Registered Retirement Income Fund (RRIF)

Registered Retirement Income Fund (RRIF)

A Registered Retirement Income Fund is a plan set up to provide income upon retirement. Seniors must withdraw a minimum amount each year. Amounts received by a taxpayer as an annuitant under an RRIF are taxable. These plans are an alternative to annuity or lump sum payments on maturity of the RRSP. These funds are subject to the same provisions of RRSPs with respect to the acquisition of a non-qualified investment.

RRIF before 71?

You can convert an RRSP to an RRIF even before you are 71. For example, if you retire early or take a leave from work as a result of your spouse's illness, when you resume work, you can convert an RRIF to an RRSP.

Minimum withdrawal percentage

At age 71, the minimum withdrawal percentage is 5.28 %

At age 75, it is 5.82 %

At age 95 and over, 20 %

Although the percentage increases every year, the annual withdrawal amount will decrease over time due to previous withdrawal(s).

RRIF to TFSA?

You cannot transfer funds tax-free from an RRIF to a TFSA. You can, however, use RRIF funds to add to a TFSA (provided you have contribution room in the TFSA). This will be treated as an RRIF withdrawal and included in total income.

RRSP/RRIF Losses after Death

If the value of an unmatured RRSP or an RRIF decreases between the date of death and the date of the final distribution to the beneficiary (or estate), the decrease can be deducted on the final return of the deceased.

Excess amount :- Funds withdrawn by a taxpayer over the minimum amount is called an “excess” amount and is subject to tax at source.It is shown separately, and the total for taxable amounts (Box 16) is reported on the Income Tax and Benefit Return.

A minimum withdrawal from an RRIF is mandatory starting at the age of 72. A minimum amount is set to meet the needs of the plan holder (i.e., monthly expenses) and no tax is withheld when this amount is withdrawn. The taxpayer may withdraw more than the minimum amount.

Amounts Deemed received by the Annuitant on Death

Upon death of an RRIF annuitant, the fair market value of the plan is deemed to be received by the deceased prior to death. The amount in Box 18 of the T4RIF slip represents fair market value (FMV) of the plan at death. This amount is reported on Line 13000 of the Income Tax and Benefit Return. However, if there is a surviving spouse, or a dependent child or grandchild under 18 years, part, or all, of the income may be reported on a beneficiary’s return.

Deemed Receipt on Deregistration

“Deregistration” means that the plan no longer meets the rule under which it was registered. The amount that equals the fair market value of the plan is deemed to be received by a taxpayer immediately before deregistration.

This amount appears in Box 20 of the T4RIF slip. The amount is reported on Line 11500 or 13000, according to the “Reporting Guide for Retirement Income”. Amounts in box 22 (other income or deductions) represent acquisition and disposition of the property in the plan. It is considered income earned after the death of the annuitant rather than the beneficiary spouse.

If an RRIF holder dies, the remaining benefits under the arrangement may pass to others under the terms of the will. If these benefits pass to the plan holder’s spouse, the yearly payments may continue, and the spouse will pay tax on the payments as they are received. If the property in the plan passes on to a person other than the spouse, the FMV of the property must be included in the plan holder’s income immediately before his or her death.

Canadian Resident Working in the US

A resident of Canada who works in the U.S., and is a member of a qualifying retirement plan in the U.S., can deduct contributions on their Canadian tax return. This is applicable for 2009 and later years. Complete RC268 along with your tax return.

Your RRIF will be a comfort to you in your retirement years!