The Thursday Sheet
SHEET 008 / SAVINGS
AR FIRST EDITORIAL / / 6 MIN READ
Why RRIF minimum withdrawals rise every year
The prescribed factor climbs from 5.28% at 71 to 20% at 95. Run the same balance down the table and the shape of a RRIF becomes obvious.
By the end of the year you turn 71, an RRSP has to stop being an RRSP. For most people it becomes a registered retirement income fund, and from the following year a RRIF has to pay out at least a minimum amount every year. That minimum is a percentage of the balance, and the percentage goes up every single year.
People often read that as the government forcing the money out faster and faster. In percentage terms it is. In dollar terms, the picture is more interesting. This sheet runs both.
The rule in one line
The minimum for a year is the fair market value of the RRIF at the start of that year, multiplied by a prescribed factor for the age of the annuitant (or of a spouse or common-law partner, if that was elected) at the start of the year. There is no minimum in the year the RRIF is set up; the first one applies the following year. For ages 70 and under the factor is 1 ÷ (90 − age). From 71 it comes from a table in the tax regulations.
The prescribed factors
| Age | Factor | Age | Factor | Age | Factor |
|---|---|---|---|---|---|
| 65 | 4.00% | 76 | 5.98% | 86 | 8.99% |
| 70 | 5.00% | 77 | 6.17% | 87 | 9.55% |
| 71 | 5.28% | 78 | 6.36% | 88 | 10.21% |
| 72 | 5.40% | 79 | 6.58% | 89 | 10.99% |
| 73 | 5.53% | 80 | 6.82% | 90 | 11.92% |
| 74 | 5.67% | 82 | 7.38% | 92 | 14.49% |
| 75 | 5.82% | 85 | 8.51% | 95+ | 20.00% |
The factor roughly doubles between 75 and 88 and reaches its ceiling of 20% at 95. That climb is the design: a RRIF is meant to turn savings into income over a lifetime, so the share paid out rises as the expected remaining lifetime falls.
The working: same balance, every age
The quickest way to see the factors is to apply them to the same illustrative balance of $300,000 on 1 January:
The working: a balance run down
In reality the balance falls as withdrawals are taken, so the rising percentage is applied to a shrinking base. Here is the same $300,000 at 72, withdrawing only the minimum each year and assuming, purely for illustration, a steady 4% annual return on what remains:
| Age | Balance, 1 January | Factor | Minimum |
|---|---|---|---|
| 72 | $300,000 | 5.40% | $16,200 |
| 75 | $284,483 | 5.82% | $16,557 |
| 80 | $251,562 | 6.82% | $17,157 |
| 85 | $208,215 | 8.51% | $17,719 |
| 90 | $152,482 | 11.92% | $18,176 |
| 95 | $82,533 | 20.00% | $16,507 |
Under these assumptions the percentage almost quadruples, but the dollar minimum stays in a narrow band of roughly $16,000 to $18,000 for more than twenty years. Total minimum withdrawals from 72 to 95 come to about $417,000, more than the starting balance, because the remaining money keeps earning. With lower returns the dollar amounts drift down sooner; with higher returns they rise. What the factors guarantee is that the fund is run down over a lifetime, not that income from it rises.
Two practical points follow from the way the rule is written. First, the minimum is fixed by the value on 1 January, so a market fall during the year does not reduce it; the same dollar amount still has to come out, even if the investments are worth less by the time it is paid. Some people keep a cash reserve inside the RRIF for that reason. Second, the minimum is only a floor. Taking more than the minimum is always allowed, and in years with unusually low income it can make sense to do so, but any amount above the minimum is subject to withholding tax at source and adds to that year’s taxable income.
Using a younger spouse’s age
When the RRIF is set up, the annuitant can elect to base the minimum on the age of a younger spouse or common-law partner. The election is made on the original application and cannot be changed later. Its effect is to use a lower factor:
A lower minimum leaves more in the plan for longer, which can help a couple keep net income below a threshold in a given year, such as the age amount phase-out or the OAS recovery line. It does not stop anyone taking more than the minimum in a year when that makes sense.
Tax and withholding
Every dollar paid out of a RRIF is taxable income in the year received. No tax is withheld at source on the minimum amount, which surprises some people at filing time; tax is withheld only on amounts paid above the minimum. From 65, RRIF payments also count as eligible income for the pension income amount. And because RRIF income counts toward income-tested benefits, it matters for anyone receiving the Guaranteed Income Supplement; see why one extra dollar of income can matter when you receive GIS.
Who this matters for, and what to check
- Anyone turning 71 this year or next: the RRSP must be converted by 31 December of the year you turn 71.
- Couples with an age gap: the spouse’s-age election is a one-time decision at set-up.
- Anyone surprised by a tax bill: consider asking the carrier to withhold tax voluntarily on the minimum.
- Anyone weighing RRIF income against TFSA withdrawals: see TFSA or RRSP after 65, and what the numbers tend to favour.
The short version
RRIF minimums rise every year as a percentage, from 5.28% at 71 to 20% at 95, because the fund is designed to pay out over a lifetime. Applied to a balance that is shrinking, the dollar minimum can stay surprisingly level for decades. A younger spouse’s age lowers the factor, but only if it is chosen at the start.
This is private sponsored information published by OÜ ET Consult. AR First is not a Government of Canada, Service Canada or Canada Revenue Agency website and has no affiliation with them. Every calculation on this page is an illustrative example with stated assumptions, not a quotation, forecast or entitlement for any reader; benefit amounts and tax rules depend on personal circumstances and change over time. Figures were checked against the official sources listed on . There is no application, registration or fee on this website for any government benefit. Never give your Social Insurance Number, banking details or My Service Canada Account or CRA sign-in credentials to a website in response to an article. For your own payments, use My Service Canada Account or contact Service Canada directly.
