Your annual RRIF minimum withdrawal is generally calculated by multiplying the fair market value of the property in your RRIF at the beginning of the year by the prescribed factor for the applicable age. The calculation is performed by the financial institution that carries your RRIF.
In its simplest form, the calculation looks like this:
RRIF value at the beginning of the year × prescribed factor = minimum withdrawal for the year
The minimum is $0 for the calendar year in which you establish the RRIF. The calculation starts in the following year, so opening a RRIF does not itself require you to take a minimum payment before that first year ends.
Which RRIF Balance Is Used in the Calculation?
The calculation uses the fair market value of the RRIF property at the beginning of the calendar year, rather than the balance on the day you actually receive a payment. This distinction matters because investments can rise or fall substantially during the year without changing a minimum that has already been determined from the opening value.
Suppose your RRIF is worth $250,000 at the beginning of the year and later falls to $230,000. Your financial institution does not ordinarily recalculate that year’s minimum using the lower balance. Similarly, an increase in value during the year does not increase an already determined minimum. The new value becomes relevant when the next year’s calculation is made.
How Is the Prescribed Factor Determined?
The second part of the formula is the prescribed factor. For most RRIFs, the Income Tax Regulations assign a specific factor beginning at age 71. For someone younger than 71, the standard formula is:
1 ÷ (90 − age)
For example, the prescribed factor for someone aged 65 would be:
1 ÷ (90 − 65) = 1 ÷ 25 = 4%
If that person’s RRIF had an opening value of $200,000, the minimum would therefore be:
$200,000 × 4% = $8,000
From age 71 onward, you use the prescribed factor corresponding to the applicable age rather than continuing to calculate the percentage with the 90-minus-age formula. At 71, for example, the standard factor is 5.28%. Our separate RRIF minimum withdrawal rates by age provides the complete table instead of reproducing it here.
Which Age Is Used for Your RRIF Minimum?
Your age at the beginning of the calendar year is normally used to determine the factor. This means the calculation does not switch to a new factor on your birthday during that year.
However, the RRIF rules allow you to elect to use your spouse’s or common-law partner’s age instead. The election must be made when the RRIF is established and cannot subsequently be changed for that fund. It can be made regardless of whether that spouse or partner will become the successor annuitant after your death.
Using a younger spouse’s age can reduce the calculated minimum because lower ages generally correspond to lower prescribed factors. For example, suppose your RRIF begins the year at $500,000, you are 75 and you elected at establishment to use your 65-year-old spouse’s age. The applicable factor would be 4%, producing a $20,000 minimum. Using your own age would instead apply the 5.82% factor for age 75, producing $29,100.
A Complete RRIF Minimum Withdrawal Example
Consider a RRIF established in a previous year with a fair market value of $350,000 at the beginning of the current year. The annuitant is 72 at the beginning of the year and did not elect to use a spouse’s or common-law partner’s age.
The prescribed factor for age 72 is 5.40%, so the calculation is:
$350,000 × 5.40% = $18,900
The RRIF carrier must therefore arrange payments totalling at least $18,900 during the year. Whether the annuitant receives that amount through monthly payments, several larger payments or another schedule offered by the institution does not alter the calculated annual minimum.
This is also why the percentage alone cannot tell you how many dollars you must withdraw. Two people of the same applicable age can have very different minimums because the calculation also depends on each RRIF’s beginning-of-year value.
Special Calculations for Certain Older RRIFs
Most current RRIFs use the standard factors described above, but the CRA maintains separate prescribed factors for certain older arrangements. A qualifying RRIF generally involves an arrangement originating before 1993 that continues to satisfy specific conditions, while another set of factors can apply to eligible pre-March 1986 funds.
Trusteed RRIFs holding certain locked-in annuity contracts can also require an adjusted calculation. In that situation, the minimum calculation can combine the prescribed-factor amount for other RRIF property with applicable periodic payments from the annuity contract. These exceptions are uncommon enough that we would rely on the carrier’s calculation rather than applying the standard formula to an older arrangement without first confirming which rules govern it.
Questions About Calculating the RRIF Minimum
Are investment management fees deducted before calculating the minimum?
The calculation is based on the fair market value of the RRIF property at the beginning of the year. In addition, mutual-fund redemption fees incurred when units are redeemed are RRIF expenses and do not count as part of the minimum amount paid to you.
Is the minimum calculated separately if you have several RRIFs?
Each RRIF is its own registered fund, so its carrier calculates the applicable minimum using the property held in that particular RRIF. Holding several RRIFs does not create one combined calculation across all of the accounts.
Does transferring money out during the year reduce an already calculated minimum?
A later reduction in the ordinary RRIF balance does not cause the standard beginning-of-year calculation to be rerun. Transfers involving RRIF property can have additional rules, particularly because the required minimum generally needs to be dealt with before certain direct transfers are completed.
Can you ask your financial institution to calculate a lower minimum?
The carrier cannot simply substitute a lower percentage because you prefer to withdraw less. The yearly minimum is determined under the prescribed calculation, although you remain free to withdraw more than the resulting amount.
