RRIF Withdrawals for Multiple Registered Accounts

Withdrawals from multiple registered accounts

Many Canadians hold RRSPs for decades and are unsure how withdrawals and conversions work. Your question is common and important, Jackie. Below I’ll explain the differences between RRSP and RRIF withdrawals, how minimum RRIF withdrawals are calculated, and who confirms the amount you need to withdraw each year.

RRSP withdrawal rules

You can withdraw money from an RRSP at any time, with one important exception: some locked-in RRSPs that originate from employer pension plans restrict early withdrawals until a specified age (often 55) or until other province-specific conditions are met. Regular RRSP withdrawals are taxable in the year you take them, though there are established exceptions such as the Home Buyers’ Plan and the Lifelong Learning Plan, which allow temporary, specific-purpose withdrawals with repayment rules.

You are not required to convert your RRSP into a RRIF just to access funds, but unless you buy an annuity or cash out the whole account, Canadian rules require that you convert your RRSP to a RRIF (or an annuity) by December 31 of the year you turn 71. Some people choose to convert part of their RRSP earlier for tax-planning reasons, such as managing taxable income over several years.

Tax differences between an RRSP and a RRIF

Both RRSP and RRIF withdrawals are fully taxable and must be reported on your tax return in the year taken. The primary difference is that RRIFs impose minimum annual withdrawals starting the year after the RRIF is opened. The required minimum is based on the RRIF’s value on December 31 of the previous year and increases with age, ensuring the account is gradually drawn down.

Minimum RRIF withdrawals are not subject to mandatory withholding tax, which leads some people to mistakenly believe this income is tax-free. That is not correct: the withdrawals are taxable income and should be included on your return. Withdrawals above the minimum may have withholding tax applied at the time of payment, according to federal rules.

There can, however, be tax-planning advantages to taking income from a RRIF instead of an RRSP in certain situations, such as pension income splitting or accessing pension income tax credits.

RRIF income splitting

One advantage of RRIF income is that, once you are 65, up to 50% of eligible pension income from a RRIF can be split with a spouse or common-law partner. Income splitting can reduce the couple’s combined tax burden by shifting taxable income from one higher-rate taxpayer to a lower-rate spouse. RRSP withdrawals generally do not qualify for pension income splitting, whereas RRIF withdrawals can qualify after age 65.

Eligible pension income may also qualify for the federal pension income tax credit, which provides a credit on up to $2,000 of qualifying income and can reduce overall tax payable. Provincial pension income credits vary by province and can further reduce tax on modest amounts of RRIF income.

Partial conversion of an RRSP

If you convert only part of your RRSP into a RRIF, only the converted portion becomes subject to the RRIF minimum withdrawal rules. The remainder of your RRSP stays outside the RRIF minimum-calculation until you convert it or cash it out. If you hold multiple RRIF accounts, each RRIF’s minimum withdrawal is calculated separately based on that account’s year-end value.

Remember that the RRIF minimum does not apply during the calendar year you open the RRIF; the first minimum applies the following year based on the December 31 balance.

Confirming minimum withdrawals

Your financial institution is responsible for calculating and confirming the minimum RRIF withdrawal each year and for ensuring you receive that amount. Institutions typically notify account holders early in the year of the previous year’s year-end value and the resulting minimum withdrawal based on your age.

Financial institutions usually offer flexibility in how often you receive payments—annually, quarterly, monthly, or another schedule—and whether you want income tax withheld at source. Although minimum withdrawals do not require withholding, you can request optional withholding to cover upcoming tax obligations.

If you habitually owe tax at year end, the Canada Revenue Agency may require you to make quarterly tax instalments once your net tax owing exceeds certain thresholds for two consecutive years. Instalments are pre-payments of expected tax based on past tax years and can help avoid interest and penalties.

Final thoughts on RRIF withdrawals

In short: you do not need to convert an RRSP to a RRIF to withdraw funds, but unless you withdraw or annuitize the entire RRSP, a conversion is required by the calendar year in which you turn 71. You may convert all or part of an RRSP earlier for tax planning. Minimum RRIF withdrawals apply only to the RRIF accounts themselves and are calculated separately for each RRIF; any remaining RRSP balances are excluded from those calculations. Your financial institution will confirm the minimum and help you choose withdrawal frequency and optional withholding.

Read more about RRIF:

• Tax and estate planning for joint accounts
• Can you delay a RRIF withdrawal?
• RRSP to RRIF, and LIRA to LIF: How it all gets done
• OAS payment dates and more about Old Age Security