RRIF withdrawal strategies

December 25, 2013 • Financial Planning, Retirement Planning, Tax Planning

You can take out as much as you want from a Registered Retirement Income Fund (RRIF); there’s no maximum. But keep in mind that every dollar out is considered taxable income in that year.

That’s one reason many retirees try to only withdraw the minimum amount required by the government annually. Here are some other options to help save fees or taxes on RRIF withdrawals:

Age of younger spouse. You have an option to base withdrawals on the younger spouse’s age, setting the minimum payment at a lower amount.

Withdrawals in kind. You can take RRIF withdrawals in kind, including mutual funds, stocks, bonds, and some GICs. By transferring securities to a Tax-Free Savings Account (TFSA) or non-registered account, you avoid paying redemption fees.

Pension income tax credit. Income from a RRIF qualifies for the $2,000 pension credit on your income tax return. Even if you would normally not open a RRIF at age 65, it may be worthwhile just to benefit from the pension income tax credit. Simply transfer enough funds from your Registered Retirement Savings Plan (RRSP) to allow for RRIF withdrawals of $2,000 each year.

Time your withdrawals. You can choose the time of year you make RRIF withdrawals. By making annual withdrawals near the end of the calendar year, you’ll keep your investments in the RRIF longer and take greater advantage of tax deferral.

Talk to us about RRIF withdrawals and other ways to reduce tax on the rest of your retirement income program.

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