Making RRIF Withdrawals … Strategically

January 25, 2023

When it’s time to withdraw funds from your Registered Retirement Income Fund (RRIF), one or more of these strategies may save you tax.

The mini-RRIF. Even if you would normally wait until the latest possible age of 71 to open a RRIF, you may want to open one at 65. But you only transfer enough funds from your Registered Retirement Savings Plan (RRSP) to allow you to make RRIF withdrawals of $2,000 each year, until age 71. That income qualifies for the $2,000 pension income tax credit.

Determining withdrawal amounts. When possible, it’s often tax-smart to withdraw only the minimum required annual amount, keeping your tax bill lower and allowing more savings to grow tax-deferred. But sometimes it’s wise to withdraw more than the RRIF minimum if that means paying less tax on the withdrawn amount now than what would be paid later, perhaps tax payable by your estate.

Spouse’s younger age. If your spouse is younger, you can base your RRIF withdrawal rate on their age, which allows for lower required annual withdrawals and means less tax.

Income splitting. If you’re 65 or older and your spouse is in a lower tax bracket, you can save tax as a couple by splitting up to 50% of RRIF income with your spouse.

Several personal and financial factors determine the most effective way to take retirement income, so talk to us about a customized solution.

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