A Registered Retirement Income Fund (RRIF) is a tax-deferred retirement plan which allows you to withdrawal the funds you saved up in your RRSP. An RRSP must be converted to a RRIF by the end of the year in which you turn 71.
With a RRIF, you have to take at least the minimum annual payment that is calculated each year. There is no withdrawal required in the first year of the plan. There is no maximum amount you can withdrawal either, but keep in mind that every dollar withdrawn is fully taxed. A RRIF provides a flexible source of income in retirement, you select the investments and how much you would like to withdrawal each year, the lowest amount being the minimum mentioned earlier.
A Registered Retirement Income Fund:
The purpose of a RRIF is to give Canadians the opportunity to withdrawal RRSP funds efficiently throughout their retirement years. Amounts withdrawn from a RRIF add to a retirees earned income for the year. Creating retirement income with a RIFF provides flexibility and liquidity in retirement.
The money you take out of a RRIF counts as earned income and is fully taxable. Drawing drown your RRIF too quickly can affect your income tax bracket, as well as the amounts you receive from government benefit programs like the Guaranteed Income Supplement (GIS) and Old Age Security (OAS). Drawing down your RIFF too slowly can result higher taxation when the RIFF is automatically sold upon you death (assuming there is no spouse to pass it along to).
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