Don Maycock...advising you to and through retirement!

RRIF Withdrawals

The Minimum RRIF Withdrawal

I had a great question from a client who recently asked "When I convert my RRSP to a RRIF, how much money must I withdraw each year?".

That's a great question, so I thought I would explain RRSP and RRIF withdrawals and the basic rules.

  1. You can make a withdrawal for any amount, up to the entire value, of an RRSP (Registered Retirement Savings Plan) at any time but please note that these are subject to tax which must be reported when you file your income tax for that year.   In addition, the financial institution must withhold a percentage of the amount, referred to as a withholding tax, before you receive your withdrawal.  I've written an article on withholding tax in detail and you can click here to read that article for more information.
  2. Once the RRSP is converted to a RRIF, you will need to begin withdrawals each year.  The basic math is that you take the market value of your portfolio on January 1st of the year and multiply it by the factor shown in the table to the right.  This is referred to as your minimum RRIF withdrawal for that year. Click here to open the Minimum RRIF Payment Table. If you, for example, wanted to start RRIF withdrawals in 2020 and you turned age 65 during that year.  The calculation is (i) take the market value of the investment on January 1st of the current year and (ii) multiply it by the  Minimum Withdrawal Factor for the client's age as at January 1st of that year.   For example, in the table to the right, the minimum withdrawal at age 65 is 4%. 4% of $100,000 is $4,000. You can take that amount in one lump sum or spread evenly each month over the year.
  3. The year in which you turn age 71, you are required to convert your RRSP to a RRIF, but you can defer withdrawals until age 72.  Using the table to the right again, the required minimum annual withdrawal is 5.4%, therefore for a investment valued at $100,000 on January 1st of that year, the minimum withdrawal is $5,400.

If you're still not sure when to start withdrawals, here's another great article more.