Got an RRSP but confused about RRIFs? You’re not alone, most Canadians and the majority of our clients struggle at understanding this stage.
But don’t worry, in this article, I’ll show you how to smoothly convert your RRSP into a RRIF, save thousands in taxes, and set up a reliable retirement income. You’ll walk away with a simple, actionable plan.
From RRSP to RRIF: How to Navigate the Conversion Highway
Think of your RRSP as the highway leading to retirement. The RRIF is the exit ramp where you slow down and manage your speed (which you can think of as your withdrawals) to avoid speeding tickets (which you can think of as your taxes).
Converting your RRSP to a RRIF is a crucial step in your retirement planning, and it could mean the difference of a lot of money. You must convert your RRSP by December 31 of the year you turn 71.
Pro tip: If you miss this deadline, the Canada Revenue Agency (CRA) will consider your entire RRSP balance as taxable income for that year—potentially pushing you into the highest marginal tax bracket, so make sure you don’t miss this deadline!
Once your RRIF is set up, withdrawals are mandatory, starting in the year you turn 72. The government requires a minimum withdrawal percentage based on your age. Here’s a table for illustration:
RRIF Minimum Withdrawal
| Age | RRIF Min | Age | RRIF Min | Age | RRIF Min | Age | RRIF Min |
| 55 | 2.86% | 65 | 4.00% | 75 | 5.82% | 85 | 8.51% |
| 56 | 2.94% | 66 | 4.17% | 76 | 5.98% | 86 | 8.99% |
| 57 | 3.03% | 67 | 4.35% | 77 | 6.17% | 87 | 9.55% |
| 58 | 3.13% | 68 | 4.55% | 78 | 6.36% | 88 | 10.21% |
| 59 | 3.23% | 69 | 4.76% | 79 | 6.58% | 89 | 10.99% |
| 60 | 3.33% | 70 | 5.00% | 80 | 6.82% | 90 | 11.92% |
| 61 | 3.45% | 71 | 5.28% | 81 | 7.08% | 91 | 13.06% |
| 62 | 3.57% | 72 | 5.40% | 82 | 7.38% | 92 | 14.49% |
| 63 | 3.70% | 73 | 5.53% | 83 | 7.71% | 93 | 16.34% |
| 64 | 3.85% | 74 | 5.67% | 84 | 8.08% | 94 | 18.79% |
| 95+ | 20.00% |
You can see at 72, the minimum withdrawal is 5.40% of the RRIF’s value, increasing gradually to 20% by age 95.
Example:
Thea turns 71 on June 15, 2025. She must convert her $500,000 RRSP into a RRIF by December 31, 2025. If she misses this deadline, the CRA will treat her entire RRSP balance as taxable income for 2025. Assuming a marginal tax rate of 50%, this could result in a tax bill of $250,000, so she makes sure not to miss that deadline.
Thea converts her RRSP on time, and her RRIF is valued at $500,000 on December 31, 2025. In 2026, the year she turns 72, she must withdraw the government-mandated minimum of 5.40%, which is $27,000. As she ages, this percentage will gradually increase, requiring larger annual withdrawals.
RRIF Tax Minimization Strategies and Essentials
I’ll cover some basic strategies to reduce your tax burden and explore some advanced strategies later in the video.
The Pension Income Tax Credit
One of the most compelling benefits of RRIFs is access to the Pension Income Tax Credit, which allows Canadians aged 65 and older to claim a deduction on up to $2,000 of eligible pension income annually.
This credit effectively reduces the amount of income tax owed on that portion of your income, making it a powerful tool for tax optimization. Importantly, RRSP withdrawals do not qualify for this credit, but RRIF withdrawals do.
Example:
Leila, 65, has a $200,000 RRSP. She doesn’t need the income, but to take advantage of the Pension Income Tax Credit, she converts $40,000 from her RRSP into a RRIF. She plans to withdraw only $2,000 annually from the RRIF, ensuring her withdrawals match the credit’s limit.
Each year, Leila claims the $2,000 Pension Income Tax Credit on her tax return. Assuming her marginal tax rate is 30%, the credit saves her $600 annually in taxes ($2,000 x 30%). Over 5 years, Leila withdraws a total of $10,000 tax-free thanks to the credit, while the remaining funds in her RRIF and RRSP continue to grow tax-deferred.
By using this strategy, Leila:
- Reduces her taxable income: The Pension Income Tax Credit offsets taxes on her RRIF withdrawals.
- Avoids unnecessary taxes: Her RRSP funds remain untouched and growing until she needs them later.
- Optimizes her cash flow: Leila enjoys tax-free withdrawals while ensuring her retirement savings last longer.
Avoiding OAS Clawbacks
Large RRIF withdrawals can push your income above the OAS clawback threshold (~$90,000+ in 2024), reducing your benefits. Coordinating withdrawals with tax-free income sources like TFSA can help.
Example:
David, 72, withdraws $20,000 annually from his $200,000 RRIF. By supplementing his income with TFSA withdrawals, he keeps his taxable income below the clawback threshold, preserving his OAS benefits.
Minimize Fees
Unlike direct RRSP withdrawals, which often come with additional fees from financial institutions, moving funds into a RRIF for withdrawals eliminates these costs.
For example, here’s RBC’s RRSP withdrawal fee at $50. You’ll be charged anywhere from $50 – $150 for taking money out of an RRSP, wheras with a RRIF you won’t be charged anything.
Using a Younger Spouse’s Age
One of the lesser-known strategies for managing RRIF withdrawals is leveraging a younger spouse’s age to calculate the mandatory minimum withdrawal. This lowers the percentage you’re required to withdraw each year, preserving more funds in your RRIF for tax-deferred growth.
Example:
Emma, 72, has a RRIF valued at $1,000,000. Normally, at her age, she would have to withdraw 5.40%, or $54,000, in 2026. However, her spouse, Alex, is 65. By using Alex’s age, Emma calculates her mandatory withdrawal at 4.00%, reducing her required withdrawal to $40,000. This adjustment lowers her taxable income by $14,000 and leaves more in her RRIF to continue growing tax-deferred.
RRIF Withdrawal Comparison:
| Age Used | Withdrawal Rate | Required Withdrawal (on $1,000,000) |
| Emma’s Age (72) | 5.40% | $54,000 |
| Alex’s Age (65) | 4.00% | $40,000 |
By using her spouse’s age, Emma strategically reduces her taxable income while maintaining her savings.
Understanding Withholding Taxes
Withholding taxes are a big source of confusion for our clients, so let me explain it here for you.
Withholding taxes on RRIF withdrawals function like a prepayment toward your annual income tax bill. While you can’t directly minimize withholding taxes, they’re reconciled when you file your tax return. If the withholding tax exceeds your actual tax liability, you’ll receive a refund. On the other hand, if your tax rate is higher than the withheld amount, you’ll owe the difference.
Think of withholding taxes as the CRA’s way of saying, “We’ll take your taxes now, just in case you forget later.”
Key Points to Remember
- Mandatory Minimum Withdrawals: Not subject to withholding tax.
- Withdrawals Above the Minimum: Subject to withholding tax, based on the amount withdrawn.
Withholding Tax Rates
| Withdrawal Amount | Withholding Tax Rate |
| Up to $5,000 | 10% |
| $5,001 to $15,000 | 20% |
| Over $15,000 | 30% |
Example: John’s RRIF Withdrawals
John, 72, has a RRIF worth $400,000. In 2026, his mandatory minimum withdrawal rate is 5.40%, so he must withdraw at least $21,600. This mandatory minimum is not subject to withholding tax, and John receives the full amount.
If John decides to withdraw an additional $10,000 beyond the mandatory minimum:
A 20% withholding tax applies, so $2,000 is withheld, and John receives $8,000.
As you can see, he only really pays a 6.33% total “witholding tax” on the total $31,600 he withdrew, because the initial minimum is not withheld.
| Withdrawal Amount | Withholding Tax Rate | Withholding Tax Amount | Amount Received |
| Mandatory Minimum ($21,600) | 0% | $0 | $21,600 |
| Extra Withdrawal ($10,000) | 20% | $2,000 | $8,000 |
| Total Withdrawal ($31,600) | 6.33% (blended rate) | $2,000 | $29,600 |
Advanced Tax Strategies for Managing Your RRIF
Managing your RRIF effectively can reduce taxes, maintain a steady retirement income, and preserve wealth for your beneficiaries. These advanced strategies range from gradual withdrawal methods to strategic estate planning. Let’s dive into each in more detail.
Using RRIF as Bridge Funds to Delay CPP and OAS
A smart strategy we see often is using RRIF withdrawals to fund early retirement while delaying CPP and OAS for higher future benefits.
Why Delay?
- CPP: Increases by 42% if delayed to age 70.
- OAS: Increases by 36% if delayed to age 70.
Example:
Michael, 60, retires with a $400,000 RRSP. He converts $200,000 to a RRIF and withdraws $20,000 annually until 70. At 70, his CPP increases from $1,200 to $1,704 per month, and his OAS rises from $700 to $952 per month.
Advantages:
- Higher Lifetime Benefits: Delayed CPP and OAS offer inflation-adjusted income.
- Tax Efficiency: RRIF withdrawals spread income over low-tax years.
- Preserved Savings: Remaining RRSP grows tax-deferred.
This strategy works best for retirees in good health who are seeking secure, higher income later in life.
RRIF Meltdown Strategy
This strategy gradually reduces your RRIF balance while reinvesting withdrawals into tax-efficient accounts like TFSAs or non-registered investments. The goal is to spread taxable income over many years, avoiding significant tax hits in high-income years or at death.
Example:
David, 70, has a $500,000 RRIF. He withdraws $40,000 annually. Of this, $10,000 goes into his TFSA, and the remaining $30,000 is invested in a dividend-paying non-registered account. This approach ensures that his RRIF balance decreases steadily, reducing the taxable amount left to his estate while maintaining a diversified investment portfolio.
RRIF Income Splitting for Couples
RRIF withdrawals can be split with a spouse to reduce household taxes. This is particularly beneficial if one spouse has a lower income. Both partners can claim the $2,000 Pension Income Tax Credit, doubling the benefit.
Example:
Mark withdraws $10,000 annually from his RRIF. By allocating $5,000 to his wife Susan, who earns less, their combined taxable income decreases. Both claim the $2,000 Pension Income Tax Credit, saving $1,200 in taxes annually. Over a decade, this strategy could save $12,000 in taxes while keeping more money within the household.
Partial RRSP-to-RRIF Conversions
Converting smaller amounts of your RRSP into an RRIF before age 71 spreads taxable income over multiple years. It also allows you to start benefiting from features like the Pension Income Tax Credit as early as age 65.
Example:
Sophia, 65, has a $300,000 RRSP. She partially converts only $50,000 annually to a RRIF for six years. By withdrawing $2,000 each year, she maximizes the Pension Income Tax Credit, saving up to $600 annually. Meanwhile, the remaining funds in her RRSP continue to grow tax-deferred.
I go over these advanced strategies and more in this RRSP withdrawal video on the channel, so be sure to check it out!
Estate Planning for RRIFs
Planning your RRIF as part of your estate can reduce taxes and see that your beneficiaries receive the maximum benefit.
Spousal Rollovers
If your spouse or common-law partner is the designated beneficiary, the RRIF balance can roll over tax-deferred to their RRSP or RRIF. This avoids immediate taxation and preserves the funds for their retirement.
Example:
John’s RRIF is worth $500,000 when he passes away. Because his wife Sarah is the designated beneficiary, the entire balance is transferred to her RRIF without triggering taxes. Sarah can then withdraw the funds based on her own schedule and financial needs.
Non-Spouse Beneficiaries
When the beneficiary is not a spouse, the RRIF balance is fully taxed as income in the year of your death. Proper planning can mitigate the impact.
Example:
Tom has a $400,000 RRIF. If his adult child is the beneficiary, the estate may face taxes exceeding $200,000, depending on the marginal tax rate. By starting withdrawals earlier and spreading them out over several years, Tom could reduce the RRIF balance, decreasing the taxable amount upon his death.
Charitable Giving
Naming a charity as the beneficiary of your RRIF is a tax-smart way to leave a legacy. Upon your death, the donation generates a tax credit that can offset the taxes owed on the RRIF balance.
Key benefits include reduced estate taxes, bypassing probate fees, and directly supporting a meaningful cause.
Pro Tips for Managing RRIF Accounts
These simple strategies can help you optimize RRIF withdrawals, minimize taxes, and streamline your retirement plan:
1. Consider Starting RRSP-to-RRIF Conversions Early
Converting at least partial small amounts before age 71 allows you to claim the $2,000 Pension Income Tax Credit starting at 65, manage taxable income, and avoid large tax hits later.
2. Consolidate RRIF Accounts
Combining multiple RRIFs simplifies administration, reduces fees, and ensures mandatory withdrawals are met without confusion.
3. Use RRIF Calculators
Online calculators project withdrawals, estimate taxes, and show how different rates impact savings, giving you better control of your finances. Try out this one, it’s simple and easy to use, there are only 4 variables to fill out.
4. Use In-Kind Transfers
Rather than selling investments, transfer them “in-kind” from your RRIF to a non-registered account. This preserves the growth potential of your assets, avoids transaction fees, and maintains your investment strategy.
5. Coordinate RRIF Withdrawals with Other Income
Balance RRIF withdrawals with CPP, OAS, TFSAs, and other accounts to manage taxes and prevent OAS clawbacks. A mix of taxable and tax-free income maximizes after-tax retirement income.
Smart RRIF management is the key to keeping more of your money in retirement. With the right strategies, you can reduce taxes, extend the life of your savings, and enjoy financial peace of mind.
At Blueprint Financial, we specialize in helping retirees optimize their RRIF withdrawals for maximum tax savings. Browse our website to access free tools and insights, and when you’re ready, let our experts guide you with a plan tailored to your needs.
Please like and subscribe to our Youtube channel for more tips to make the most of your retirement. Check out the planning services we offer, and book a free consultation when ready!
