As the year draws to a close, many retirees turn their attention to mandatory Registered Retirement Income Fund (RRIF) withdrawals. This year, there is added anticipation about whether the federal government will follow through on its election promise to reduce 2025 RRIF minimum withdrawals by 25 percent. At the time of writing, no announcement has yet been made.<\/p>\n
However, even without any temporary changes to the rules, there are many strategies you can consider to manage taxes effectively when it comes to your RRIF withdrawals.<\/p>\n
1. Delay withdrawals until year-end<\/strong>. If you don\u2019t need monthly income from your RRIF, consider making withdrawals closer to the end of the year. This approach can allow your investments more time to compound and grow in a tax-sheltered way. For those converting an RRSP to an RRIF at age 71, remember that mandatory withdrawals don\u2019t begin until the following year.<\/p>\n 2. Use the pension income tax credit at age 65.<\/strong> RRIF withdrawals generally qualify for the $2,000 non-refundable pension tax credit starting at age 65. If you don\u2019t yet have an RRIF, converting a small portion of an RRSP to an RRIF before age 71 may be one way to take advantage of this credit. You may also be able to split pension income with a spouse or partner, which can reduce taxes or improve access to income-tested government benefits.<\/p>\n 3. Don\u2019t forget pension income splitting.<\/strong> If you have a spouse in a lower tax bracket, you can elect to report up to one-half of your RRIF withdrawals on their tax return once you are 65 years or older. This can reduce the overall household taxes paid.<\/p>\n 4. Need funds beyond the RRIF minimum?<\/strong> Consider withdrawing from non-registered accounts first.<\/strong> If you need funds above the mandatory RRIF requirement, consider which accounts to draw from in order to manage your overall tax liability. For example, capital gains in non-registered accounts are taxed at a lower effective rate than RRIF withdrawals because only 50 percent of capital gains are included in taxable income. This may help preserve tax-sheltered growth within the RRIF.<\/p>\n 5. Adjust RRIF withdrawals according to your tax bracket<\/strong>. In years when your taxable income is lower, it may make sense to withdraw more than the RRIF minimum requirement. Doing so can take advantage of a lower tax rate and provide greater flexibility in future years.<\/p>\n 6. Base withdrawals on a younger spouse\u2019s age.<\/strong> If you have a younger spouse, you can use their age to calculate your RRIF minimum withdrawal requirement, which can reduce required withdrawals and maintain flexibility. You can always take more than the minimum if needed. Note that you must elect to use a spouse\u2019s age when the RRIF is first established.<\/p>\n 7. Fund the TFSA with RRIF withdrawals.<\/strong> If you don\u2019t need the full RRIF minimum withdrawal, consider contributing excess funds to a TFSA, subject to contribution limits. This allows continued tax-advantaged growth, since future TFSA gains are tax free.<\/p>\n 8. When estate planning, name a spouse as the successor annuitant<\/strong>. When considering beneficiary designations for your RRIF, if you are naming a spouse or common-law partner, consider designating them as the successor annuitant rather than as a beneficiary. This allows the RRIF to continue seamlessly after your death, with the spouse becoming the annuitant and simplifying administration.<\/p>\n Plan Ahead<\/strong><\/p>\n RRIF withdrawal considerations should be part of your broader retirement income plan. Early planning, well before mandatory withdrawals begin, can create opportunities to reduce taxes, maximize growth and improve flexibility. Every situation is unique, so working with a professional tax advisor can help you craft a personalized strategy that aligns with your financial goals. If you have any questions or require support, please call the office.<\/p>\n","protected":false},"excerpt":{"rendered":" As the year draws to a close, many retirees turn their attention to mandatory Registered Retirement Income Fund (RRIF) withdrawals. This year, there is added anticipation about whether the federal government will follow through on its election promise to reduce 2025 RRIF minimum withdrawals by 25 percent. At the time of writing, no announcement has […]<\/p>\n","protected":false},"author":189,"featured_media":7411,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","footnotes":""},"categories":[36],"tags":[56,67],"class_list":["post-7410","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wealth-planning","tag-retirement","tag-tax-planning"],"acf":[],"yoast_head":"\n