PINKNEY FINANCIAL SERVICES
Retirement & Pensions
Registered Retirement income fund (RRIF)
A RRIF is a type of retirement account that allows individuals to convert their Registered Retirement Savings Plan (RRSP) or other eligible retirement savings into a source of income during retirement. If an individual own RRSPs, they must be converted your RRSPs to a RRIF or RRIFs before the end of the year you turn 71. When this occurs, funds are directly transferred funds from your registered accounts to a RRIF. Investments will not be taxed while they are in a RRIF. However, taxes must be paid on withdrawals.
- RRIF contributions: Contributions to a RRIF can be made only from a RRSP, other RRIFs, and certain other retirement plans. Under age 71, some or all of RRIF funds may be converted to a RRSP. This may be helpful if an individual no longer requires RRIF income.
- RRIF withdrawals: A minimum annual withdrawal is required from a RRIF, starting no later than the year after it has been opened. Withdrawals are taxed. Withdrawals greater than the minimum amount will be subject to withholding tax.
Key Features and Considerations of RRIFs
- Conversion from RRSP: When an individual reaches the age of 71, they are required to convert their RRSP into a retirement income option, such as a RRIF. However, a RRIF can be opened at any age, providing flexibility.
- Tax-deferred growth: Similar to RRSPs, funds held within a RRIF grow on a tax-deferred basis. This means no taxes are paid on the income or capital gains generated within the account until withdrawal of funds.
- Minimum annual withdrawals: Each year, the investor are required to withdraw a minimum amount from a RRIF, which is determined based on age and the value of the RRIF. The government sets the minimum withdrawal percentages, which increases with age.
- Taxation of withdrawals: Withdrawals from a RRIF are considered taxable income and are subject to an individual’s marginal tax rate. The financial institution holding the RRIF will typically withhold a portion of the withdrawal amount as tax remittance to the government.
- Investment options: RRIFs offer a range of investment options, including stocks, segregated funds, mutual funds, and other qualified investments.
For information regarding the rules and regulations
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