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RRIF (Registered Retirement Income Fund)

Description

An RRIF is one of the tax-deferral vehicles available to RRSP holders who wish to continue the tax sheltering of their plans. An RRIF is designed to pay out a specified amount every year and is thus intended to distribute the assets accumulated in an RRSP. The investor retains control over all investment decisions.

Setting Up an RRIF

An RRIF must be set up through a transfer from an RRSP. This can be done at any time, but is usually done in the year that the investor turns 69, when the RRSP must be terminated.

Required documents:

RRIF application form
T2033 form required to transfer the assets from an RRSP

Spousal RRIFs

An RRIF must be set up by the end of year in which the RRSP plan holder turns 69. In the case of spousal RRSPs, spousal RRIFs must be set up. The plan holder remains the same and it is she or he who receive and declares the income payments. Furthermore, a spousal RRIF cannot be transferred to an individual RRIF.

RRIF Income Payouts

A. Withdrawals in the first calendar year of a RRIF's existence
There is no minimum amount that must be withdrawn in the first year of an RRIF's existence. Accordingly, any withdrawals will be subject to withholding taxes in addition to normal income taxes.

B. Withdrawals in subsequent years
Each year, a minimum amount must be withdrawn. This amount differs and must be calculated at the beginning of each year.

There are two methods to calculate the minimum amount depending on whether the RRIF is a qualifying one or not. A qualifying RRIF is one that was set up prior to 1993 and has had no deposits after 1992.

Method 1: Qualifying RRIFs
The required minimum withdrawal amount depends on the age of the annuitant:
Annuitant's Age	Formula
Less than 78	RRIF value on January 1st/ (90 - Age)
Greater than or equal to 79	Percentage (see table)

Method 2: Non-Qualifying RRIFs
The required minimum withdrawal amount depends on the age of the annuitant:
Annuitant's Age	Formula
Less than 71	RRIF value on January 1st/ (90 - Age)
Greater than or equal to 71	Percentage (see table)

Percentage withdrawals

Age at Start of Year	%	Age at Start of Year	%
70 and less	Formula	83	9.58
71	7.38	84	9.93
72	7.48	85	10.33
73	7.59	86	10.79
74	7.71	87	11.33
75	7.85	88	11.96
76	7.99	89	12.71
77	8.15	90	13.62
78	8.33	91	14.73
79	8.53	92	16.12
80	8.75	93	17.92
81	8.99	94 and more	20.00
82	9.27

All required minimum withdrawals are subject to income taxes (in the year of the withdrawal) but not withholding taxes. Non-residents must pay withholding taxes (15% in the case of U.S. residents) on amounts withdrawn.

C. Withdrawals above the minimum amount

Investors may withdraw more than the required minimum amount. These amounts are subject to withholding taxes. A T4RIF is issued indicating how much was withdrawn and the amount of taxes withheld.