How Much Should You Withdraw from Your RRIF?


    A. If I understand your question, Sandy, it sounds like you want to draw your Registered Pension Fund (RRIF) on a schedule that is tailored to your life expectancy. There is a 50% chance that a 78-year-old woman will live to be 92 years old and a man to be 90 years old.

    There are some considerations. As you probably know, there is a formula for determining the minimum withdrawal from your RRIF account each year. Assuming you turned 78 this year and you were 77 at the start of the year, and your account value was $ 330,000 at the end of 2020, then your minimum payout would be 6.17% of the account value, or about $ 20,361.

    If your account is a regular RRIF and not a suspended RRIF that came from a retirement plan transfer, you will not have a maximum payout limit. You can redeem the entire account at once if you wish, but that withdrawal would be fully taxable. If you die and do not have a spouse, your RRIF account will be deemed fully debited and fully taxable on your final tax return. Depending on your other sources of income and where you live, your tax payable on RRIF can be well in excess of 50%.

    How much you can withdraw each year, we can answer your question in a number of ways. If you divide $ 330,000 by 12 (the number of years until you turn 90), you can withdraw $ 27,500. However, this assumes a return of 0%.

    If your RRIF returns 3% every year, you can withdraw $ 32,187 for 12 years. However, if you wanted your payouts to increase with inflation each year, assuming the account was earning 3% annually, your payouts would start at $ 28,999 and increase 2% every year.

    So the short answer, Sandy, is you can withdraw around $ 30,000 per year, which is much higher than your minimum withdrawal.

    I think you need to set your primary goal for your account. When looking to spend the money, consider other assets that you own, including other investment accounts or real estate that you own. A combination of larger RRIF withdrawals and withdrawing funds from other sources may be best.

    If you want to minimize taxes, consider your other sources of income, tax deductions, and tax credits. By making additional RRIF withdrawals, you can take advantage of your low tax brackets each year and potentially contribute to a Tax Free Savings Account (TFSA) for tax free future investment income. In contrast to fully taxable RRIF accounts, TFSA accounts are also tax-free in the event of death.

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