A member of the iA Financial Group,

Investia Financial Services Inc.

 

 

Making Withdrawals from Your RRIF

Two key decisions you have to make with a RRIF are how much money to take out and when. While there is a minimum amount you have to take out each year, there is no maximum amount. All withdrawals are fully taxable.

Withdrawing the minimum amount

You have to start withdrawing money from your RRIF in the year after you open it. The federal government sets the minimum amount you must take out of your RRIF every year. It’s based on a percentage of the value of your RRIF.

Here’s how it works:

  • The minimum amount increases as you get older.

  • If your spouse is younger than you, you can use their age to calculate your minimum amount. The lower the age, the lower the minimum amount and the less income tax you’ll pay on the withdrawals.

  • You can choose to make regular monthly, quarterly, semi-annual or annual withdrawals.

  • All withdrawals are fully taxable.

USING YOUR SPOUSE’S AGE FOR THE MINIMUM AMOUNT

If your spouse is younger than you, you can use their age to calculate your minimum amount. This is a good strategy if you have other sources of income and want to leave your money in your RRIF for as long as possible. You don’t have to have a spousal RRIF or name your spouse as the RRIF beneficiary to use their age for your minimum amount. But you must tell your financial institution that you’re doing so before you make your first RRIF withdrawal. And you can’t change your mind later.

 

If you take out more than the minimum amount

You can take out as much as you need every year from your RRIF, but there are tax considerations.

Here’s how it works:

  • There is no maximum withdrawal limit.

  • All withdrawals are fully taxable.

  • If you take out more than the minimum amount, you’ll also pay withholding tax on the excess amount. Your financial institution will hold back an amount, based on the withholding tax rates, and pay it directly to the government on your behalf.

 

Withholding tax rates

Amount in excess of the minimum amount

Withholding tax rate (except in Quebec)

Up to $5,000

10%

Between $5,000 and $15,000

20%

More than $15,000

30%

 

Key point

If you withdraw as little as possible in the early years of your RRIF  your savings will last longer. That’s because more of your money will stay in the RRIF and grow tax free until you take it out.

 

Caution

You’ll pay withholding tax on any withdrawals from your RRIF that exceed the minimum amount set by the government.

 

 

 

 

 

 

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