A Registered Retirement Income Fund (RRIF) works like a Registered Retirement Savings Plan (RRSP) in reverse. Before, you were putting money into your RRSP as savings. Now, you withdraw money from your RRIF for income after you retire.
Like an RRSP, you choose the types of investments to hold in a RRIF. You have to follow rules about taking out a certain amount each year.
How does a RRIF work?
You don't pay tax on any of the money in your RRIF, as long as it stays in the plan. This includes any money you make from investing. You do pay tax, however, when you take money out of your RRIF for income. If there is any money left in your RRIF when you die, it will go to loved ones or to your estate.
You must withdraw a minimum amount from your RRIF each year. You choose which investments to sell to provide the cash for your withdrawals. You also decide how often you would like to receive your payments. Most people choose regular payments, such as monthly, quarterly (every three months), semi-annual (twice a year), or annual (yearly) payments.
You can also withdraw extra money from your RRIF when you need it. There is no maximum withdrawal limit per year.
Remember: A RRIF is for income when you retire
You have to follow rules about taking out a certain amount each year. You only pay tax when you withdraw money from the plan.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.