“Why do I have to pay tax on money I withdraw from a RRIF? I set up the RRIF with funds from a savings account.”
Submitted by: John B.
A Registered Retirement Income Fund (RRIF) is an account registered with the federal government that provides a steady income in retirement. A RRIF is opened by transferring money from a Registered Retirement Savings Plan (RRSP). Transfers from other registered accounts such as pension plans are allowed in certain circumstances. However, funds are not transferred from a non-registered savings plan to a RRIF. Find out more about how RRIFs work.
Because contributions to an RRSP are made with pre-tax dollars, and is not taxed as long as it stays in the RRSP, you pay tax when you withdraw from the RRSP. If the RRSP was transferred to a RRIF, the tax is deferred until you make your withdrawals from your RRIF. All withdrawals from a RRIF are fully taxable.
Speak to a registered financial advisor or tax professional for more information about tax considerations relating to your RRIF.