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Tag: RRIF

  • In planning for retirement, worry about longevity rather than dying young – MoneySense

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    Or, as U.S. retirement guru Wade Pfau recently put it, “A retirement income plan should be based on planning to live, rather than planning to die.” The Michael James blog recently highlighted that quote.  

    Retirement is usually about planning for unexpected longevity, often exacerbated by inflation. After all, a 65-year-old Canadian woman can expect to live to 87—but there’s an 11% chance she’ll live to 100. 

    That fact was cited by Fraser Stark, President of Longevity Retirement Platform at Toronto-based Purpose Investments Inc., at a September presentation to the Retirement Club, which we described this past summer. Stark’s presentation was compelling enough that I decided to invest a chunk of my recently launched RRIF into the Purpose Longevity Pension Fund (LPF). A version of Stark’s presentation may be available on YouTube, or you can get the highlights from the Purpose brochure.

    Compare the best RRSP rates in Canada

    Stark confirms that LPF, launched in 2021, is currently the only retail mutual fund or ETF offering longevity-protected income in Canada. Note that LPF is not an ETF but a traditional mutual fund. It aims to generate retirement income for life; to do so, it has created what it describes as a “unique longevity risk pooling structure.” 

    This reflects what noted finance professor Moshe Milevsky has long described as “tontine thinking.” See my Retired Money column on this from 2022 after Guardian Capital LP announced three new tontine products under the “GuardPath” brand. However, a year ago Guardian closed the funds, so is effectively out of the tontine business. Apparently, it’s a tough slog competing with life annuities.

    Here’s the full list of wealth advisors and full-service brokers that offer it. Included are full-service brokerages (and/or their discount brokerage units) of the big banks, including Bank of Montreal, National Bank, and recently Royal Bank on a non-solicited basis. Among many independents offering it are Questrade and Qtrade. In addition, Stark says iA Financial allows investments in LPF on a non-solicited basis.

    Mimicking defined benefit pensions

    Purpose doesn’t use the term tontine to describe LPF, but it does aim to do what traditional employer-sponsored defined benefit (DB) pensions do: in effect, those who die early subsidize the lucky few who live longer than expected. 

    LPF deals with the dreaded inflation bugaboo by aiming to gradually raise distribution levels over time. It recently announced it was boosting LPF distributions by 3% for most age cohorts in 2026, following a similar lift last year.

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    Here’s how Purpose’s actuaries describe LPF:

    “The Longevity Pension Fund is the world’s first mutual fund that offers income for life by incorporating longevity risk pooling, a concept similar to that utilized by defined benefit pension plans and lifetime annuities, to provide lifetime income.”

    Purpose envisages LPF working alongside annuities for some retirees (see my last column on why annuities aren’t as popular as some think they should be). LPF is not registered as a pension, but it’s described as one because it’s structured to provide income for life, no matter how long you live. It’s offered as a mutual fund rather than an ETF because it’s not designed to be traded, Stark said in one podcast soon after the launch. 

    Age is a big variable. Purpose created two classes of the Fund: an “Accumulation” class for those under age 65, and a “Decumulation” class for those 65 or older. You cannot purchase it once you reach 80. LPF promises monthly payments for life but the structure is flexible enough to allow for either redemptions or additional investments in the product—something traditional life annuities do not usually provide. When moving from the Accumulation to the Decumulation product at age 65, the rollover is free of capital gains tax consequences. 

    The brochure describes six age cohorts, 1945 to 1947, 1948 to 1950 etc., ending in 1960. Yield for the oldest cohort as of September 2025 is listed as 8.81%, falling to 5.81% for the 1960 cohort. My own cohort of 1951–1953 has a yield of 7.24%.

    How is this generated? Apart from mortality credits, the capital is invested like any broadly diversified Asset Allocation fund. The long-term Strategic Asset Allocation is set as 49% equity, 41% fixed income and 10% alternatives. As of Sept. 30, Purpose lists 38.65% in fixed income, 43.86% in equities, 12.09% in alternatives, and 4.59% in cash or equivalents. Geographic breakdown is 54.27% Canada, 30.31% the United States, 10.84% international/emerging, and the same 4.59% in cash. MER for the Class F fund (which most of its investors are in) is 0.60%.  

    Stark says LPF has accumulated $18 million since its launch, with 500 investors in either the Accumulation or Decumulation classes. He also referred me to the recently released actuarial review on LPF. 

    Longevity income vehicles in the U.S.

    While LPF (and formerly) Guardian are the two main longevity product suppliers in Canada of which I’m aware, several products in the United States attempt to tackle the same problem in different ways. A few weeks ago, I did a roundup of the major U.S. offerings by contacting various U.S. and Canadian retirement experts through Featured.com and LinkedIn. The resulting blog covers products like Vanguard Target Retirement Income Fund, Fidelity Strategic Advisors Core Income Fund, Stone Ridge LifeX Longevity Income ETFs, and others. 

    For now, it appears Purpose is alone in this space in Canada, apart from fixed life annuities offered by insurance companies. The U.S. market is different because of Variable Annuities with income options. 

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    Jonathan Chevreau

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  • Making the most of the pension tax credit – MoneySense

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    Having said that, this tax credit is not a big deal for most people, and in some cases, you will be better off not converting an RRSP or LIRA to a RRIF or LIF to qualify for the credit. 

    In 2025, the maximum federal tax savings is $290 (for my calculations, read on). There is a little more in savings when you apply the provincial credit, which varies by province. In Ontario, the additional tax saving is $89. That means the total tax savings for everyone in Ontario is $379, assuming they are paying at least $379 in tax. If you can’t use the full credit, you can transfer what you can’t use to your spouse.

    Mind the new tax rate

    As a reader, Sylvain, you may have read that the maximum federal tax savings is $300 and not the $290 stated above. That was true in previous years, but the lowest federal tax rate was reduced this year from 15% to 14%. The rate didn’t come into effect until the end of June, or halfway through the year. Therefore, for 2025 the lowest federal tax rate and pension tax credit is 14.5%. Next year they will both be 14%. 

    The other thing to keep in mind is that claiming the $2,000 pension tax credit is not a way to get $2,000 out of your RRIF/LIF tax-free, something I often hear. Well, okay, it almost is if you are in the lowest tax bracket.  

    Doing the math around the pension tax credit

    Think about the way the tax credit works. For the federal $2,000 tax credit, a rate of 14.5% is applied and the tax savings is $2,000 x 14.5% = $290. A rate of 5.05% is applied to the $1,762 Ontario credit for a tax savings of $1,762 x 5.05% = $89. The two combined come to a tax savings of $379.

    Now think about what happens when you draw $2,000 from a RRIF or LIF. If you are in the lowest tax bracket in Ontario, with a marginal tax rate of 19.55% (14.5% federal + 5.05% provincial), you will pay $2,000 x 19.55% = $391 in tax. When you apply the pension tax credit savings of $379, you end up paying only $12 in tax on the $2,000 withdrawal. If the Ontario pension tax credit was $2,000 rather than $1,762 then it would have been a wash with no tax owing.

    The story is different for a person in the highest tax bracket with a marginal tax rate of 53.53%. A $2,000 RRIF or LIF withdrawal will result in $1,070 in tax before applying the credit, and $681 in tax after the pension tax savings of $379. A person with an income of about $100,000 will pay about $240 in tax after the credit is applied.   

    This leads to the next question for the person who is only drawing the $2,000 to get the pension tax credit. Does it make sense to draw the money and reinvest the lesser after-tax amount, or would it be better to leave the full $2,000 in the RRIF or LIF to grow?  This becomes a planning question. What are your spending and gifting plans?

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    What the pension tax credit is good for

    Have I pelted you with enough math, Sylvain? You are right to think about ways to minimize the tax you owe and there are times when you can claim the pension tax credit before the year you turn 65.  

    The most familiar way you can claim the pension tax credit before age 65 is when you are receiving income from life annuities from superannuation or employer pension plans. You can also claim the credit if you are under age 65 and are receiving pension payments as the result of the death of a spouse who was eligible for the pension tax credit. In other words, if your spouse is over age 65 and drawing from a RRIF and then dies, you can claim the pension tax credit on that continued income even if you are not yet 65.

    Another advantage of the pension tax credit comes with the ability to split pension income. If you have a defined-benefit pension plan you can split your pension income with your spouse before age 65. In this case both of you can claim the pension tax credit, even if you are both under 65. The same is true with RRIF or LIF income after age 65, assuming you are both 65 or older. Instead of claiming a $2,000 pension tax credit, the two of you can each claim the $2,000 credit. Two credits for one pension!

    Thanks for your question, Sylvain. Some people automatically convert RRSPs or LIRAs to RRIFs or LIFs to qualify for the pension tax credit without really thinking about it.  

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    About Allan Norman, MSc, CFP, CIM


    About Allan Norman, MSc, CFP, CIM

    With over 30 years as a financial planner, Allan is an associate portfolio manager at Aligned Capital Partners Inc., where he helps Canadians maintain their lifestyles, without fear of running out of money.

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    Allan Norman, MSc, CFP, CIM

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  • From RRSP to RRIF—managing your investments in retirement – MoneySense

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    When the time comes, RRSP, or registered retirement savings plan accounts, are converted to RRIF, or registered retirement income fund accounts, a change that needs to be made by the end of the year that you turn 71.

    Shifting your portfolio for RRIF withdrawals

    You can hold the same investments in a RRIF as you hold in an RRSP, but you won’t be able to continue making fresh contributions like you did before the conversion. Rather, the opposite will be the case. You are required to withdraw amounts based on your age every year, with the percentage rising as you get older. “It’s designed to be depleted throughout your lifetime. So I find that’s challenging for a lot of people,”  Andrade says.

    Part of the shift in retirement can be a change in the composition of your portfolio. Andrade said she typically takes a “bucketing” approach for clients when building a RRIF portfolio, with a portion set aside in something with no or very little risk that can be used for withdrawals. That way, if the overall market takes a downturn, clients aren’t forced to sell investments at a loss because they need the cash.

    Planning withdrawals to protect retirement income

    Andrade says having the available cash is important when you are depending on your investments to pay for your retirement. “I want to make sure the money is there when I need it and if the market performs poorly or there’s a downturn, you still have time to recover,” she says.

    Withdrawals from an RRIF are considered taxable income. So even though the money may have come from capital gains or dividend income inside the RRIF, when you withdraw it, it’s taxed as income, making the planning of the withdrawals important. 

    There is no maximum to your RRIF withdrawals in any given year, but you may incur a significant tax hit if the amount is large and pushes you into a higher tax bracket. If a big withdrawal pushes your income high enough, you could also face clawbacks to your OAS.

    Tailor your retirement plan to your needs

    Just because you are taking the money out of a RRIF account doesn’t mean you have to spend it. If you don’t need the money and have the contribution room, you can take the money and deposit it into a TFSA where it will grow, sheltered from tax.

    Sandra Abdool, a regional financial planning consultant at RBC, says having money outside of your RRIF can help you avoid making big withdrawals and facing a large tax hit if you suddenly find yourself with a pricey home repair or needing to make big-ticket purchase like a new vehicle.

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    “How you weave this is very much specific to each client. It’s really going to depend on what are your sources, how much income do you need, what is your current tax bracket, and what is the tax bracket projected to be by the time you get to 71,” she says.

    Abdool says you should be having conversations with your financial adviser well before retirement to ensure you are ready when the time comes. “By putting a plan in place, you’re going to be prepared knowing that the income you’re looking for will be there and you’ll have the peace of mind knowing how things are going to unfold in the future,” she said.

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  • What’s more important: your wealth or your legacy? – MoneySense

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    Let’s dig into this by first understanding what will happen if your dad continues doing what he is doing and he doesn’t add money to his TFSA. If he lives to 90, earns 5% on his investments, your home appreciates 3%, and we assume a general inflation rate of 2%, he will leave you about $654,000 in today’s dollars. That is made up of his share of the house, which isn’t taxable, and his registered money, which is taxable. I will use today’s dollars (values) for everything as we go. Actual amounts in the future will be higher due to inflation.

    TFSA strategies to enlarge your estate

    Now the question is: Can we increase the amount eventually going to you by drawing extra from the life income fund (LIF) and RRIF to add to his TFSA? Your dad has never contributed to a TFSA, so he has $102,000 of past contribution room he can add, plus his future annual contributions. His LIF withdrawals will be subject to maximum withdrawal limits, so he won’t be able to fully deplete his LIF. 

    Your dad has contribution options: he can top up his TFSA right away or do it gradually over time. If he tops it up in the next two years, he will have to draw about $135,000 from his RRIF and LIF each of the two years. This will cause him to lose his OAS in those years, but his RRIF will be depleted by age 85. His issue then will be that the maximum LIF withdrawals won’t be enough for him so he will have to start drawing from his TFSA.  

    TFSA contribution room calculator

    Find out how much you can contribute to your TFSA today using our calculator.

    Even still, this approach will increase the after-tax estate value to $689,000, which is better than continuing on the current approach, leaving you $654,000.

    A more optimal approach is to make up the past contribution limits by adding $15,000 a year to the TFSA to catch up the past contribution room of $102,000, plus the future annual contribution limits. This approach also means no OAS clawback, ever.  

    This gradual approach will leave you $703,000 with only $10,500 paid in tax. Remember, no TFSA left you with $654,000 and $160,000 was paid in tax.

    But be careful what you ask for

    Clearly, if your dad’s wish is to maximize the amount of money left to you, the best approach is to draw extra from the registered accounts, keeping his taxable income below the OAS clawback threshold, and contributing that amount to his TFSA with you as the beneficiary.  

    But what if that is not your dad’s wish and instead it is to maximize his wealth rather than the value of his estate? There are a number of reasons why some people will put wealth ahead of estate value, such as the parents who tell me they have helped their kids enough, those who want to leave money to charity, couples and singles with no children, and others with concerns about having enough money.

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    I know it sounds like the two goals, wealth accumulation and estate maximization, will result in roughly the same thing but they produce different outcomes. Think about it: when your dad draws money from his RRIF he pays tax resulting in less going to his TFSA which reduces his net worth. Leaving the money in the registered accounts maintains his net worth. 

    Here is an example where wealth accumulation and giving to charity is the goal. If your dad follows the estate maximization plan and adds to his TFSA, the charity will get $707,000 and about $7,000 is paid in tax. Contrast this with your dad not drawing extra from his RRIF to add to his TFSA strategy; the charity receives about $796,000 and the estate has tax owing of $17,000. That is about an extra $90,000 going to the charity. 

    Is your plan flexible?

    I should point out that, other than wealth or estate maximization, there is another reason for having money in TFSAs and that is to provide taxable/non-taxable income flexibility. If, in the future, your dad is ever faced with large bills, such as for long-term care, it will be good to have a non-taxable income source to keep him from moving up an income tax bracket or losing a government benefit. 

    Alex, you are on the right track. From the information provided it looks like your dad should be drawing extra from his RRIF to contribute to his TFSA. Just make sure this meets his goals.

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    About Allan Norman, MSc, CFP, CIM


    About Allan Norman, MSc, CFP, CIM

    With over 30 years as a financial planner, Allan is an associate portfolio manager at Aligned Capital Partners Inc., where he helps Canadians maintain their lifestyles, without fear of running out of money.

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    Allan Norman, MSc, CFP, CIM

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  • How to plan for taxes in retirement in Canada – MoneySense

    How to plan for taxes in retirement in Canada – MoneySense

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    The impact of your marginal tax rate

    It’s important to clarify, Ken, that if you have a minimum RRIF withdrawal with no tax withheld, that does not mean that income is tax-free. When you report your RRIF and other income sources on your tax return for the year, you may still owe tax.

    Canada has progressive tax rates so that higher levels of income are taxed at higher rates. For example, in Ontario, the first $12,000 or so you earn has no tax. The next roughly $3,000 has 15% tax. And the next $36,000 of income after that has about 20% tax. The type of income you earn may change these rates, as will tax deductions and credits. But if we kept going to higher incomes, there would be incremental increases in tax rates.

    If you have a higher income, your entire income is not taxed at the higher tax rate. Incremental tax rates lead to income being taxed at different rates as you move up through the tax brackets.

    This is why retirees tend to have tax owing. If you have a $10,000 pension, you may have no tax withheld at source. But if you have $60,000 of other income, you might owe 30% tax on that pension income.

    Getting ahead of tax installment requests

    If you owe more than $3,000 of tax in two consecutive years (or $1,800 in tax for two years in Quebec), the Canada Revenue Agency (CRA) (or Revenu Quebec) will start asking you to prepay your tax for the following year. This is called a quarterly income tax installment request.

    Installments—along with OAS clawbacks—tend to be the two cursed tax issues for retirees.

    You can reduce your installments by requesting higher withholding tax on your CPP, OAS, pension or RRSP/RRIF withdrawals, Ken. This optional tax withholding might be preferable if you would rather not owe tax or prefer to limit your installment requirements. If you can get your withholding tax rate estimated accurately, you may be able to better spend money coming into your bank account because it is all yours, and not accruing a tax liability.

    The choice is yours

    Many retirees do not have sufficient tax withheld by default. So, quarterly tax installments are common at that stage of life. But owing tax does not have to be a given if you prefer to increase your optional withholding tax.

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    Jason Heath, CFP

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  • How to consolidate your registered accounts for retirement income in Canada – MoneySense

    How to consolidate your registered accounts for retirement income in Canada – MoneySense

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    There is a spousal attribution rule with spousal RRSPs that applies if you take withdrawals within three years of your spouse contributing. This may result in the withdrawals being taxed back to the contributor.

    When you combine an RRSP and a spousal RRSP, whether you like it or not, the new account must be a spousal RRSP. As a result, you would typically transfer an RRSP into the existing spousal RRSP. 

    There are no tax differences between an RRSP and a spousal RRSP for withdrawals, other than the aforementioned attribution rules. 

    Even if you separate or divorce, your spousal RRSP cannot be converted to a personal RRSP. 

    As a result, Steve, your wife could combine her RRSP and her spousal RRSP by converting them both to a spousal RRIF. I would be inclined to do this. 

    Combining LIRAs with other registered accounts

    Locked-in RRSPs have different withdrawal and consolidation rules than regular and spousal RRSPs. The locking-in provisions of your wife’s locked-in retirement account (LIRA) are meant to prevent large withdrawals. These funds would have come from a pension plan she previously belonged to. Pension money is treated differently from personal retirement savings, such that locked-in accounts have maximum withdrawals as well as minimum withdrawals. 

    In some provinces, an account holder may be able to unlock their locked-in account if the balance is below a certain threshold. This may apply for your wife, Steve, as you mentioned the account is small. Some provinces also allow a one-time unlocking of a portion of the account when you convert a LIRA to a life income fund (LIF), which is essentially a RRIF equivalent for a LIRA. 

    As a result, Steve, your wife may be able to get some or all of her LIRA account transferred to the same RRIF as her RRSP and spousal RRSP. If not, she will have to settle for having a RRIF and a LIF. 

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    Jason Heath, CFP

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  • Which savings should retirees draw down first? – MoneySense

    Which savings should retirees draw down first? – MoneySense

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    Working as a financial planner, I am often asked, “What is the most tax-efficient way to draw down on investments?” From the outset, I question if a decumulation plan based on tax efficiency is the best use of someone’s money. I wonder whether it is even possible to design “the best” long-term, tax-efficient withdrawal strategy.  

    I have modelled many different combinations of withdrawal strategies, such as RRSP first, non-registered first, blending the two, depleting registered retirement income funds (RRIFs) by age 90, dividends from a holding company, integrating tax-free savings accounts (TFSAs), and so on. In most cases, there is no significant difference to the estate over a 25- or 30-year retirement period, with the odd exception.

    You may have read articles suggesting the right withdrawal strategy can have a major impact on your retirement. The challenge when reading these articles is you don’t know the underlying assumptions. For example, if the planner is using a 5% annual return, is it all interest income and fully taxable? What is the mix of interest, dividends, foreign dividends, capital gains and turnover rate that makes up the 5% return? There is no standard all planners use, which leads to confusion and can make things seem more complicated than they need to be.

    Think spending, not decumulation

    Here is my approach to designing a decumulation plan. First, think about my opening. You have about 20 years of active living left to get the most out of your money. What do you want to do? Twenty years from now, do you want to look back on your life and say, “I sure was tax-efficient,” or would you rather say, “I had a great time, I did this and that and I helped…” I write this because it is not uncommon for me to see people be too restrictive on their spending in the name of tax efficiency, or not wanting or having the confidence to draw down their investments when they could.

    Stop thinking decumulation; that puts the focus on the money. Instead, think spending. How do you want to spend your money? I know you can’t predict over 20 years, so focus on this year. How can you make this a fantastic year while living within your means? Do you even know the limit to your means? 

    Now prepare an expense sheet so you can see where you are spending your money and where you want to spend it. This is where a financial planner with sophisticated software can help. Have your expenses modelled and projected over time. Will your income and assets support your ideal lifestyle or even allow you to enhance your lifestyle?

    Now do the math

    Once you have a spending plan supported by your income and assets, do the projections showing different withdrawal strategies. You need the spending plan first, because the amount and timing of your spending dictates the withdrawal plan. Plus, detailing your spending gives you a better view behind the curtain to see the impact of spending amounts and frequency on tax and capital changes of different withdrawals. What does spending on things like vehicles, special vacations and renovations mean?

    I suspect that as you work through this exercise, ideally with a planner capable of using sophisticated software, you will see that the withdrawal order doesn’t matter too much and can be easily influenced by various assumptions. If that is your result, you are in a good position. It allows you to manage your affairs so you are tax-efficient each year. 

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    Allan Norman, MSc, CFP, CIM

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  • “We’re set for life. Should we cash out an RRSP?” – MoneySense

    “We’re set for life. Should we cash out an RRSP?” – MoneySense

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    Withdrawing from an RRSP before age 70

    Are you thinking you’d like to withdraw everything from your RRSP before starting your OAS or age 70? This way, if you die after age 70, there’s no RRSP/RRIF to transfer to your wife, no resulting income increase for her, and therefore no OAS clawback. This sounds like a good idea; let’s play it out and see. Start by converting your RRSP to a RRIF (registered retirement income fund) so you can split your pension income with your wife; you cannot split RRSP withdrawals.

    To deplete your RRIF of $200,000 plus investment growth within five years, draw out about $45,000 a year and, at the same time, delay your OAS pension until age 70. The OAS pension increases by 0.6% per month for every month you delay beyond age 65 and if you delay until age 70 it will increase by 36%, guaranteed, and it is an indexed pension that will last a lifetime under current legislation.

    What may have been a little better is delaying your CPP as it increases by 0.7%/month and the initial pension amount is based off the YMPE (yearly maximum pensionable earnings) which has historically increased faster than the rate of inflation, meaning that by delaying CPP to age 70 it may increase by more than 42%. 

    With your RRIF depleted, your wife will not experience an OAS clawback if you die before she does. Mission accomplished, but we should question the strategy. What are you going to do with the money you take out of your RRIF and how much money will you have after tax? 

    Consequences of accelerated withdrawals from a RRIF

    I estimate that, in Ontario, your $45,000 after-tax RRIF withdrawal will leave you with $28,451 to invest. So, rather than having $45,000 growing and compounding tax sheltered you will have $28,451 growing and compounding. Ideally, if you have the room, you will invest this money in a tax-free savings account (TFSA), where it will also be tax sheltered, otherwise, you will invest in a non-registered account. A non-registered account means paying tax on interest, dividends and/or capital gains as they are earned, probate and no pension income splitting. 

    I should acknowledge that, if your intention is to spend the RRSP and have fun that is a perfectly suitable strategy, especially when you know the income, you need is $147,000 per year and you have indexed pensions to support that income. The problem for me is it makes for a short article, so let’s continue the analysis. 

    What would happen if, instead of drawing everything from your RRIF, you drew just enough to supplement your OAS pension while delaying it to age 70? What if, at age 72, your RRIF remains at about $200,000 and the mandatory minimum withdrawal is $10,800. You could split that $10,800 with your wife and not be subject to OAS clawback. Of course, when you die the RRIF will transfer to your wife, who will no longer be able to pension split and her OAS pension will likely be impacted.

    Stop trying to predict the future and enjoy your money

    Randy, I think you can see there is no clear-cut winning strategy here. Either draw RRSP/RRIF early or leave it to grow. You may read about strategies involving income averaging or early RRIF withdrawals to minimize tax, but often I find these to be more smart-sounding strategies rather than winning strategies. There are so many variables to account for, the analysis must be done using sophisticated planning software in conjunction with your life plan.

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    Allan Norman, MSc, CFP, CIM

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  • RRIF withdrawal rates chart 2024 – MoneySense

    RRIF withdrawal rates chart 2024 – MoneySense

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    The minimum age at which you can convert a registered retirement savings plan (RRSP) to a registered retirement income fund (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.

    How to use the table: Slide the columns right or left using your fingers or mouse to see even more data, including returns and strategy. You can download the data to your device in Excel, CSV and PDF formats. 

    wdt_ID Age at end of previous year Withdrawal rate for current year Age at end of previous year Withdrawal rate for current year
    1 55 2.86% 76 5.98%
    2 56 2.94% 77 6.17%
    3 57 3.03% 78 6.36%
    4 58 3.13% 79 6.58%
    5 59 3.23% 80 6.82%
    6 60 3.33% 81 7.08%
    7 61 3.45% 82 7.38%
    8 62 3.57% 83 7.71%
    9 63 3.70% 84 8.08%
    10 64 3.85% 85 8.51%
    11 65 4.00% 86 8.99%
    12 66 4.17% 87 9.55%
    13 67 4.35% 88 10.21%
    14 68 4.55% 89 10.99%
    15 69 4.76% 90 11.92%
    16 70 5.00% 91 13.06%
    17 71 5.28% 92 14.49%
    18 72 5.40% 93 16.34%
    19 73 5.53% 94 18.79%
    20 74 5.67% 95+ 20.00%
    21 75 5.82%
    Age at end of previous year Withdrawal rate for current year Age at end of previous year Withdrawal rate for current year

    table.wpDataTable td.numdata { text-align: right !important; }

    Source: Rates calculated using the CRA’s prescribed factors formulas.

    This was excerpted from RRIF and LIF withdrawal rates: Everything you need to know by Jason Heath, CFP.


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  • Should you max out your RRSP before converting it to a RRIF? – MoneySense

    Should you max out your RRSP before converting it to a RRIF? – MoneySense

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    I am guessing you have downsized your home to move to a condo and now have money to contribute more to your registered retirement savings plans (RRSPs) as a result. First, we will start with a quick rundown of how RRSP to RRIF conversion works.

    Converting an RRSP to a RRIF

    A registered retirement income fund (RRIF) is the most common withdrawal option for RRSP savings. By December 31 of the year you turn 71, you need to convert your RRSP to a RRIF or buy an annuity from an insurance company. So, the conversion must take place not by his June birthday, Chris, but by December 31, 2025. You have a little more time than you might think.

    A RRIF is like an RRSP in that you can hold cash, guaranteed investment certificates (GICs), stocks, bonds, mutual funds, and exchange traded funds (ETFs). In fact, when you convert your RRSP to a RRIF, the investments can stay the same. The primary difference is you withdraw from it rather than contributing to it. 

    Withdrawing from a RRIF

    RRIFs have minimum withdrawals starting at 5.28% the following year if you convert your account the year you turn 71. This means you have to take at least 5.28% of the December 31 account value from the previous year as a withdrawal. Those withdrawals can be monthly, quarterly or annually, as long as the minimum is withdrawn in full by year’s end. Each year, that minimum percentage rises. 

    There is no maximum withdrawal for a RRIF. Withdrawals are taxable, though. If you are 65 or older, you can split up to 50% of your withdrawal with your spouse by moving anywhere between 0% and 50% to their tax return when you file. You do this to minimize your combined income tax by trying to equalize your incomes.

    You can base your withdrawals on your spouse’s age and if they are younger, the minimum withdrawals are lower. 

    Contributions before you convert

    If you have funds available from your condo downsize, Chris, you could contribute to your husband’s RRSP. He can contribute until December 31, 2025. If you are younger than him, he can even contribute to a spousal RRSP in your name until December 31 of the year you turn 71, whereby he gets to claim the deductions, but the account belongs to you with future withdrawals made by you.

    However, just because you have money to contribute, it doesn’t mean you should. Say your husband has $10,000 of RRSP room and his taxable income from Canada Pension Plan (CPP), Old Age Security (OAS), investments, and other sources is $50,000. He could contribute and deduct that $10,000 to reduce his taxable income to $40,000. In most provinces, the tax savings would be about 20%. His tax refund would be about $2,000.

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  • How to cope with the RRSP-to-RRIF deadline in your early 70s – MoneySense

    How to cope with the RRSP-to-RRIF deadline in your early 70s – MoneySense

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    Unless taxpayers make a request, there are no withholding taxes on the minimum RRIF withdrawal. This can result in the Canada Revenue Agency (CRA) requesting quarterly tax installments in the future: after filing a tax return where net taxes owing (taxes owing less the taxes deducted at source) exceed $3,000. 

    If this looks to be an annual event, it’s wise to pay the tax installments, as the CRA will charge installment interest on the amounts outstanding or paid late, Ardrey says. “That rate of interest is currently at 10%.” 

    (Of course, if you overpay installments, the CRA will not pay you any interest.)

    Withholding taxes is another consideration. These are not the same as your final tax bill (after you die), Birenbaum says, but instead are “a default percentage the government takes upfront to ensure they get (at least some) tax on RRSP or RRIF withdrawals.” If you’re in your 60s and have ever taken money from your RRSP, you know you pay 10% withholding tax for withdrawals of $5,000 or less, 20% between $5,001 and $15,000, and 30% over $15,000. Amounts are higher in Quebec.

    But the rules are different for RRIFs; there are no withholding taxes required on minimum withdrawals. Outside Quebec, withholding taxes are the same for RRSPs, says Birenbaum. For systematic withdrawals, withholding taxes are based not on each individual payment but on the total sum requested in the year that exceeds the minimum mandated withdrawal. 

    You don’t necessarily want to pay the least in withholding taxes, as many may know from making RRSP withdrawals in their 60s. You can always request paying a higher upfront withholding tax on RRIF withdrawals, if you expect to owe more at tax-filing time due to other pension and investment income. You can also set aside some RRIF proceeds in a savings account dedicated to future tax liabilities. 

    Do RRIFs trigger OAS clawbacks?

    Another complication of extra RRIF income is that it can trigger clawbacks of Old Age Security (OAS) benefits. If your total income exceeds $90,997, OAS payments will be clawed back by $0.15 for every dollar over this amount until they reach zero.  

    Income splitting with a RRIF

    Fortunately, there are ways to minimize these tax consequences. If you are one half of a couple, you can benefit from a form of pension income splitting: RRIF income can be split with a spouse on a tax return when appropriate, providing the taxpayer is over 65. An income split of $2,000 can provide a pension tax credit for the spouse, which could be the difference between being impacted by the OAS clawback or not.

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  • RRIF and LIF withdrawal rates: Everything you need to know – MoneySense

    RRIF and LIF withdrawal rates: Everything you need to know – MoneySense

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    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.

    Age at end of previous year Withdrawal rate for current year Age at end of previous year Withdrawal rate for current year
    55 2.86%   76 5.98%
    56 2.94%   77 6.17%
    57 3.03%   78 6.36%
    58 3.13%   79 6.58%
    59 3.23%   80 6.82%
    60 3.33%   81 7.08%
    61 3.45%   82 7.38%
    62 3.57%   83 7.71%
    63 3.70%   84 8.08%
    64 3.85%   85 8.51%
    65 4.00%   86 8.99%
    66 4.17%   87 9.55%
    67 4.35%   88 10.21%
    68 4.55%   89 10.99%
    69 4.76%   90 11.92%
    70 5.00%   91 13.06%
    71 5.28%   92 14.49%
    72 5.40%   93 16.34%
    73 5.53%   94 18.79%
    74 5.67%   95 or older 20.00%
    75 5.82%  
    Source: Rates calculated using the CRA’s prescribed factors formulas.

    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.

    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.

    Age at end of previous year LIF/LRIF withdrawal rates:
    B.C., Alta., Sask., Ont., N.B., N.L.     		LIF withdrawal rates:
    Manitoba, Quebec, Nova Scotia    		 LIF withdrawal rates:
    federal, Yukon, Northwest Territories, Nunavut
    55 6.51% 6.40% 5.16%
    56 6.57% 6.50% 5.22%
    57 6.63% 6.50% 5.27%
    58 6.70% 6.60% 5.34%
    59 6.77% 6.70% 5.41%
    60 6.85% 6.70% 5.48%
    61 6.94% 6.80% 5.56%
    62 7.04% 6.90% 5.65%
    63 7.14% 7.00% 5.75%
    64 7.26% 7.10% 5.86%
    65 7.38% 7.20% 5.98%
    66 7.52% 7.30% 6.11%
    67 7.67% 7.40% 6.25%
    68 7.83% 7.60% 6.41%
    69 8.02% 7.70% 6.60%
    70 8.22% 7.90% 6.80%
    71 8.45% 8.10% 7.03%
    72 8.71% 8.30% 7.29%
    73 9.00% 8.50% 7.59%
    74 9.34% 8.80% 7.93%
    75 9.71% 9.10% 8.33%
    76 10.15% 9.40% 8.79%
    77 10.66% 9.80% 9.32%
    78 11.25% 10.30% 9.94%
    79 11.96% 10.80% 10.68%
    80 12.82% 11.50% 11.57%
    81 13.87% 12.10% 12.65%
    82 15.19% 12.90% 14.01%
    83 16.90% 13.80% 15.75%
    84 19.19% 14.80% 18.09%
    85 22.40% 16.00% 21.36%
    86 27.23% 17.30% 26.26%
    87 35.29% 18.90% 34.45%
    88 51.46% 20.00% 50.83%
    89 or older 100.00% 20.00% 100.00%
    Source: Office of the Superintendent of Financial Institutions and Empire Life.

    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:

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  • What’s new in the latest edition of Retirement Income for Life? – MoneySense

    What’s new in the latest edition of Retirement Income for Life? – MoneySense

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    1. “Mine is probably the only calculator that assumes one’s spending does not quite keep pace with inflation in our later years.” 
    2. “My calculator is one of the few out there that isn’t sponsored by a bank or investment company. I’m not selling anything other than the best income estimate possible. Also, it is the only calculator to my knowledge that explicitly shows how much better you do if you buy an annuity or defer CPP (Canada Pension Plan).”

    Deferring CPP: Sometimes people shouldn’t wait until age 70

    For me, deferring the CPP ship has already sailed. I took it at 66 when my wife retired, although she waited until 68 to take hers. We had initially planned for her to wait until age 70, but we did it sooner because Vettese’s articles argued for an exception to his usual recommendation to wait until age 70. In 2022 and in 2023, he suggested that those on the cusp of turning 70 might take CPP a year or two early, owing to the high inflation adjustments Ottawa made to CPP and Old Age Security (OAS) in those years. 

    But partial annuitization is very much still a possibility. My wife’s locked-in retirement account (LIRA)—which she opened when working—is likely to turn into a life income fund (LIF) sometime this year or the next. She has no employer pension, and I have only what I have dubbed a “mini” pension and an even smaller “micro” pension from previous employers. 

    How to use annuities in retirement

    So, I’ve always read, with interest, Vettese’s views about annuitizing at least part of RRSPs once they must be wound up at the end of the year one turns 71. At one point he suggested annuitizing 30% of RRSP assets, though the current book lowers that to 20%. (See also this Retired Money column on that very subject, written early in 2018 entitled: RRIF or Annuity? How about both?)

    Incidentally, the third edition of the book also mentions a couple of annuity-like innovations that weren’t available when the first two editions were published. In chapter 16, entitled “Can we do even better?” Vettese described Purpose Investments’ Longevity Pension Fund and Guardian Capital’s Guardpath Modern Tontine Trust. 

    He says that instead of annuities issued by Canadian insurance companies, these two new longevity financial products are offered by investment companies, thus chiefly use stocks and bonds for income. 

    One difference is that, unlike with traditional annuities, the income is not guaranteed. Also, there are no survivor benefits. He concludes the chapter, stating both are “like a less nerdy version of annuities for retirees prepared to take a small amount of risk.”

    But back to PERC

    You can try a stripped-down version for free and with no obligation. In fact, you’ll have to print out the results because of privacy concerns: “The data from PERC is stored, but it’s not attached to anything that could reveal one’s identity,” he told me. 

    If you want the full treatment with multiple scenarios, the price for a one-year subscription to a Canadian customized PERC is a reasonable $135 plus tax. You can enter the basics of your financial situation and that of your spouse (which Vettese recommends) and, in less than a half an hour, the PERC generates a summary of your likely future retirement income. You enter pre-tax amounts for pensions and other income and PERC handles the tax side of it automatically. 

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    Jonathan Chevreau

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

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

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    Registered retirement income fund (RRIF) withdrawals are fully taxable and added to your income each year. You can leave a RRIF account to your spouse on a tax-deferred basis. But a large RRIF account owned by a single or widowed senior can be subject to over 50% tax. A RRIF on death is taxed as if the entire account is withdrawn on the accountholder’s date of death.

    What is the minimum RRIF withdrawal?

    Minimum withdrawals are required from a RRIF account each year, and in your 80s, they range from about 7% to 11%. For you, Amy, this would mean minimum RRIF withdrawals of about $200,000 to $300,000 each year. This would likely cause your marginal tax rate to be in the top marginal tax bracket. Sometimes, using up low tax brackets can be advantageous, but you do not have any ability to take additional income at lower rates.

    RRIF withdrawals: Which tax strategy is best?

    Taking extra withdrawals from your RRIF when you are in the top tax bracket is unlikely to be advantageous. Here is an example to reinforce that.

    Say you took an extra $100,000 RRIF withdrawal and the top marginal tax rate in your province was 50%. You would have $50,000 after tax to invest in a taxable account. Now say the money in the taxable account grew at 5% per year for 10 years. It would be worth $81,445.

    By comparison, say you left the $100,000 invested in your RRIF account instead. After 10 years at the same 5% growth rate, it would be worth $162,890. If you withdrew it at the same 50% top marginal tax rate, you would have the same $81,445 after tax as in the first scenario.

    The problem with this example is the two scenarios do not compare apples to apples. The 5% return in the taxable account would be less than 5% after tax. And the same return with the same investments in a tax-sheltered RRIF would be more than 5%. As such, leaving the extra funds in your RRIF account should lead to a better outcome.

    So, in your case, Amy, there is not an easy solution to the tax payable on your RRIF. You can pay a high rate of tax on extra withdrawals during your life, or your estate will pay a high rate on your death. Given you do not need the extra withdrawals for cash flow, you will probably maximize your estate by limiting your withdrawals to the minimum.

    Should you donate your investments to charity?

    You mention donating securities with capital gains. If you have non-registered investments that have grown in value, there are two different tax benefits from making donations.

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    Jason Heath, CFP

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