What is a registered retirement income fund (RRIF)?
It’s like a Registered Retirement Savings Plan (RRSP) in reverse, but instead of making contributions, you make withdrawals as you need them. An RRSP helps you save for retirement through annual contributions - a RRIF lets you spend the money you’ve saved.
A RRIF requires you to take minimum annual withdrawals from your savings to help fund your retirement. In short, a RRIF is designed to help create dependable and predictable income in your retirement.
It’s important to remember that:
- A RRIF is a way for you to use your RRSP savings to generate retirement income while keeping the balance of your registered savings invested in a tax-deferred plan.
- While you're required to make a minimum withdrawal each year, there are no other limits on withdrawals and the balance of your savings can continue to grow tax free (until withdrawn).
What are the benefits of a RRIF?
A RRIF is a great way to help you turn your savings into income for retirement.
- Acts like a “Reverse RRSP” where instead of making contributions, you make withdrawals.
- Your earnings are tax-sheltered.
- Whether you have 1 RRSP or many, you can combine them into 1 RRIF, making things simple and easy.
- You must convert your RRSP to a RRIF by age 71
- If there’s money left in your plan when you die, it goes to your beneficiaries or estate, subject to appliable legislation (less any applicable taxes).
- A RRIF can hold a variety of investments including:
- Stocks
- Mutual Funds
- GICs
- Bonds
- Funds are protected from creditors/can’t be seized if the funds are invested with an insurance company
Are RRIF withdrawals taxed/taxable?
Yes, RRIF withdrawals are taxed.
- You don’t pay tax on the money in your RRIF even if your investments continue to grow.
- You only pay tax on the money you withdraw from your RRIF each year, which is treated as income. If you take out more than your minimum amount, taxes will be withheld at the time of withdrawal. Like an employer withholds taxes and pays them to the government on your behalf, the same is done with your RRIF. If you withdraw more than the minimum, the amount of withholding tax will depend on the amount withdrawn and the province you live in.
- Minimum withdrawal rates vary by province and increase as you get older. The rates are newly calculated every year.
- You can set up a RRIF to pay you on any schedule you like, including monthly, semi-annually, or annually. You can also withdraw lump sums as needed.
What is a Lifetime income fund (LIF)?
Like a RRIF, a LIF is used as a retirement income vehicle. It converts locked-in retirement accounts, (LIRA), pension plan funds, and other locked-in funds into retirement income.
A LIF is designed for money that originally came from a pension plan. The rules for converting your plan and receiving income differ among provinces, so, it’s a good idea to check what the rules apply to you.
What are the benefits of a LIF?
A LIF is a great tool to help you turn your locked-in savings into retirement income.
- Uses money from your pension plan(s)
- Keeps your earnings tax-sheltered
- Stipulates withdrawal minimums and maximums each year
- For conversion of locked-in retirement accounts
- If there’s money left in your plan when you die, it goes to your spouse or common law partner first, then the beneficiaries or estate, subject to appliable legislation (less any applicable taxes).
- A LIF can hold a variety of investments including:
- Stocks
- Mutual Funds
- GICs
- Bonds
- Funds are protected from creditors/can’t be seized
- Stocks
Are LIF withdrawals taxed/taxable?
Yes, LIF withdrawals are taxed.
- You don’t pay tax on the money in your LIF even if your investments continue to grow.
- There is both a minimum and maximum withdrawal for a LIF.
- You only pay tax on the money you withdraw from your LIF each year, which is treated as income.
- If you take out more than your minimum amount, taxes will be withheld at the time of withdrawal. Like an employer withholds taxes and pays them to the government on your behalf, the same is done with your LIF.
- If you withdraw more than the minimum, the amount of withholding tax will depend on the amount withdrawn and the province you live in.
RRIFs, LIFs and LRIFs
Preparing for retirement is a big and important undertaking. When you consider all the details, keeping track of all those acronyms and what the differences, benefits and features are of each of them can get a little confusing.
We want to help you make retirement income decisions by presenting the information you need in the clearest way possible. So, we’ve created a comprehensive breakdown of just that. Download our retirement income documents | PDF 4.8 MB to help you understand the similarities of these products, and what sets them apart.
Where to find help
You can work with an advisor to choose how to invest your money to help grow your eventual income. They can design a custom plan that’s right for you. If you’re a Canada Life plan member, we have licensed professionals who can also provide assistance specific to your plan. Contact Canada Life to find out how.