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Home Retirement

Understanding RRIF Withdrawals with Multiple Registered Accounts

by bullnews
March 4, 2025
in Retirement
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Understanding RRIF Withdrawals with Multiple Registered Accounts
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When it comes to managing your retirement funds, one of the strategies you can employ involves income splitting. This allows you to allocate up to 50% of your eligible pension income to your spouse or common-law partner. By doing so, you can potentially reduce the overall amount of tax you both pay, as it shifts some income from your tax return to theirs. Note that withdrawals from your RRSP don’t qualify for this, but once you reach the age of 65, RRIF withdrawals do become eligible for splitting.

In addition to this, eligible pension income gives you access to a federal pension income amount tax credit. This credit reduces the tax you pay on up to $2,000 of qualifying income. Depending on the province you reside in, the pension income amounts range from $1,000 to $2,000. This means that part of your RRIF withdrawals could end up being largely tax-free.

When considering the conversion of an RRSP to a RRIF, it’s crucial to know that only the portion you convert is subjected to the minimum annual withdrawal requirement. The remainder of your RRSP isn’t affected. If you decide to set up more than one RRIF account, each one will have its minimum withdrawals calculated separately.

Keep in mind that these minimum withdrawals kick in only starting the year after you open your RRIF. There are no minimum withdrawal requirements in the first year.

Your bank or financial institution plays a key role here. They’re tasked with confirming your minimum withdrawal each year, making sure you adhere to it. Early in the year, they usually notify you about the year-end value along with the calculated minimum withdrawal based on your age.

You’ll generally have some flexibility in terms of how often you want to receive your withdrawals—whether annually, quarterly, monthly, or another schedule—and whether you prefer any optional tax to be withheld. While there’s no mandatory withholding tax on minimum withdrawals, if you take out more than the minimum, those additional amounts will face increasing rates of withholding tax. However, since the income is taxable, it might be worthwhile for some RRIF holders to voluntarily have extra tax withheld to account for the future tax bill.

Tags: AccountsMultipleRegisteredRRIFUnderstandingWithdrawals
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