Seven compelling reasons to transfer your RRSP to a RRIF

While most Canadians are fairly knowledgeable about the benefits of contributing to their RRSP, fewer understand the potential rewards of transferring their RRSP to a Registered Retirement Income Fund, or RRIF. When an RRSP matures when the holder turns 71, they have the option of redeeming their funds as a lump-sum payment, transferring them to an annuity, or rolling them into an RRIF — an account type designed to pay regular income to its holder. This article will make a case for choosing the latter and harnessing the benefits of the RRIF.

  1. Grow your savings tax-deferred: All of your RRSP assets can be transferred in-kind, tax-free to your RRIF — and once there, the assets continue to grow on a tax-deferred basis. But keep in mind, any money withdrawn from your RRIF account is taxable in the year received.
  2. Get a regular income stream with no withholding taxes on the minimum payment: While there is an annual minimum payment amount that must be withdrawn from your RRIF account, there is no maximum amount. Withdrawals can include both systematic payments and/or lump-sum amounts, and payments can be modified at any time to meet your income needs. Best of all, unlike withdrawals from an RRSP, there are no withholding taxes deducted on your minimum RRIF payments. Note that a withholding tax is applied to withdrawals above the minimum amount.
  3. Base your RRIF payments on your spouse's age if it's advantageous: While minimum payments are required when setting up RRIF accounts, you can elect that the minimum payment be based on your spouse's age, providing additional flexibility if your spouse is younger than you by reducing your mandatory withdrawal amount.
  4. Split your pension income up to 50%: Since 2007, up to 50% of eligible pension income can be split with a spouse or common-law partner for individuals 65 years old or older. Since RRIF income qualifies as eligible pension income, this can mean huge tax savings for Canadian families.
  5. Get a Pension Income Credit of $2,000: Starting at age 65, income from your RRIF qualifies for up to $2,000 towards the Pension Income Credit each year (if it's not already being used with a private pension plan), which could mean a substantial tax savings over time.
  6. Leave your RRIF to your spouse tax-free: If your spouse is named as the beneficiary of your RRIF, it can be transferred tax-free to their RRSP or their own RRIF. If you name your spouse a successor annuitant, they can take over your RRIF tax-free and start receiving RRIF payments. In both cases, your RRIF will not make up part of your estate and will avoid probate fees.
  7. Benefit from lower RRIF minimum payment amounts: The 2015 federal budget reduced RRIF minimum payment amounts to reflect the increasing longevity of Canadian seniors, and the need to plan for longer retirement periods. The new, lower RRIF minimum payment amounts may provide you with more flexibility when planning your retirement income payments.

2016 RRIF minimum withdrawal schedule:

RRIF payment age (at start of year) RRIF minimum payment amount factor (%)
65 4.00
71 5.28
75 5.82
80 6.82
85 8.51
90 11.92
90 and over 20

If you transfer assets from another institution to your Qtrade Investor account, we will cover your transfer-out fees up to $150. For terms and conditions of that offer, and for help with your transfer, visit our Account Transfer page.