A registered retirement income fund (RRIF) turns the accumulated value of a registered savings plan – typically an RRSP – into retirement income.  

You can transfer your RRSP savings to a RRIF on a tax-free basis at any time up to the end of the year in which you turn 71. And you must begin receiving that retirement income no later than the end of the following calendar year.

You won’t pay any taxes at the time you transfer your savings because you’re not immediately withdrawing the savings in cash. The income paid from the RRIF, however, is taxable in the year you receive it.

The income from a RRIF is extremely flexible. You can choose the payment amount, subject to a required minimum that’s based on the value of the RRIF and your age, at the beginning of each year. You can also vary the income from one year to the next to help meet your changing income needs or financial obligations. You might, for example, choose to have your income increase from one year to the next to help combat inflation.

With flexibility, however, comes responsibility. The more income you take out in the short term, the less money you’ll have left in the long term. Whether your savings last a lifetime, or only for a limited number of years, is strictly up to you. Combining RRIFs and annuities generally helps to reduce the risk that you’ll run out of money by withdrawing too much.

Keep in mind that large lump sum withdrawals can also have an impact on your marginal tax rate for the year – which increases the amount of income tax you’ll pay.