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Nancy Woods, adviser with RBC (Deborah Baic/The Globe and Mail)
Nancy Woods, adviser with RBC (Deborah Baic/The Globe and Mail)

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Can dividends ease the tax burden when exiting a RRIF? Add to ...

Hi Nancy,

I am a senior citizen investor. This year I have to transfer $10,000 from my RRIF to a non-registered fund that will trigger paying higher taxes on my income tax return. Is it better to place this amount in a dividend class fund in terms of taxes? Am I correct in assuming that I do not have to pay taxes on dividend income generated from this fund if I do not sell the fund?

Thank you,


Dear Jay,

Since you say you “have to transfer $10,000” from your RRIF, I am assuming it is your required minimum withdrawal amount. That amount will be considered income and you will be issued a tax slip to ensure you declare that amount on your income tax return.

However you choose to invest those monies, if there is income paid and classified as a dividend you will be required to pay tax on it when held in a regular investment account. If you purchase a mutual fund there may not only be income that you will have to pay tax on each year, but possibly capital gains as well if the fund manager has realized gains within the fund. This may occur even if you have not sold the mutual fund. There will be tax in the future when you sell a fund and you have made a capital gain.

You should consider depositing some or all of the $10,000 into a TFSA, providing you have available contribution room, You will still have to declare the income from the RIF but any future gain or income will be tax sheltered.

Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment advisor with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com


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