Once you've retired, getting the money from your RRSP is easy. All you have to do is go to the financial institution that is holding your RRSP account and say that you have retired. Then it's time to kick back and relax. Your RRSP will be rolled over to a Registered Retirement Income Fund (RRIF) account. An RRIF is the opposite of an RRSP. Instead of you having to pay into it, an RRIF actually pays you!

However, using an RRIF account does require a morbid calculation: you have to guess how long you're going to live so that the money you've saved in your RRSP will not be gone before you are. Here is one guideline that can be used to work out approximately how much your annual RRIF withdrawal amounts should be:


RRIF Withdrawal Amounts = (Book Value of RRIF at Beginning of Calendar Year)
(1- (90 - plan holder or spouse\'s age))

Keep in mind that this formula is meant to be very general; it does not take into account unforeseen expenses. The point of the formula is to come up with an amount of money that can be withdrawn on an annual basis up until the retiree reaches the age of 90. In this example, we assume that the average age at which someone dies is 90. Again, we've made a very rough estimation. The formula yields a negative number because it represents the money that is withdrawn from the total investment. An RRIF payment is an annuity due; therefore, money that is taken out of an RRIF is spent from the beginning of the period to the end, as opposed to investments, which are made at the end of periods, after money is earned.


Money withdrawn from your RRSP through RRIF account payouts is taxed at your marginal tax rate (for more on this, see How does the marginal tax rate system work?). If you have $300,000 saved for your retirement and you're 65 years old, your RRIF will pay you about $1,000 per month. If this $1,000 is your only source of income, you will be taxed at a marginal rate of 15%, leaving you with about $850 every month. You may also receive a monthly Canada Pension Plan check if you are eligible.

Next: RRSPs: Registered Plan Strategies »



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