Converting Your RRSP to a RRIF

The primary difference between a Registered Retirement Income Fund (RRIF) and a Registered Retirement Savings Plan (RRSP) is that a RRSP is used to save and invest for retirement, whereas a RRIF is used to pay you periodic income in retirement.

While you can contribute to an RRSP, you cannot contribute to a RRIF.

What is a RRIF?

A RRIF is a government-registered plan that allows you to withdraw money from your RRSP when you retire.

To open a RRIF, you need to convert your Registered Retirement Savings Plan through your RRSP provider.

You must convert your RRSP to a RRIF by the end of the year you turn 71. 

When you convert your Registered Retirement Savings Plan to a RRIF, you need to withdraw an annual minimum income from it starting in the following year.

A RRIF essentially enables your retirement income.

Are RRIF Withdrawals Taxable?

Your contributions to an RRSP and the investment income you make in the RRSP are tax-deferred.

With your RRIF, you get to withdraw money from your RRSP, and the Canada Revenue Agency (CRA) recognizes this as income, which they tax.

The CRA taxes your RRIF withdrawals using your marginal tax rate, which is expected to be lower than when you were actively working.

You will report your RRIF withdrawals to the CRA when you file your tax return. 

If you withdraw above the RRIF minimum amount, your RRIF carrier will withhold taxes and remit directly to the CRA, but you still need to report this income when filing your income tax and benefit return. 

You can get your RRIF income details from your T4RIF Statement of income from a Registered Retirement Income Fund . 

What is an RRSP?

A Registered Retirement Savings Plan is a registered account you use to save for retirement.

Your contributions to an RRSP and your investment income in the account are tax-deferred.

When you contribute to an RRSP, you can claim the RRSP tax deduction to reduce your taxes.

Your RRSP contributions can be invested in allowable assets such as stocks, bonds, mutual funds, guaranteed income certificates (GICs), and exchange-traded funds (ETFs).

The assets in your RRSP are what you convert to a Registered Retirement Income Fund, usually when you retire and are ready to receive retirement income.

Converting a RRSP to a RRIF

You can convert your RRSP to a RRIF at any time, but you must start receiving income from it the following year.

When you turn 71, you are required to convert your RRSP to a RRIF.

Here’s what you should consider before converting your Registered Retirement Savings Plan to a RRIF

Retirement Plans

If you plan to retire early and start receiving income from your RRSP, you can convert your RRSP to a RRIF before you turn 71.

If you do not need the money from your RRSP, you can defer converting to a RRIF until later.

Tax Strategy

When you turn 71, you must withdraw the money in your RRSP by the end of the year.

You can either withdraw a lump sum amount and pay substantial taxes or transfer the funds to a RRIF and pay taxes as you receive periodic income.

You also have the option to purchase an annuity. 

Current Income and Employment Status

If you still earn income from active employment and do not need income from your RRSP, you can put off converting your RRSP to a RRIF.

Also, when you convert your Registered Retirement Savings Plan to a Registered Retirement Income Fund, you can no longer contribute to your RRSP.

Withdrawals

There is an annual minimum withdrawal amount from RRIFs.

The minimum amount you must withdraw is calculated based on your age and the balance in your RRIF.

If you withdraw the minimum amount, you will need to report it as income and pay taxes. 

If you need funds above the minimum withdrawal amount, you can access the money in your account, however, unlike the tax treatment for the minimum withdrawal amount, taxes will be withheld by the financial institution where you set up your RRIF.

Lady researching converting RRSP to RRIF

Frequently Asked Questions

  • What is the advantage of a RRIF?
  • Can you lose money in a RRIF?

Adeola is a Chartered Accountant and business finance professional. She is very passionate about financial literacy and education. When she’s not crunching numbers, she loves spending time with family.