Registered Retirement Income Fund – RRIF

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Definition: Registered Retirement Income Fund – RRIF

A Registered Retirement Income Fund (RRIF) is a retirement plan which is tax-deferred according to the tax laws in Canada. People use an RRIF to bring in income from the savings accrued under their Registered Retirement Savings Plan or RRSP. As with an RRSP, an RRIF account is also registered with the Canada Revenue Agency.

There is always an option to convert an RRSP into an RRIF anytime on the condition that the person has yet to reach his/her 71st year. Before the end of the year in which an individual reaches 71, it is compulsory to either take back all funds from an RRSP plan or change the RRSP to an RRIF or life annuity. If there is a simple withdrawal of the funds from an RRSP, the complete amount is fully taxable as normal income; one may defer this taxation by transferring his/her investments in an RRSP into an RRIF.

Investments which are kept inside a RRIF grow in a tax-deferred manner in the same way as an RRSP. Primarily, there are two differences between an RRSP and an RRIF. The first is that no more contributions can be done once conversion to a RRIF has taken place. The other is a special functionality called a least RRIF withdrawal. As an example, if an RRIF is valued at $600,000 when the account holder is 72 at the beginning of the year, the minimum annual payout will be $44,880, since 7.48% of the value of the plan in the starting of the year, i.e. 600,000 X .0748 = 44,880.



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