RRIF in mid December 2024 by transferring $5,000 from my RRSP. A week later I withdraw $2,000 from the RRIF I just opened, can I then claim the $2,000 pension credit when I file my income tax for the 2024 tax year? Or does the RRIF have to be open for the entire tax year for which you plan to take the credit? Thanks

[@themightydecibel-heavymeta7130]

There is another option: retain as an RRSP and draw down what you want, whenever you want until age 71. That way you're not forced to take out a minimum.

[@DoneByD]

There may be associated fees for each withdrawal when withdrawing directly from your RRSP account, which isn't the case when coming from the RRIF.

[@marieklyne2722]

My spouse and i are both over 65. He is working. I am withdrawing from my rsp to make a contribution to his rsp. I will pay minimal tax. He will move to a lower tax bracket. We need these funds to cover his tax bill that will still be owed. We are going to then transfer this rsp contribution to a rif and withdrawing it to make the tax pmt before april 30th. This withdrawl will then be split in 2024. Again i will pay mnimal tax, and we don't expect he wil continue to work. Do you see any flaws??

[@terrykennedy3335]

if it's a GIC then how can I have monthly withdrawals is that possible? I guess what I'm looking for is the best rate on a monthly withdrawal program to maximise my RRIF for long term use. Here is a scenario: 200K 25 years of retirement monthly withdrawals at the minimum. I surely don't want a 2.5% annual rate of return on my money that basically makes me nothing.

[@martymendes1]

Thanks for another great video, Rhys. Question for you. My mom, age 78, has a RRIF account with one of the big banks. That account holds a bunch of long-term GICs. She asked what happens for her minimum withdrawal if there is no cash and no maturing GIC in the account. Where would the money come from for the withdrawal? The answer she got was that because it's in a RRIF account, they automatically sell a portion of the lowest yielding GIC to cover the distribution and that there is no penalty for breaking the term of the GIC and withrawing early. Does this make any sense? And if that is correct, shouldn't my mom always invest in the highest yielding GICs available, regardless of term? Thanks again.

[@davidhughes6048]

Having worked for a Big 6 bank I cannot recommend relying on their financial advice.

[@The786Aziz]

Your mom should ask the bank to cash out all GICs and reinvest them in the highest paying GIC which can be at least 5.6% for starters. Of course there are other investment options for her to consider

[@wellbuiltwealth]

Tough for me to comment on their policies. But if that’s been what they’ve been doing so far, then it’s likely what they do. So yes, get those rates as high as you can :)

[@RCML27]

That's what happens with my Mom's RRIF GICs at BMO and RBC. I don't know if it's coming out of the lowest yielding GIC or not because I didn't pay attention to that, but it is coming out of the GICs. Now I just want to know how they calculate the interest if the GICs haven't expired yet and my Mom passed away a month and a half ago? Do they pay interest till the date of death or since it didn't go till maturity they'll just give you back your principal only?

[@martymendes1]

Good question. I find it very curious that GICs are locked in products and yet, within a RRIF account, they're not! I'd have to the the math to see if they're paying out the full interest for the amount of time the money is invested, but it's complicated. Wouldn't be surprised if there are some obscure fee or charge factored in.

[@BRASS8888]

would be great to have a video on what to do with your eligible RRSP contribution amount during the year you are retired. lets say you have earn in 2023 an rrsp contribution of $10 000 for 2024 . in 2024 you retire in March. you start converting your RRSP in a RRIF to start an RRSP meltdown to the first bracket of tax (around $50 000) . so it would make no sense to make the $10 000 contribution because the amount you would save in tax would be the same amount you pay (within the same tax bracket). so what do you do with the $10 000 eligible contribution you still have left . what are the options. thank you. also note that ALL eligible contribution to date have already been taken during the working life. so there is only the $10 000 left.

[@wellbuiltwealth]

Maybe I’m not understanding this correctly, but I’m thinking I just wouldn’t use it. We see people into retirement all the time with unused contribution room. Really, the bottom line is to use it when it makes sense. And ignore it when it doesn’t.

[@RCML27]

​@@wellbuiltwealthThat's what I've been doing. Ignoring it. I'm getting the QPP disability pension (similar to CPP disability pension) and I notice my RRSP contribution room increasing every year even though I've stopped working. I guess they use that disability pension to calculate your RRSP contribution room. I've also had to take my government defined benefit pension since I turned 60 since the insurance company that was paying me long term disability told me to at age 60. So together I'm getting $50,000 ($16K in QPP disability pension and $34K in a bridged defined benefit pension that drops to $24K at 65). Add in at least $7,000 in interest and dividend income and I'm into the 2nd tax bracket (same bracket as when I was working). So when and how should I melt down my $350K RRSP since I have health problems and don't want the government taking over half of it if I die early? Do I take enough out each year to have my total income just be under the 3rd tax bracket?

[@markwolovetz]

Why not just withdraw 5 k chunks from rrsp. No rrif required.

[@master15951]

Is Tax credit 2000$ is it every year I can claim ?

[@wellbuiltwealth]

Yup!

[@mrslcom]

For someone who retires before age 65, what’s the advantage of using a RRIF rather than just withdrawing from a RRSP?

[@davidhughes6048]

I think most institutions will charge you for an RRSP withdrawal, but withdrawals from RRIFs should be part of the deal. Also, I could be wrong but I believe there is no witholding tax on the required minimum withdrawal from a RRIF.

[@wellbuiltwealth]

Bang on!

[@mikelynch896]

@@wellbuiltwealthbut you still would pay the same amount of tax on the next years income tax?

[@Pkeats817]

So, transferring from RRSP to a RRIF is so that you can get a monthly payment for when retirement starts?

[@billyrock8305]

Exactly. You can decide how much and when you want to take the money. You must take the government tabled minimum depending on your age. You pay no withholding tax. Monthly payouts is most common way to receive your money.

[@Pkeats817]

@@billyrock8305 I have a Lira type account, labelled as RRSP and another “regular” RRSP. Would the Lira/RRSP need to be converted to an annuity to use it? Is there a minimum age to access that account? Can it be paid out monthly if it isn’t converted to an annuity? Thanks for your previous response. 🙂

[@humbleloonie]

@@Pkeats817 LIRA is also often referred to as Locked-In RRSP. It can be transferred to a LIF (similar to RRIF for RRSP) or an annuity. I think you can't make any withdrawal until age 55 (or it depends on your province) and you also need to convert it to a LIF by the end of the year you turn 71. Like the RRIF, the LIF can be withdrawn depending on your arrangement with the institution it is held. All the best!

[@Pkeats817]

@@humbleloonie Thanks! As far as I understand, I can transfer half out at 55. I don’t quite understand what happens to the remaining locked in portion in regards to how and when it will be used. Literally, how and when it will be paid out to me, is what I don’t quite understand, yet. 🙂

[@wellbuiltwealth]

If you look up some videos on LIRAs and LIFs that should help you. I have that on my to-do list but just haven’t got there yet :)