RRIF and LIF withdrawal rates: Everything you need to know

You do not have to wait until age 71 to convert your RRSP. Most people consider doing so once they have retired.

RRIF withdrawal rates

The minimum age at which you can convert an RRSP to a RRIF varies by province: it’s 50 in some, and 55 in others. But starting the year after conversion, you must begin to make minimum withdrawals from your RRIF. The table below includes the minimum withdrawal rates for all RRIFs set up after 1992. It shows the percentage of the account balance (at the previous year-end) that must be paid out in the current year.

Download this chart to your device: Downloadable RRIF withdrawal rates chart 2024.

Locked-in retirement accounts (LIRAs)

The withdrawal rates above represent the minimum percentages that must be withdrawn, but account holders can make larger withdrawals if they need to or want to, as long as the account is not locked in.

Why do some Canadians have locked-in accounts? When a pension plan member leaves a pension, they may have the opportunity to transfer funds from their pension to a locked-in retirement account (LIRA). If they have a defined contribution (DC) pension, they may transfer the investments to a locked-in account. If they have a defined benefit (DB) pension plan and elect to receive a lump sum commuted value and to forgo their future monthly pension payments, they may be eligible to transfer some or all of the funds to a locked-in account.

A locked-in RRSP may also be called a LIRA. LIRA is the term used in B.C., Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, New Brunswick, and Newfoundland and Labrador.

You can withdraw from an RRSP, but you cannot withdraw from a locked-in RRSP. The latter must be converted to the locked-in equivalent of a RRIF: a life income fund (LIF) is most common, although Newfoundland and Labrador has locked-in RIFs (LRIFs) and Saskatchewan and Manitoba have prescribed RRIFs.

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LIF withdrawal rates

LIFs have the same minimum withdrawal rates as RRIFs. But they also have maximum withdrawal rates, which vary by province and territory, to prevent former pension plan members from spending their pension funds too quickly. The table below shows the maximum withdrawal rates for LIFs.

There may be situations where locked-in account holders can make withdrawals that exceed the annual maximum. In Ontario, for example, there may be unlocking options for people experiencing financial hardship from:

• Medical expenses

• Arrears of rent or debt secured on a principal residence (such as a mortgage)

• First and last months’ rent

• Low expected income

There are non-hardship unlocking opportunities as well. Sticking with the example of Ontario, you may be able to unlock if:

• Your life expectancy has been shortened to two years or less by an illness or a physical disability
• You are at least 55 years old and the total value of the funds in all of your locked-in accounts is less than 40% of the year’s maximum pensionable earnings (YMPE)
• The amount of money transferred to your locked-in account exceeds federal limits stated in the Income Tax Act
• You are a non-resident of Canada and 24 months have passed since your departure from Canada
• You transferred money into an Ontario LIF that is governed by the requirements of Schedule 1.1, and, within 60 days of this transfer, you want to withdraw or transfer up to 50% of the total money that was transferred to the Schedule 1.1 LIF

RRIF rules for account holders who are married or common-law

When a married or common-law RRSP account holder establishes a RRIF, they can elect to use their spouse’s age for their RRIF minimum withdrawals. If an account holder has a younger spouse, this would result in a lower minimum withdrawal requirement.

Couples sometimes use spousal RRSP accounts to split income with each other. The account holder spouse owns the account and will withdraw from it in the future, and the other spouse contributes and claims the tax deduction. A spousal RRSP must be converted to a spousal RRIF before the end of the account holder’s 71st year. The same RRIF withdrawal rules apply, regardless of whether a RRIF is a personal RRIF or a spousal RRIF.

Tax considerations of RRIF withdrawals

RRIF withdrawals are considered fully taxable income. The withdrawals are reported on a T4RIF slip.

There is no withholding tax required on RRIF minimum withdrawals. This does not mean the withdrawals are not taxable. The withdrawals are added to your income for the year, which may result in a tax balance owing. If you have too little tax withheld in consecutive years, you may need to start paying quarterly income tax installments to the Canada Revenue Agency or Revenu Québec.

If you make extra withdrawals beyond your minimum, withholding tax applies to only the excess, at the following rates:

• 10% (5% for Quebec) on amounts up to $5,000

• 20% (10% for Quebec) on amounts over $5,000

• 30% (15% for Quebec) on amounts over $15,000

For Quebec residents making extra RRIF withdrawals, 14% provincial withholding tax applies in addition to the federal tax rates of 5%, 10% or 15%, depending on the amount of the withdrawal.

If a taxpayer is 65 or older, they can move up to 50% of their RRIF withdrawals to their spouse or common-law partner’s tax return. If the recipient spouse’s income is lower, this could result in a couple paying less combined tax.

RRIF withdrawals are also considered eligible pension income and qualify from age 65 onwards for the pension income amount, a small tax credit for seniors.

RRIF withdrawal strategies

Withdrawals can be taken in cash or in kind. So, if the financial institution allows it, you may be able to withdraw investments without selling them and have it qualify as a RRIF withdrawal. Not selling the investment could come in handy if there are costs to selling it, or if the asset is illiquid and cannot be easily sold.

RRIF withdrawals can be taken monthly, quarterly or even annually. A retiree can set the withdrawal schedule to their preferences and then manage their account to ensure they withdraw sufficient cash.

You should consider converting your RRSP to a RRIF if you’re certain that you will be making RRIF withdrawals every year when you retire. But think twice about converting your entire account if you have a variable income due to part-time work or consulting, have non-registered investment income that could include sporadic capital gains, or face other circumstances that could cause your income to spike from year to year. If you want to benefit from pension income splitting and to claim the pension income amount, you can convert part of your RRSP to a RRIF. It is not all or nothing.

What happens to your RRIF when you die?

Upon death, your RRIF is fully taxable unless you leave it to your spouse or to a financially dependent child or grandchild. If your spouse inherits your RRIF, it can remain tax-sheltered until their death.

If a RRIF has a named beneficiary, it will be paid to them without any withholding tax. Your estate pays the tax owing on your final tax return, if applicable. This is an important consideration if your RRIF beneficiaries differ from your estate beneficiaries.

A RRIF with a named beneficiary does not pass through your estate and is generally not subject to probate or estate administration tax.

Know the RRIF withdrawal rules

Millions of Canadians have RRSPs, and those accounts are generally converted to RRIFs. It is important to understand the RRIF rules, including the minimum withdrawals and other considerations, especially as you approach retirement.

Read more about RRIFs:

• RRIF withdrawals: What should seniors with million-dollar portfolios do?

• How much should you withdraw from your RRIF?
• What happens to my RRIF when I die?
• 3 ways to recession-proof your RRIF

About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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