Registered Retirement Income Fund (RRIF)

What Is a Registered Retirement Income Fund (RRIF)?

A registered retirement income fund (RRIF) is a retirement fund like a annuity contract, which pays out income to at least one beneficiaries. Frequently, owners of registered retirement savings plans (RRSP) roll over the balance from those plans into a RRIF in order to fund a retirement income stream.

Earnings in RRIFs are not taxed, yet RRIF payouts are viewed as a part of the beneficiary's normal income and are taxed as such by the Canada Revenue Agency (CRA) in the extended time of the payout. The organization or company that holds the RRIF is called the "carrier" of the plan. Carriers can be insurance companies, banks, or any kind of licensed financial intermediary. The Canadian government isn't the carrier for RRIFs, however it registers them for tax purposes.

Understanding Registered Retirement Income Funds

Registered retirement income fund plans are intended to give retired people a consistent flow of income from the savings in their RRSPs. RRSPs must be rolled throughout when the donor arrives at age 69, yet by converting a RRSP into a RRIF, individuals can keep their investments under a form of tax shelter, while as yet having the chance to allocate assets according to their determinations.

The Canadian government depicts RRIFs as an arrangement between the insured individual and a carrier — an insurance company, trust company, or a bank — that it registers. You transfer assets to the carrier from a RRSP, another RRIF, or some other Canadian retirement vehicle, and the carrier makes payments to you. You can have more than one RRIF, and you can have self-directed RRIFs. The rules that apply to self-directed RRIFs are generally equivalent to those for RRSPs.

Life Income Fund (LIF)

A life income fund (LIF) is a type of RRIF offered in Canada that can be utilized to hold locked-in pension funds as well as different assets for a possible payout as retirement income. Life income funds are offered by Canadian financial institutions. They give individuals an investment vehicle for managing the payouts from locked-in retirement accounts (LIRA) and different assets. In many cases, pension assets might be held however are not open in the event that an employee leaves a firm. These assets, typically called locked-in assets, can be managed in other investment vehicles however may expect conversion to a life income fund when the owner is ready to begin taking withdrawals.

How RRIFs Operate

According to the government revenue agency, "You set up a registered retirement income fund (RRIF) account through a financial institution, for example, a bank, credit union, trust or insurance company. Your financial institution will educate you on the types regarding RRIFs and the investments they can contain. You can have beyond what one RRIF and you can have self-directed RRIFs."

"Starting in the quite a long time after the year you lay out a RRIF, you must be paid a yearly minimum amount. The payout period under your RRIF is for as long as you can remember. Your carrier ascertains the minimum amount in view of your age toward the beginning of every year. Notwithstanding, you can choose to have the payment in view of your spouse or customary regulation partner's age. You must choose this option while filling out the original RRIF application form. When you make this election, you can't change it."

"Amounts received from a RRIF upon the death of an annuitant can be transferred straightforwardly or indirectly to your RRSP, to your RRIF, to your PRPP, to your SPP or to buy yourself an eligible annuity on the off chance that you were a qualified beneficiary of the deceased annuitant."

"The existing enemy of evasion rules applicable to registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) have been enhanced to forestall any aggressive tax planning. The rules generally embrace the existing tax-free savings account rules for non-qualified investments, restricted investments, and advantages, for certain adjustments."

Features

• RRIFs are contracts between the insured individual and a "carrier" that is registered by the Canadian government.
• The purpose of RRIFs is to furnish retired folks with a consistent flow of income from their Canadian savings vehicles, like RRSPs.
• Life income funds (LIFs) are a type of RRIF that can be utilized to hold locked-in pension funds.
• A registered retirement income fund (RRIF) is a Canadian retirement vehicle like an annuity.