RRSP/RRIF

# RRIF minimum income rules

When you reach retirement and it comes time to take regular income out of your RRSPs, the vehicle of choice is the Registered Retirement Income Fund (RRIF). Although you can make withdrawals from a RRSP, the point of a RRSP is to accumulate funds for retirement. That’s why they call it a savings plan.
When I think of a RRIF, I visually see a bucket of money just like the RRSP is a bucket of money.  The difference between the RRSP bucket and the RRIF bucket is the RRIF bucket has a tap on it where income flows out.  You can adjust the tap to increase or decrease the flow of money out of the bucket.

In both the RRSP and the RRIF bucket, you can invest in the same types of investments like GICs, bonds, mutual funds, stocks, etc. As long as the money stays in the account or bucket, whether it is a RRSP or RRIF, the money continues to grow tax deferred. The RRIF differs from an RRSP in that you cannot put direct contributions into a RRIF and with a RRIF, you must take out a minimum amount each and every year. In other words, you can close the tap completely.  You must take out a minimum amount of income.  This is called the Minimum Income.

## How is the minimum income determined?

Here’s the formula for the minimum income on the RRIF:

## 1 / (90- age)

For example, if you are 65 years of age, 90 minus 65 is 25. One over 25 is 4%. At 65, you must take out at least 4% of the RRIF balance at the beginning of the year in income. If you had \$100,000 in the RRIF, you would need to take out at least \$4000.

## RRIF minimum income

Age2015 and later1992 to 2015Pre 1992
654.00%4.00%4.00%
664.17%4.17%4.17%
674.35%4.35%4.35%
684.55%4.55%4.55%
694.76%4.76%4.76%
705.00%5.00%5.00%
715.28%7.38%5.26%
725.40%7.48%5.56%
735.53%7.59%5.88%
745.67%7.71%6.25%
755.82%7.85%6.67%
765.98%7.99%7.14%
776.17%8.15%7.69%
786.36%8.33%8.33%
796.58%8.53%8.53%
806.82%8.75%8.75%
817.08%8.99%8.99%
827.38%9.27%9.27%
837.71%9.58%9.58%
848.08%9.93%9.93%
858.51%10.33%10.33%
868.99%10.79%10.79%
879.55%11.33%11.33%
8810.21%11.96%11.96%
8910.99%12.71%12.71%
9011.92%13.62%13.62%
9113.06%14.73%14.73%
9214.49%16.12%16.12%
9316.34%17.92%17.92%
9418.79%20.00%20.00%
95+20.00%20.00%20.00%

You can see that at age 71, the minimum income changes and no longer follows the formula 1/(90-age) formula. At 71, the minimum income amount is predetermined by the government. You can see that as you get older, the minimum percentage increases.

The government introduced a new minimum income schedule in the 2015 Federal Budget lowering the amount of money required for withdrawals starting at the age of 71. Income used to jump dramatically to 7.38% but that was lowered to 5.28%.

## Withholding tax on minimum income

When withdrawing money from a RRIF, withholding tax is NOT taken off on the minimum income amount.  Withholding tax only applies to amounts that exceed the RRIF min.  For example, Jack is 65 and want to take out \$10,000 from his \$100,000 RRIF.  The minimum income is \$4,000 (4% X \$100,000).  If he withdraws \$4,000 from the RRIF, there would be no withholding tax but that does not mean the \$4000 is tax free.  It just means no tax is taken off but he still has to report the \$4,000 on his tax return.  If he takes out \$10,000, the financial institution would withhold 20% of the difference between \$10,000 and \$4,000.  Thus, \$6,000 X 20% = \$1,200.  Jack would get \$8,800 and \$1,200 would get remitted to CRA for taxes.  Remember, withholding tax is just the pre-payment of tax but it does not equal the total tax owed.  Your actual tax rate is based on your Marginal Tax Rate, not your withholding tax rate.

Related article:  Understanding Withholding Tax in retirement

## Changes to RRIF Minimum income in 2020

Due to COVID, in 2020, the minimum required withdrawal for all types of registered retirement income funds (RRIFs) has been reduced by 25%. Individuals who have already withdrawn more than the reduced 2020 minimum amount will not be permitted to re-contribute the excess amount back into their RRIFs. Tax will only be withheld if you withdraw more than your unreduced minimum amount.

The 25% reduction applies to the entire minimum amount for 2020. For example, if an individualâ€™s 2020 RRIF minimum amount before the reduction is \$12,000, they could have received the minimum amount of \$1,000 per month. Due to the economic measure, their 2020 minimum amount is reduced by 25% to \$9,000 (\$12,000 x 75% = \$9,000). If the individual had already received \$1,000 from January to April for a total of \$4,000, they would only need to receive a total of \$5,000 for the rest of the year to reach their new minimum amount. This means their monthly RRIF payments are reduced to \$625 for the remaining 8 months (8 x \$625 = \$5,000).

For more information on RRIFs, check out one of Jim’s most popular articles: Everything You Need to Know About RRIFs

1. Lawrence Bernstein

Good information. Thanks. I do have one question: My wife is 20 years younger than I am.
Am I able to use her age when I turn 71 to estimate my minimum amount of RRIF withdrawal?
The formula would be 1/(90-61)?

2. Bernie

I have the same question but my spouse is 31 years younger.
Would my formula, at 71, be 1/(90-40)?

• Jim Yih

Sorry for the delayed response. Yes to the both of you. You can use your spouses age for the minimum income calculation.

• Fred Rosmanitz

How does CRA deal with a situation wherein a person does make the annual minimum withdrawal from theiR RIF?

3. James Lundholm

I have a pension from Civil Service (35 years); Military – USAR 29 years) and Social Security. I My annual income is \$124,000.00 from these three sources. I am currently working and earn \$124,000.00 per year. I have Blue Cross, Medicare and Tricare for life (plus delta Dental). Do I need to work any more additional years for retirement? James W. Lundholm

4. Fred Rosmanitz

How does CRA deal with a situation wherein a person does make the annual minimum withdrawal from my RIF?

5. Maureen

So if I understand this correctly, if the minimum withdrawal at 65 from a RRIF is 4%, I could transfer \$50,000 from my RRSP to a RRIF (both self directed) and take out \$2000 (4%) that first year and then claim \$2000 deduction for it on my year end taxes.

I can continue to do that until 71 when I have to bring everything else over from RRSP to RRIF and then the withdrawal amounts will increase because of the increased funds.

• Tom

I hope Jim answers this because I am considering doing the exact same thing.

• Serge Bergeron

You are thinking of withdrawing \$2000 RIF and offsetting that with the \$2000 Pension Credit? if so that is correct – and if you have a younger spouse – you could withdraw \$4000 and do the Pension income split and you both are entitled to the \$2000 pension credit.

• Maureen

Thanks Serge. Didn’t realize you could take out twice as much and do the split with your spouse. I have an older spouse by two years so he’ll be at 65 before me so he could do this for the first two years at least. Have to find all the nuggets so we pay the taxman less. đź™‚

6. Marcia Edwards

Hello JIM. Thank you for your knowledge and helping seniors. I have a question. I am 72 as of yesterday. I starting receiving my RRIF payments in January 2020. Because I am 72 the percentage point jumps to 5.28%. When does the increase become effective? On your birthday or at the end of the year? Thank you.

Marcia

Thank you

• Jen

The RRIF factor (the percentage you must pay out), is based on your age on January 1st each year. So your RRIF payments for 2020 would have been based on the factor for a 71 year old (your age at the beginning of 2020) which is 5.28%. In 2021, it will increase to 5.4% of the value of your RRIF account on January 1, 2021. This doesn’t include the allowance for 2020 to reduce your RRIF payments by 25% for COVID-19 relief.

7. Terry Kennedy

Haven’t the RRIF minimum income rules been adjusted for this year because of special circumstances re:COVID-19 ??

• Jim Yih

Hi Terry,
I have added content to reflect the changes to the minimum income in 2020 due to COVID
Jim

8. Nick

HI JIM
I turned 71 in Sep 2020. I have RRSP account in 2 banks.
When should I change RRSP account to RRIF and start
Withdrawing from RRIF.

• Jim Yih

Anytime between now and the end of the year. I would try to not wait later than Dec 1 because you are getting into the holiday season.
Jim

9. Chuck

HI Jim
Any talk of the government reducing the RRIF minimum again for 2021?

10. Doug Olson

Hi Jim,
I turn 66 in December this year and am considering opening a RRIF and contributing from my RRSP \$12,000 to cover \$2,000 RRIF withdrawals for this year and the next five years to get the pension credit. My remaining RRSP would be transferred to the RRIF in the year I turn 71. Can I do a withdrawal in the same year as a contribution to the RRIF and get the pension credit? Also, would it be in my 72nd year that my RRIF withdrawal would increase to take into account conversion of my remaining RRSP into the RRIF?

11. Liss

If I want to convert to RRIF and start the withdrawals with 55 years old, do I still have the minimum of 4%. or do I have to calculate it according to the formula? I have read above that after 25 years old, it is the 4%. Thanks!

12. Arman Ozzorluoglu

I have a LIRA from a previous employer’s pension plan. How would I handle that? Do I convert it to RRIF? If so, would I need to wait until 65?

13. Robert

I don’t understand your formula as written – “1 / (90- age)”.
e.g. 80y & 90y
80y = 1 / (90-80) = 1/10 = 10% vs 6.82% in your chart.
90y = 1 / (90-90) = Division by zero error.
95y = 1 / (90-95) – will work if it is “1 / abs(90-95)” = 1/5 = 20% agrees w table.
What am I missing?

• Doug Runchey

Hi Robert – You are missing the paragraph right below the table.

• Roy

There should be a condition that says:
where age 71, ask CRA, etc…

14. Dino

Hi Robert.The formula does not apply after your age reaches 71

• Robert

Hi Doug R & Dino – thank you. You are quite right. My mistake was thinking RRIF’s & retirement begins at 65 along with not reading thoroughly. As Dino said it works up to 70 & that calculation I did in my head but then 80y did not work.

15. Karen Young

I am the beneficiary of my husbands RIF . He was 76, Iâ€™m 66 and did not own a RIF prior to his death in April 2020 . All my investments are in a self directed brokerage. How do I receive the RIF payments? He received annually as had very little in this account. Do I contact the brokerage directly , as I am opting for the COVID 25% reduction?

16. Donald Barnes

My wife turns 71 this year and I turn 70 this year .
Can she delay turning a rrsp into a rrif,based on my age ,not her’s?
Brgds,
Don

17. Guy

There is an important typo in the second paragraph:

“The RRIF differs from an RRSP in that you cannot put direct contributions into a RRIF and with a RRIF, you must take out a minimum amount each and every year. In other words, you can close the tap completely. You must take out a minimum amount of income. This is called the Minimum Income.”

“you can close the tap completely” should read: “you *cannot* close the tap completely”

18. RM

you must take out a minimum amount each and every year. In other words, you can close the tap completely.

Did you mean to say “In other words you CANNOT close the tap completely.” ??

19. Daniel

Hi Jim,
I have spent countless hours researching, including calls to the CRA and my financial institution on the following, with no answer:

I contributed to my spouse’s Spousal RRSP in July 16 2021; any contributions made in the last 3 years (3 yr attribution rule) will be attributed to me, should my spouse withdraw before July 16 2024. This year (2022) our RRSPs, LIRA, including Spousal RRSPs were converted to RRIFs, Spousal RRIFs and LIFs respectively. Since this is the first year these accounts were created, if we withdraw from them, there are no minimum amounts like there would be in 2023. My question: If my spouse withdraws the “minimum” this year from her Spousal RRIF, will the withdrawal be attributed to me, the contributing spouse? I am assuming the “minimum” in the first year is set to zero (no minimum) and any withdrawal amounts (RRIF, LIF) would be above the minimum (zero). Thanks!

20. Danny

What happen if it is impossible to take a minimum RRIF withdrawal in a particular year?
For example, the whole RRIF account might be invested in a fund that does not permit redemptions that year. If there is no additional cash in the account, it is impossible to sell the investment and make the minimum withdrawal.