Retirement Income Fund (RIF) - part of a healthy retirement plan
Whether your retirement is around the corner or years away, a RIF will likely be part of your plan. That means it’s never too early to start planning.
A RIF is an account that’s registered with the federal government, and is like an extension of a Retirement Savings Plan (RSP). Similar to an RSP, a RIF provides a tax shelter for interest, dividend and capital gain income. However, that’s where the similarity ends. RIF require annuitants to withdraw a minimum annual payment, subject to a pre-defined schedule. For example, a 71-year-old purchasing a RIF today would be required to withdraw a minimum of 7.38% of the remaining balance as at the end of the previous year. This percentage increases each year.
While there is no minimum age limit to open a RIF, any RSPs must be ended by December 31 in the year that you turn 71. At that point, you can do one of three things with your RSP: cash it out, convert it into an annuity, or roll it over into a RIF. As part of your planning, you should consider that RIF payments are both taxed as regular income and are used to calculate tax credits and benefits, such as Old Age Security.
Tips for getting the most from your RIF
To get the most out of your RIF, you should consider:
- Split income with your spouse. Shift up to 50% of eligible income
to a lower income spouse to reduce your combined taxes and
impact on income tested tax credits and benefits (i.e. Old Age Security).
- Use a younger spouse’s age to determine minimum annual payment.
If your spouse is younger than you, you can base the minimum
annual payment on their age to preserve your capital inside the RIF plan.
- Decide when to take income. Subject to the minimum annual
payment requirements, you can decide the frequency and amount
of your withdrawals.
- Make one last RSP contribution. If you have sufficient room, you
can consider topping up your RSP before converting to a RIF.
The deductions can be saved for future years to reduce your taxable
income and reduce clawbacks on income tested tax credits and benefits.
Oaken is out in the community!
We want to get to know our customers better, and that’s why we’re making a special effort to get out into the community. Last month we were at the Zoomer Show in Vancouver, where we set up our booth, met lots of current and future Oaken customers. We also gave away a $500 GIC – congratulations to our lucky winner, Pat Petrala from Vancouver, B.C.!
Even more recently we were at the Senior Expo in Victoria, presented by Senior Living Magazine, where we met even more British Columbians. And next month we’re heading to Ottawa for the Zoomer Show at the Ernst & Young Centre on April 26th and 27th, where we’ll be giving away another $500 GIC. We hope to see you there.
Articles about RIFs (and retirement in general)
There’s a lot to consider when planning your retirement. Here are some articles that will help you get started.
60, 65, 70? Five points to consider before deciding when to take Canada or Quebec Pension Plan benefits. This article shows that retirement at 65 isn’t for everyone.
RRIFs are more flexible but can you run out of money? The benefits and drawbacks of RIFs.
When to convert an RRSP to a RRIF – early, at the last possible moment, or not at all? A quick guide to timing your retirement moves.