RRIF - Registered Retirement Income Funds
A Registered Retirement Income Fund (RRIF) is a plan that is designed to provide a steady stream of income during retirement from funds provide by a RRSP that has matured. Similar to an RRSP, a wide range of investments can be held in a RRIF and the income on the balance accumulates tax-free. However, a specific percentage of the plan's assets must be withdrawn each year as income.
The RRIF plan is designed to provide people with a constant income flow through retirement from the savings in their RRSPs and to spread out their taxation over the retirement years. By converting an RRSP into an RRIF, people can keep their investments under a form of tax shelter allowing the balance to accumulate tax-free, while still allowing you the personal choice of where to allocate these funds within your plan.
RRIF payouts are considered a part of the retired beneficiary's normal income and are taxed as such by the Canadian Revenue Agency in the year that the beneficiary receives each payout. Withdrawal payments can be made monthly, quarterly, semi annually or annually (at the end of the year).
You will receive an income stream that's based on a pre-determined percentage of the plan's assets that remain each year, plus you can withdraw extra cash when needed (subject to withholding tax). There is a minimum amount that need be taken and a limit to how much can be withdrawn above that amount.
The spouse can be made the plan beneficiary so that in the event of death, the remaining amount in your RRIF will transferred over to that souse without any tax implications. Of course the surviving spouse will pay taxes on this money as it is withdrawn.
RRIF’s may be obtained through insurance companies, banks or any kind of licensed financial intermediary. The Government of Canada is not the carrier for RRIFs; it merely registers them for tax purposes.
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