• Jeff Sproul

What You Need to Know About Converting Your RSP to a RIF

Updated: May 9, 2020

For the majority of readers who are not yet 71 years old, this information will prove valuable to you some day, so it is definitely worthwhile reading it. For those who currently have an RSP account, one day you will probably have a RIF account so it makes sense to understand all the rules and options available to you. There are many similarities between an RSP and a RIF. The main difference between the two is that the RSP is used to accumulate money via contributions, whereas the RIF disburses money via withdrawals.

Rules for converting RSP to RIF:

  • You have until December 31st of the year you turn 71 to convert each RSP to a RIF.

  • You can convert your RSP to a RIF any time prior to the deadline, although documents should be submitted for processing by early December of the year you turn 71. The rollover from an RSP to a RIF is usually to meet retirement income needs and/or for tax planning purposes.

  • Mandatory or minimum payments – payments begin the year after you set up your RIF account. There is a minimum percentage amount that must be withdrawn each year and this is calculated using a government formula. The withdrawal amount increases as you get older.

  • Maximum withdrawal amount only applies to locked-in plans which are usually the result of a pension plan payout.

  • All withdrawals from RSP or RIF accounts are considered taxable income.

  • A RIF account can hold the same investments as an RSP account. Assets in a RIF account are still “registered” so you don’t pay tax on the income and there are no capital gains or losses.

  • Once you have converted an RSP to a RIF you can no longer make contributions to the plan.

  • Investments can be transferred in-kind from a RIF to a non-registered account or to a TFSA account. You don’t need to sell the actual investments in your RIF to complete a withdrawal.

  • You can have more than one RIF account, however consolidation at conversion is suggested.

  • You can make multiple transfers to the same RIF account from your RSP account.

  • Opening a small RIF account at age 65 can allow you to take advantage of the $2,000 per annum pension credit by means of withdrawal.

One of the main differences between a RIF and an RSP is that you have to make at least one withdrawal per year from your RIF account starting in the year you turn 72. To make that happen you have to select a payment option. The government rules say that you have to withdraw the mandatory amount from your RIF by Dec 31st of that year. There is a lot of flexibility in how this can be set up:

  • Payment frequency – What frequency of payment is most efficient for your situation?

  • Payment form – Funds can be deposited directly to your bank account. You can also have the payment transferred to your non- registered account or TFSA account at the same institution as long as you have contribution room.

  • Withholding tax –There is no minimum withholding tax on the mandatory annual minimum withdrawal amount. If you take more than the mandatory amount then the withholding tax levels applied are the same as for RSP withdrawals. In either case you can (and probably should) ask the institution to withhold a higher percentage. The amount withheld will create a tax credit on your next tax return but you could still owe more money especially if you have other income sources.

Please feel free to contact our office to discuss your options in further detail.


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