What Is a Registered Retirement Income Fund?

A Registered Retirement Income Fund (RRIF) is a retirement fund similar to an annuity contract that pays out income to a beneficiary or a number of beneficiaries. The owners of Registered Retirement Savings Plans (RRSPs) often roll over the balance in those plans into an RRIF in order to fund a retirement income stream.

RRIF payouts are considered a part of the beneficiary's normal income and are taxed as such by the Canada Revenue Agency in the year that the beneficiary receives payouts. The organization or company that holds the RRIF is known as the carrier of the plan. Carriers can be insurance companies, banks, or any kind of licensed financial intermediary. The government of Canada is not the carrier for RRIFs; it merely registers them for tax purposes.

Understanding the Registered Retirement Income Fund (RRIF)

The RRIF plan is designed to provide retirees with a constant income flow from the savings in their RRSPs. RRSPs must be rolled over by the time the contributor reaches age 69, but by converting an RRSP into an RRIF, people can keep their investments under a form of tax shelter, while still having the chance to allocate assets according to their specifications.

How RRIFs Operate

According to the government revenue agency, "You set up a registered retirement income fund (RRIF) account through a financial institution such as a bank, credit union, trust or insurance company. Your financial institution will advise you on the types of RRIFs and the investments they can contain. You can have more than one RRIF and you can have self-directed RRIFs. 

"Starting in the year after the year you establish a RRIF, you have to be paid a yearly minimum amount. The payout period under your RRIF is for your entire life. Your carrier calculates the minimum amount based on your age at the beginning of each year. However, you can elect to have the payment based on your spouse or common-law partner’s age. You must select this option when filling out the original RRIF application form. Once you make this election, you cannot change it. 

"Amounts received from a RRIF upon the death of an annuitant can be transferred directly or indirectly to your RRSP, to your RRIF, to your PRPP, to your SPP or to buy yourself an eligible annuity if you were a qualified beneficiary of the deceased annuitant.

"The existing anti-avoidance rules applicable to registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) have been enhanced to prevent any aggressive tax planning. The rules largely adopt the existing tax-free savings account rules for non-qualified investments, prohibited investments, and advantages, with some modifications."