Last updated: April 28 2015
The April 21 Federal Budget adjusted the minimum RRIF withdrawal rates Canadians must apply to their taxable incomes in their retirement years.
Specifically, an RRSP must be “matured” or converted to a retirement income vehicle such as an annuity or RRIF by the end of the year in which the RRSP holder turns 71. If a RRIF is chosen as the vehicle, a minimum amount must be withdrawn each year after establishing the RRIF.
Minimum Withdrawals
The minimum withdrawal factors, which have been in place since 1992, are based on a percentage factor multiplied by the value of the assets in the RRIF. The last time adjustments were made to these withdrawal factors was in 2007, when the age limit for starting taxable pension payments from an RRSP was increased from age 69 to 71. Under those rules, in effect until 2014, the RRIF holder had to withdraw 7.38% of their RRIF in the first year. The factor increases gradually each year until age 94 when it is capped at 20% per year. Under the budget proposals, the minimum withdrawal factors will be adjusted to better reflect historical rates of return and the expected inflation rate (5% and 2%). This withdrawal factor is determined under Reg. 7308. A history of the rules follows.
Note: The rules governing qualifying investments for RRIFs are the same as for RRSPs.
Transfers Between RRIFs and Other Registered Plans
Aside from RRSP accumulations, the following may be transferred to the taxpayer’s RRIF on a tax-free basis:
o Form T2033 Direct Transfer Under Subsection 146.3(14.1) or 146(21), or Paragraph 146(16)(a) or 146.3(2)(e) may be used to effect the transfer.
o Form T2220 Transfer from an RRSP, RRIF, PRPP or SPP to Another RRSP, RRIF, or SPP on Marriage Breakdown must be used to effect the transfer.
o Form T2151 Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3 must be used to effect the transfer.
o Form T2151 Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3 must be used to effect the transfer.
No contributions may be made to a RRIF other than transfers from other registered accounts.
RRIF Minimum Withdrawal Rates
Since 2007 (RRSP matures at age 71: 7% nominal rate plus 1% indexation)
Age at |
Qualifying RIF |
General Funds |
Old Rules |
2015 and |
Under 71 | 1/(90-age)* | 1/(90-age) | 1/(90-age) | 1/(90-age)* |
71 | 0.0526 | 0.0738 | 0.0526 | 0.0528 |
72 | 0.0556 | 0.0748 | 0.0556 | 0.0540 |
73 | 0.0588 | 0.0759 | 0.0588 | 0.0553 |
74 | 0.0625 | 0.0771 | 0.0625 | 0.0567 |
75 | 0.0667 | 0.0785 | 0.0667 | 0.0582 |
76 | 0.0714 | 0.0799 | 0.0714 | 0.0598 |
77 | 0.0769 | 0.0815 | 0.0769 | 0.0617 |
78 | 0.0833 | 0.0833 | 0.0833 | 0.0636 |
79 | 0.0853 | 0.0853 | 0.0909 | 0.0658 |
80 | 0.0875 | 0.0875 | 0.1000 | 0.0682 |
81 | 0.0899 | 0.0899 | 0.1111 | 0.0708 |
82 | 0.0927 | 0.0927 | 0.1250 | 0.0738 |
83 | 0.0958 | 0.0958 | 0.1429 | 0.0771 |
84 | 0.0993 | 0.0993 | 0.1667 | 0.0808 |
85 | 0.1033 | 0.1033 | 0.2000 | 0.0851 |
86 | 0.1079 | 0.1079 | 0.2500 | 0.0899 |
87 | 0.1133 | 0.1133 | 0.3333 | 0.0955 |
88 | 0.1196 | 0.1196 | 0.5000 | 0.1021 |
89 | 0.1271 | 0.1271 | 1.0000 | 0.1099 |
90 | 0.1362 | 0.1362 | 0.1192 | |
91 | 0.1473 | 0.1473 | 0.1306 | |
92 | 0.1612 | 0.1612 | 0.1449 | |
93 | 0.1792 | 0.1792 | 0.1634 | |
94 | 0.200 | 0.200 | 0.1879 | |
95 and older | 0.200 | 0.200 | 0.200 |
Transitional Rule: For 2015 only RRIF holders can re-contribute withdrawals over the new minimum up to February 29, 2016 and take a deduction for the amount over the minimum.
The result is that seniors can keep their RRIF accumulations sheltered longer and have greater flexibility over the way the money is withdrawn.
Next week we will explore RRIF planning opportunities.