A registered retirement income fund (RRIF) is one of the options for converting a registered retirement savings plan (RRSP) into income. You can transfer funds from an RRSP into a RRIF at any time, but it is mandatory that you do so by December 31 of the year in which you turn 71.
Here are 4 basic things about RRIFs that you should know:
Unlike an RRSP, you cannot continue to contribute additional funds into a RRIF. However, the investments in the account can continue to grow tax-free until withdrawn.
You are required to withdraw a mandatory amount each year from a RRIF. The amount is calculated by taking the market value of your RRIF as of Dec 31 of the previous year and multiplying it by a specific percentage. As you get older, the percentage and minimum withdrawal amounts increase.
If you have a spouse who is younger than you, you can make your RRIF last longer by setting up the account to calculate minimum withdrawals based on your spouse’s age.
While you won’t be taxed on any growth in the RRIF, you will be expected to pay taxes on amounts that are withdrawn. Plus, you will be charged a withholding tax on any withdrawals that exceed the minimum withdrawal limit.
4) Death and beneficiaries
It’s wise to name a beneficiary (such as your spouse and/or your children) on your registered retirement income fund, so the money in the fund can pass to your spouse tax-free and so any named beneficiaries will have quick access to the funds.
So, if you want your loved ones to get your RRIF funds as quickly as possible, then naming them as beneficiaries is a must.
This post was sponsored by Sun Life Financial.