Q

What's an RRIF?

A

It's a retirement savings account designed to grow your money even after you retire.

RRIF might appear to be a misspelling of the sound of a dog’s vocalizations but it’s actually an acronym for Registered Retirement Income Fund. When you retire, your government-regulated retirement account can be converted to an RRIF where the money can be invested in pretty much anything — stocks, bonds, GICs, mutual funds, ETFs — and continue to grow.

Most retirement accounts — like an RRSP for instance — are used to help people save money before retirement. But once you’re retired — or by the end of the year you turn 71, whichever comes first — you can’t use those accounts anymore and they must be converted into either an RRIF or an annuity. The government is a stickler about this. You are also obligated to withdraw a minimum amount of money from your RRIF every year, a figure that’s arrived at annually through an algorithm that takes into account your age and the market value of your assets.

Any money that you withdraw from your RRIF will be considered taxable income. The advantage of having an RRIF, though, is that you don’t have to withdraw all the money in your RRSP (or similar account) all at once and incur a whopping tax bill. Once in an RRIF, you can withdraw the money gradually over the years, which will keep your tax rate lower.

And the money in the account can be invested as you (or your financial planner) see fit, so it can grow during your retirement years.

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Retirement savings
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