A Registered Retirement Income Fund, or RRIF, is the account that takes over when your RRSP retires: it holds the same investments, keeps them growing tax-deferred, and pays you a rising minimum amount every year that counts as taxable income. So how does a RRIF work in practice? You open one by December 31 of the year you turn 71 (or earlier if you want), your money keeps compounding inside, and starting the year after you set it up you must withdraw at least a prescribed percentage that climbs with your age until it caps at 20%.
Opening a RRIF and Converting Your RRSP
Your RRSP has a hard end date. You must close it, or convert it, by December 31 of the year you turn 71. Miss that deadline and the CRA treats the whole balance as income in that year, which can produce an enormous tax bill.
Most people avoid that by transferring their RRSP directly into a RRIF at their bank, credit union, or brokerage. The transfer itself triggers no tax. Stocks, bonds, GICs, and mutual funds carry across as-is; nothing has to be sold. When you set the account up you choose how often you want to be paid — monthly, quarterly, semi-annually, or annually — and that schedule governs how the financial institution releases money to you through the year.
You can open a RRIF earlier than 71 if it suits your plan. Retiring in your 60s and needing income before government pensions start is one reason. Another is unlocking pension income splitting and the pension income amount tax credit at 65, both of which can lower your household tax bill. The trade-off: minimums start the year after you open the account, so tax-sheltered savings begin draining sooner.
Other Options When Your RRSP Matures
A RRIF is not the only path at maturity. You have three, and you can combine them.
- Convert to a RRIF. You keep control of your investments, receive flexible income, and the remaining balance keeps growing tax-deferred. Most common choice.
- Buy an annuity. You hand a lump sum to an insurance company in exchange for guaranteed payments for life or a fixed term (up to age 90). The amount depends on your age, prevailing interest rates, and the annuity type. You lose investment control but eliminate the risk of outliving your money.
- Withdraw everything as cash. The full amount is added to your income for the year, with withholding tax deducted right away. Rarely sensible unless the balance is small, because a large lump sum can push you into the top bracket.
Some retirees split their RRSP between a RRIF and an annuity, using the annuity for fixed costs like housing and the RRIF for flexible spending. One boundary worth knowing: if your RRSP holds locked-in funds from an employer pension plan, those assets typically move to a Life Income Fund (LIF) rather than a standard RRIF, with additional withdrawal caps that vary by province.
Mandatory Minimum Withdrawals
No minimum is required in the calendar year you open the RRIF. Starting the year after, you must withdraw at least a prescribed minimum every year for the rest of your life.1Canada Revenue Agency. Minimum Amount From a RRIF The formula multiplies the fair market value of the account on January 1 by a percentage that rises with age.
If you (or the spouse whose age you elected to use) are 70 or younger, the factor is 1 ÷ (90 − age). At 65 that comes to 4.00%. From age 71 onward, the CRA publishes a fixed table.2Canada Revenue Agency. Chart – Prescribed Factors Key milestones:
- Age 71: 5.28%
- Age 72: 5.40%
- Age 75: 5.82%
- Age 80: 6.82%
- Age 85: 8.51%
- Age 90: 11.92%
- Age 95 or older: 20.00%
These are minimums. You can always take more, and there is no ceiling on withdrawals. The 20% factor at 95 stays flat every year after, so minimums alone will never fully empty a RRIF, though the balance shrinks steadily.
Using a Younger Spouse’s Age
When you set up the RRIF you can elect to base your minimums on your spouse or common-law partner’s age instead of your own.1Canada Revenue Agency. Minimum Amount From a RRIF A younger spouse means a smaller required payout and more money left sheltered. The election is one-time; you cannot switch later, even if the relationship ends.
How RRIF Income Is Taxed
Every dollar you withdraw is taxable income on your annual return, at whatever your marginal rate happens to be. The CRA treats it the same as employment income or interest. Capital gains and dividends earned inside the RRIF lose their preferential treatment on the way out.
Withholding at Source
Your financial institution withholds no tax on the minimum amount. Anything above the minimum has tax deducted before the money reaches you. Outside Quebec, the federal rates are:
- Up to $5,000 above the minimum: 10%
- $5,001 to $15,000 above the minimum: 20%
- More than $15,000 above the minimum: 30%
Quebec residents see lower federal withholding (5%, 10%, and 15% at those tiers) plus an additional 14% provincial withholding. Withheld amounts are installments toward your total tax bill, not the final number; you may owe more or receive a refund at filing.
Because the minimum has no withholding at all, people who live mostly on RRIF income sometimes get a large balance owing at tax time. If that happens, the CRA can require you to make quarterly installment payments going forward.
Pension Income Amount Tax Credit
Once you turn 65, RRIF payments qualify for the federal pension income amount, a non-refundable credit on up to $2,000 of eligible pension income.3Canada Revenue Agency. Line 31400 – Pension Income Amount At the lowest federal rate of 15%, that’s $300 in tax savings, and most provinces offer a matching credit that roughly doubles the benefit. This is why some people convert a small slice of their RRSP to a RRIF at 65 even when they don’t yet need the income.
Pension Income Splitting
From 65 onward, you can allocate up to 50% of your RRIF income to your spouse or common-law partner for tax purposes by filing Form T1032.4Canada Revenue Agency. Pension Income Splitting The income shifts to their return, where it may be taxed at a lower rate, and they can claim the pension income amount credit on the allocated portion. The election is annual, so you can retune the percentage every year.
If You Leave Canada
Non-residents face a flat 25% Part XIII withholding tax on RRIF payments, deducted before the money is sent.5Canada Revenue Agency. Rates for Part XIII Tax Tax treaties reduce that rate for many countries; U.S. residents, for instance, typically see 15% on periodic pension payments under the treaty. Your financial institution needs a completed NR301 form to apply the reduced rate.
Investments Inside the Account
Everything inside a RRIF grows tax-free until it comes out. Dividends, interest, and capital gains are all sheltered while they stay in the account. Because the balance is largest in the early retirement years, this shelter is at its most valuable then.
Qualified investments cover the range most people already use: GICs, stocks and other securities listed on a designated exchange, mutual funds, segregated funds, exchange-traded funds, government and corporate bonds, and Canada Savings Bonds.6Canada Revenue Agency. Income Tax Folio S3-F10-C1, Qualified Investments Many people carry the same portfolio over from their RRSP; others shift toward more conservative holdings or hold extra cash to fund upcoming withdrawals.
Non-qualified investments trigger a penalty tax of 50% of the fair market value at the time the investment was acquired or became non-qualified.7Canada Revenue Agency. Income Tax Folio S3-F10-C1 Prohibited investments (typically shares or debt of a company where you hold a significant interest) attract a 50% tax on the value plus a 100% tax on any income or gains they produce.8Canada Revenue Agency. Income Tax Folio S3-F10-C2, Prohibited Investments Standard bank and brokerage holdings almost never run into these rules; they mainly catch business owners who try to hold private-company shares inside the account.
What Happens to a RRIF When You Die
The tax outcome depends entirely on who you have named.
Spouse as Successor Annuitant
Name your spouse or common-law partner as successor annuitant, either in the RRIF contract or your will, and they simply take over the account.9Canada Revenue Agency. Death of a RRIF Annuitant, PRPP Member, or ALDA Annuitant The RRIF continues, minimums recalculate on the successor’s age, investments stay sheltered, and death itself triggers no tax. This is the cleanest outcome and the reason most couples set their accounts up this way.
Spouse as Beneficiary (Not Successor)
Naming a spouse as beneficiary rather than successor annuitant collapses the RRIF. The fair market value at death is first reported as income on the deceased’s final return, but the surviving spouse can offset that by transferring the funds into their own RRSP (if under 72) or RRIF, deferring the tax.10Canada Revenue Agency. Spouse or Common-Law Partner as Successor Annuitant Same end result in most cases, but with paperwork the successor route avoids.
Financially Dependent Children or Grandchildren
A financially dependent child or grandchild can receive a tax-deferred transfer in limited circumstances. Where the dependent has a mental or physical disability, the funds can roll into their RDSP, RRSP, or RRIF, or be used to buy an annuity. A financially dependent child without a disability can transfer the amount into a term annuity with payments ending no later than age 18.11Canada Revenue Agency. Death of a RRIF Annuitant
All Other Beneficiaries
If a non-spouse, non-dependent beneficiary inherits, or no beneficiary is named and the RRIF passes through the estate, the full fair market value at the date of death is included on the deceased’s final return. If the account loses value between date of death and final distribution, the estate can request a reassessment to deduct the decrease.11Canada Revenue Agency. Death of a RRIF Annuitant The tax on a large RRIF with no surviving spouse can consume 40% to 50% of the account, which is why beneficiary designations are worth looking at well before they matter.