As you approach retirement, it’s important to understand how to manage your finances, including your Registered Retirement Income Fund (RRIF). One crucial aspect of RRIFs is the withdrawal table set by the Canada Revenue Agency (CRA). In this article, we’ll cover all the essential information you need to know about the CRA RRIF withdrawal table.
Main Content
Firstly, let’s define what a RRIF is. A RRIF is a retirement income fund that you can open using the balance of your Registered Retirement Savings Plan (RRSP) after you retire. The CRA requires you to make minimum withdrawals from your RRIF each year, according to a predetermined schedule.
The CRA RRIF withdrawal table is a schedule that dictates the minimum amount of money you must withdraw from your RRIF each year, based on your age and the value of your RRIF. Here’s a breakdown of the CRA RRIF withdrawal table:
Age 71 or Younger
If you’re 71 or younger, you must withdraw a minimum of 5.28% of your RRIF’s value each year.
Age 72
When you turn 72, your minimum withdrawal rate increases to 5.4%.
Age 73
At age 73, your minimum withdrawal rate increases to 5.53%.
Age 74
At age 74, your minimum withdrawal rate increases to 5.67%.
Age 75
At age 75, your minimum withdrawal rate increases to 5.82%.
Age 76
At age 76, your minimum withdrawal rate increases to 5.98%.
Age 77
At age 77, your minimum withdrawal rate increases to 6.17%.
Age 78
At age 78, your minimum withdrawal rate increases to 6.36%.
Age 79
At age 79, your minimum withdrawal rate increases to 6.58%.
Age 80 or Older
If you’re 80 or older, you must withdraw a minimum of 6.82% of your RRIF’s value each year.
FAQ
What happens if I withdraw less than the minimum amount?
If you withdraw less than the minimum amount required by the CRA RRIF withdrawal table, you’ll have to pay a penalty tax of 50% of the amount you should have withdrawn.
Can I withdraw more than the minimum amount?
Yes, you can withdraw more than the minimum amount required by the CRA RRIF withdrawal table. However, keep in mind that any amount you withdraw above the minimum will be subject to income tax.
What if I have multiple RRIF accounts?
If you have multiple RRIF accounts, you’ll need to calculate your minimum withdrawal for each account separately, based on the value of each account and your age.
Can I change my RRIF withdrawal amount?
Yes, you can change your RRIF withdrawal amount at any time. However, keep in mind that you can’t withdraw less than the minimum amount required by the CRA RRIF withdrawal table.
What if I die before withdrawing all my RRIF funds?
If you die before withdrawing all your RRIF funds, the remaining balance will be distributed to your designated beneficiaries or estate, who will be responsible for paying any taxes owed.
What if I have other sources of retirement income?
If you have other sources of retirement income, such as a pension or Old Age Security (OAS) payments, you may be able to withdraw less than the minimum amount required by the CRA RRIF withdrawal table. However, it’s important to consult with a financial advisor to determine the best course of action.
What if I need to withdraw more than my RRIF’s value?
If you need to withdraw more than your RRIF’s value, you may be able to convert your RRIF to an annuity, which will provide you with a guaranteed income stream for the rest of your life.
What if I have a spouse or common-law partner?
If you have a spouse or common-law partner, you may be able to split your RRIF income with them, which can reduce your overall tax burden.
What if I don’t have a RRIF?
If you don’t have a RRIF, you may want to consider opening one to take advantage of the tax-deferred growth and income benefits.
Pros
One of the biggest benefits of the CRA RRIF withdrawal table is that it provides a predictable schedule for minimum withdrawals, which can help you plan your retirement income more effectively. Additionally, RRIFs offer tax-deferred growth, which means you won’t pay taxes on any investment gains until you withdraw the funds.
Tips
If you’re approaching retirement age, it’s important to start planning for your RRIF withdrawals early. Consult with a financial advisor to determine the best withdrawal strategy for your unique situation. Additionally, consider splitting your RRIF income with your spouse or common-law partner to reduce your overall tax burden.
Summary
The CRA RRIF withdrawal table is a schedule that dictates the minimum amount of money you must withdraw from your RRIF each year, based on your age and the value of your RRIF. It’s important to understand this schedule to effectively plan your retirement income. Remember to consult with a financial advisor and consider splitting your RRIF income with your spouse or common-law partner to reduce your tax burden.
