RRIF withholding tax rates: how much should I receive from my RRIF?

Most Canadians are well informed about the Registered Retirement Savings Plan (RRSP), but these accounts don’t last forever. In the year you turn 71, the most common option is to convert your RRSP into a Registered Retirement Income Fund (RRIF), which can function a little like your own personal pension fund for example, which ensures you receive certain amount of money from your retirement savings year after year.

Here’s how it works. Once you convert your RRSP into a RRIF, which could be done before you turn 71 – the most common age is about 65 – your investments can continue growing tax deferred. You’ll also have to start withdrawing at least some of your investments, which will be subject to income tax.

When you do withdraw, your dollars may be subject to a withholding tax before you receive the money, to cover some, if not all, of what you might owe on your final income taxes. The withholding tax is automatically sent to the Canada Revenue Agency (CRA), in just the same way tax is taken off your paycheque.

How much you will owe in final taxes depends on how much you withdraw from your RRIF and whether you have any other sources of income.  Before converting your RRSP into a RRIF, it’s a good idea to understand how withdrawals and withholding taxes work.

How do RRIF withdrawals work?

Whether you need the money or not, once you’ve converted your RRSP to a RRIF, you have to remove a minimum amount from the RRIF every year. If you convert your RRSP to a RRIF in the year you turned 71, you must start taking income from your RRIF by the end of the calendar year you turn 72. At that age, the minimum withdrawal would be 5.4%. For someone with a RRIF worth half a million dollars, that amounts to $27,000. The percentage of assets rises every year: at age 80, for example, you must withdraw a minimum of 6.82% under the current schedule; at age 90, 11.92%, or $59,600 on a $500,000 RRIF. The amount you withdraw is treated as income for tax purposes and taxed at your individual income tax rate.

Couples are permitted to base minimum withdrawal amounts on the younger spouse or common-law partner’s age, which helps ensure they don’t outlive their savings.

Here are the minimum withdrawal rates, starting at 65. 

RRIF withholding tax rates

There is no upper limit on how much you can withdraw from a RRIF. However, amounts above the minimum withdrawal rate are subject to what’s called a withholding tax at source. That means a certain amount gets paid directly from your financial institution to the federal government, to ensure that you don’t get hit with an unexpected tax bill when you file your return. You may have to pay tax beyond that, particularly on the minimum withdrawal amount, which is not subject to withholding taxes.

It’s a good idea to keep the withholding tax rate in mind as you start withdrawing. Here’s what you might be subject to in your province:

Federal withholding taxes on RRIF withdrawals

*For a single withdrawal from RRSP funds held in the province of Quebec, there will be 14% provincial income tax withheld (it was 15% prior to 2023), in addition to the above 5%, 10% or 15% federal tax withheld.  See Revenue Quebec’s Payments from an RRSP, a VRSP, a PRPP or a RRIF.

Any amount taken from your RRIF gets added to your gross income and is subject to tax according to where you land within the income tax bracket, which you can find here.

Given that withdrawals are taxed as income, if you have a big one-time expenditure in retirement – say, a home renovation or a kid’s wedding – it may be better to withdraw that money from a Tax-Free Savings Account (TFSA) or unregistered savings than your RRIF.

Drawing income from your RRIF

When it comes time to draw on the savings in your RRIF, you’ll have to indicate the frequency of withdrawals and where you want those funds to be deposited. Most people opt for monthly or biweekly payments, similar to a paycheque, but they can be quarterly, or even paid out in full once a year.

If you name your spouse as a beneficiary or “successor annuitant” of your RRIF, on death, your RRIF will roll over to your surviving spouse on a tax-deferred basis.  

If you are afraid of outliving your savings, remember that seniors typically enjoy multiple sources of income, including Old Age Security, Canada Pension Plan benefits and workplace pensions. It’s also possible for people to reinvest income withdrawn from a RRIF in a TFSA or in unregistered accounts that can be drawn upon should their RRIF get depleted.

After a lifetime of saving, hopefully you’ll have more than enough to enjoy retirement on your own terms – even if you may have to pay some tax along the way. To help you reach your goals and ensure you are not paying any more tax than needed, consider talking with a financial advisor, who can help you find the most efficient way to tap into your hard-earned retirement savings.