Understanding RRIFs

Workplace retirement programs help employees build savings. As retirement approaches, the question becomes how to turn those savings into income. A Registered Retirement Income Fund, or RRIF, allows money transferred from an RRSP to remain invested while payments are made to the account holder.

Employers do not need to determine an employee’s withdrawal strategy. However, understanding the rules helps HR and payroll explain the transition from a group RRSP, particularly when employees continue working into their seventies.

What is a RRIF?

A RRIF is a registered arrangement with a financial institution that pays income from transferred retirement savings. It is commonly funded through a direct RRSP transfer, which generally does not trigger immediate income tax. Eligible investments can remain in the account, and investment earnings are sheltered from tax while inside the RRIF. Payments received are generally taxable income. A RRIF accepts eligible transfers, but ordinary new contributions are not permitted. Transferring existing RRSP savings to a RRIF does not create a new tax deduction. The account is intended to pay out accumulated savings rather than receive regular payroll contributions.

When must an RRSP change?

By December 31 of the year an individual turns 71, their RRSP savings must be withdrawn, transferred to a RRIF or used to purchase an annuity. These options can be combined. A RRIF can also be opened earlier, and the account holder does not have to be retired. Remaining employed does not extend the deadline for an employee’s own RRSP. For employers offering a group RRSP, this means reviewing payroll contributions, matching arrangements and provider requirements before the employee reaches that deadline. An employee’s retirement date and the date their RRSP must change may be years apart.

How much must be withdrawn?

No minimum withdrawal is required in the year a RRIF is opened. Minimum payments begin the following calendar year. The standard calculation uses the account’s value at the beginning of the year and a prescribed factor based on age at that time. For example, under the 2026 rules, a $200,000 opening balance and an applicable age of 72 produce a minimum payment of $10,800 at the 5.40% factor. Before receiving any payments, the holder can elect to use a spouse’s or common-law partner’s age instead. A younger partner’s age generally lowers the minimum. That minimum is a tax-rule requirement, not a calculation of how much the household needs or can afford to spend.

How are payments taxed?

For Canadian residents, the minimum payment is generally made without mandatory withholding tax. It is still taxable income. Tax is generally withheld from amounts withdrawn above the minimum, but withholding may not cover the final tax owing. That depends on total income, deductions and credits for the year. An employee drawing RRIF income while still working needs to account for both wages and withdrawals. RRIF income can also affect income-tested benefits, including Old Age Security through the recovery tax. The account holder can request additional withholding to help cover the expected tax bill. The amount deposited into a bank account is therefore not necessarily the amount available after tax.

Can withdrawals exceed the minimum?

An ordinary, non-locked-in RRIF has no annual maximum withdrawal. Larger payments are possible, subject to available funds and investment or contract restrictions. The remaining balance can stay invested, but a RRIF does not itself guarantee returns or income for life. Withdrawals, fees and investment results affect how long the money lasts. Different rules apply to locked-in pension savings. Depending on the governing pension legislation, those funds may require a life income fund or another permitted arrangement with additional withdrawal restrictions. Employees should not assume that money from every workplace retirement plan can move into an ordinary RRIF on the same terms.

What should employers explain?

Employees approaching a transfer need clear information about their available options, the paperwork required and any deadlines. They should also understand whether investment choices, fees and account access will change when money leaves the workplace plan. Some arrangements offer a group RRIF, which is a collection of individual RRIFs. Ultimate responsibility for administering each fund remains with the carrier. Employers can coordinate education and access to qualified advice without recommending a particular withdrawal amount. That decision requires a broader view of the employee’s finances, including other income, household expenses and tax circumstances.

A RRIF carries decisions beyond the initial transfer: how much to withdraw, when to receive payments and how to invest the remaining balance. Explaining the basic rules before employees leave a workplace plan gives them time to consider those decisions. It also helps HR and payroll identify account deadlines that apply even when retirement is still some years away.