There is no minimum age for converting an RRSP to a RRIF, so you can convert as soon as you need retirement income. But you do have to convert your RRSP investments into some form of retirement income before the end of the calendar year in which you turn 71. You can make a contribution to your RRSP for that year as long as you contribute by December 31.
RRSPs & RRIFs
Retirement can be a wonderful time when you’re financially prepared for it. At Alterna we offer several services that can help you get the most out of your retirement funds.
RRSP eSavings Account
RRSP eTerm Deposits
At Alterna we also offer access to mutual funds through Qtrade Asset Management Inc., Qtrade Advisor and Qtrade Investor†.
You don’t have to make all your retirement decisions on your own. Our financial planners can help you build your nest egg and manage your RRSP or RRIF effectively. Just contact us to arrange a meeting. Your financial planner will help you create or adjust your plan so that it suits your retirement needs perfectly.
What is a RRIF?
Are you turning 71? Under current government regulations, you must convert all your Registered Retirement Savings Plans (RRSPs) to a retirement income option during the year you turn 71. You may also convert RRSP funds anytime before you turn 71 if you choose.
Two popular retirement income options are:
- Registered Retirement Income Funds (RRIFs), which operate similarly to an RRSP and provide retirement income for you and your spouse
- Annuities, which provide guaranteed income for life
Many people choose a RRIF. It can be invested just like an RRSP and continues to earn tax deferred interest on the balance, even while you are regularly withdrawing funds from the principal amount.
And, when you make a RRIF withdrawal at Alterna Bank, the payment is withdrawn from your term with the lowest interest rate (not all financial institutions take this into consideration).
RRIF Questions & Answers
When can I start to receive income from my RRIF?
Is retirement income taxable?
There are no tax consequences when you transfer your funds from an RRSP to a RRIF. The payments you receive from your RRIF are taxable at the same rates as RRSP withdrawals, but withholding tax is not automatically applied to minimum RRIF payments. Since your RRIF income is spread over your retirement years, so are the taxes. If you are over age 65, income received from your RRIF and other pensions qualifies for the Pension Income Credit, which can lead to tax savings.
How do I choose my payment level?
You must take some taxable payments from the RRIF each year, except the year that you first open your RRIF. You can choose any payment level, as long as the total each year is at least equal to the mandatory minimum amount.
The minimum amount changes annually and is calculated through a government formula based on your age (or your spouse's age, if you so choose) and the total value of the RRIF at the beginning of the year.
There is no maximum payment level. With many RRIFs you can vary your payments up or down from year to year (as long as the minimum withdrawal is maintained). Obviously, the larger the payments you take out, the sooner your funds will be depleted.
Can I choose to base my RRIF payments on my spouse's birthdate?Expand/Collapse
Yes, you can choose to base your RRIF payments on your birthdate or your spouse's/common-law partner's birthdate.
- If your spouse is younger, especially if younger than 71, your minimum payments will be much lower
- If you select the age of the older spouse, your minimum payment will be higher without triggering a withholding tax at source
- If both RRIFs are based on the same birth date, when one spouse passes away the survivor can combine two or more RRIFs into one, rather than having to continue with separate RRIFs
If you didn't make this choice when you applied for your RRIF, or if you marry or enter into a common-law partnership later, you can transfer your RRIF to a new RRIF based on your spouse's age.
2015 CRA RRIF Minimum Changes FAQ
The federal government has made changes to the minimum amount required as a withdrawal from a RRIF plan effective January 1, 2015. This change is reflective of more recent long-term historical rates of return and expected inflation.
If you haven’t received your RRIF annual minimum payment for 2015 or if you have a received a partial payment of your annual minimum payment you may request to have your RRIF payment amended to the new 2015 minimum amount.
If you have received your payment based on the old minimum amount, you are eligible for a re-contribution of the difference between the old minimum amount and the new reduced minimum amount if you choose.
If you would like to request a change to your annual minimum payment, please call us at 1.866.560.0120.
What changes have been made to the RRIF minimums?
The 2015 Federal Budget released measures to reduce the withdrawal factor for Registered Retirement Income Funds (RRIFs) for annuitants between the ages of 71 and 94.
I have a RRIF that was issued prior to 1993 (i.e. Qualified RRIF). Do these changes apply?
Yes, these changes apply to all types of RRIFs.
When are these changes effective?
These changes are effective January 1, 2015.
Will Alterna automatically reduce my 2015 minimum payment based on changes imposed by the 2015 Federal Budget?
No. For 2015, Alterna will pay out RRIF minimums based on the ‘old’ withdrawal factors. If you would like to have your payment(s) modified to reflect the ‘new’ minimum withdrawal factors, you must provide specific instructions to do so.
What happens if I’ve already taken my minimum payment, or I do not want to modify my periodic payments for 2015?
You may be eligible for a re-contribution to your RRIF if you have withdrawn more than the new minimum for your age in 2015 as a result of this reduction. You will be permitted to re-contribute the excess, representing the calculated difference between the existing minimum withdrawal amount, and the new reduced minimum withdrawal amount. The re-contribution will be deductible for the 2015 tax year.
How do I request a change to my payment amount?
If you would like to request a change to your annual minimum payment amount you can:
- Call the Alterna Bank Contact Centre at 1 866-560-0120
How do I determine my eligibility for a re-contribution to my RRIF?
If you have already received your RRIF annual minimum payment, or choose not to adjust your remaining payments to reflect the new minimum, you may be eligible for re-contribution. Speak to one of our representatives more information to help you determine your eligibility for a RRIF re-contribution.
How long do I have to re-contribute my eligible amount?
You have until February 29, 2016 to make an eligible re-contribution.
When a re-contribution is made, you will receive a re-contribution receipt exclusively for the re-contributions made to a RRIF for the 2015 Tax Year only.
What happens if I choose not to re-contribute the eligible amount?
If you choose not to re-contribute the eligible amount, it will be reported in Box 16 of the T4RRIF slip as a taxable amount. This amount will not be subject to excess withholding taxes for the 2015 taxation year. Only amounts withdrawn in excess of the “old” minimum amount will be subject to excess withholding taxes for 2015 only.
Can I make a partial re-contribution?
Yes. If you are eligible for a re-contribution, you may re-contribute any amount up to, but not exceeding the difference between the old minimum and the new minimum.
I have more than one RRIF held by different institutions. If I choose to direct all of my eligible re-contributions to my RRIF held at Alterna, will Alterna provide me with a confirmation that I have not exceeded my total eligible re-contribution amount?
No, it is your responsibility to ensure that you are not over re-contributing to your RRIF(s). Alterna cannot track what other RRIFs you may have with other financial institutions. Alterna will only provide you with confirmation of the eligible re-contribution amount for any RRIFs held at Alterna.
I am currently taking a specified payment amount over the old RRIF minimum, what amount am I eligible to re-contribute?
You may only be eligible to re-contribute the difference between the old minimum and the new minimum for the 2015 tax year.
What will I receive when I make an eligible re-contribution?
You will receive a contribution receipt that will indicate that it is a 2015 re-contribution to your RRIF as well as an Eligible Withdrawal Amount letter.
When will my re-contribution receipt and eligible withdrawal amount letter get mailed to me?
You can expect to receive your re-contribution receipt and eligible withdrawal amount letter in March 2016. Exact mailing dates have not been released.
RRSP Questions & Answers
What is an RRSP?
RRSPs are government-approved, tax-deferred savings plans that help people save money for their retirement. Even if you contribute to a company or government pension plan, you can usually reap tax benefits by contributing to an RRSP.
An RRSP allows you to make tax-deductible contributions during high-income years. Then you receive income and pay taxes on the proceeds during your lower-income retirement years. As a result, the part of your income that you would usually pay to the government in taxes instead accumulates in a tax shelter as part of your RRSP investment.
How much can I contribute?
The best way to show this is to use an example: The maximum RRSP deduction limit for 2010 is $22,000. However, if you did not use all your RRSP deduction limit for the years 1991-2009, you can carry forward the unused amount to 2010. Therefore, your RRSP deduction limit for 2010 may be more than $22,000. The maximum RRSP contribution limits for the past five years are:
The maximum limit for future years will be indexed for inflation. To find out your exact RRSP deduction limit, check your previous year’s income tax Notice of Assessment or call CRA Tax Information Phone Service at 1-800-267-6999.
What if I contribute too much money to my RRSP?
The over-contribution allowance is $2,000. If you exceed this limit, you will incur a penalty of 1 percent per month from the time of your over-contribution.
When should I start contributing to my RRSP?
The sooner you start contributing to an RRSP, the better off you will be at retirement. If you do not have a lump sum to invest at the beginning of the year, we can set you up with regular contributions that match your budget. Contributions can be little as $25 a month.
The earlier in the year you contribute to an RRSP, the more money you will eventually accumulate. For example, if you contribute $2,000 each February for the previous year's contribution, and you earn 5% interest, you will have $130,878 in 30 years. If you contribute the same $2,000 every February for the upcoming year's contribution and you earn the same 5%, you will have $139,522 in 30 years.
What happens if I don't use my total RRSP deduction limit?
You can carry forward the unused portion of your annual RRSP deduction limit indefinitely. If you don't have the cash to make your maximum annual contribution, or if your RRSP deduction limit is growing larger with each passing year, you may want to consider an investment loan. This way you can make the full contribution and maximize your potential tax refund.
What is a spousal RRSP?
You can contribute to an RRSP in your spouse's name and still deduct the contributions from your taxable income. By making contributions to your spouse's RRSP, you are helping your spouse build retirement income.
A spousal RRSP will benefit you in later years if your spouse will be receiving a smaller retirement income than you. Contributing to a spousal RRSP in this way is called income splitting. The money that is growing in your spouse's RRSP will eventually be paid out as retirement income, but will be taxed at a lower rate due to their lower retirement income level.
Any contributions you make to a spousal RRSP reduce your annual RRSP deduction limit. Your contributions to a spousal RRSP do not affect your spouse's annual RRSP deduction limit.
Should I pay down my mortgage or put money into my RRSP?
In most situations it's best to place the extra funds into an RRSP and use your tax refund to pay down your mortgage.
Borrowing for RRSPs
If you find you don't have enough cash on hand to make your maximum contribution or would like to take advantage of unused RRSP deduction room from previous years, borrowing may be the answer.
With an Alterna Investment Loan, the amount you'll save on taxes is often more than the interest you'll pay to borrow. To maximize your RRSP benefit, we recommend that you immediately apply your tax refund to the loan to reduce your borrowing costs. You should also try to pay off the loan as early as possible.
See how borrowing over a one-year period can get you a tax refund that is much higher than the cost of the interest you pay:
|Marginal tax rate:||41%|
|Cost of borrowing||$126.78|
Example is for illustrative purposes only. Please refer to your tax professional when considering borrowing to make an RRSP contribution to understand the potential tax refund.
Our Retirement Income Fund Calculator provides withdrawal minimums and payment options based on the consumption and length of the investment.
These calculators are made available to you as tools for independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy. All examples are hypothetical and are for illustrative purposes only. Please visit your branch to seek personalized advice from qualified professionals for all personal finance issues.
A Tax Free Savings Account (TFSA) is a flexible, easily accessible savings plan. It provides you with a great way to save for your short- or long-term financial goals or simply for a rainy day—and you will not owe tax on the interest you earn.
A Registered Retirement Savings Plan (RRSP) is an investment option that allows you to save for retirement and because it’s regulated by the Canadian government, RRSPs provide special tax benefits. For example, your annual contribution can reduce the amount of income tax you pay in that year and the money you put away can have years of tax-deferred growth potential. You only pay tax on the amounts you withdraw.
If you’ve already maximized your RRSP contributions, a TFSA is one of the many options that will help you save more of your hard-earned money.
With Alterna’s range of investment options, you’ll find safe and effective ways to purchase your first home, buy a new car, plan for a worry-free retirement or preserve your capital during your retirement years. Our financial advisors are here to help you save for the future while you continue to enjoy life today.
Talk to us. Whether you’re looking for a locked-in investment, one that’s easily accessible or both, we’ll help you find the retirement solution that’s best for you. Contact Alterna today to find out more.
Safe & Secure—with deposit insurance
Did you know that all eligible deposits held by clients at Alterna Bank are covered by the Canada Deposit Insurance Corporation (CDIC)? That means your funds are guaranteed up to $100,000 per qualifying account.
Open online in minutes.
Log in to online banking.
Call Us Directly
We can easily help you over the phone.
† Financial planning, mutual funds and other securities are offered through Qtrade Advisor. Online brokerage services are offered through Qtrade Investor. Qtrade Advisor and Qtrade Investor are divisions of Qtrade Securities Inc., Member of the Canadian Investor Protection Fund. Financial planning and mutual funds are also offered through Qtrade Asset Management Inc., member MFDA.
Only deposits held in Canadian currency, having a term of five years or less and payable in Canada are eligible to be insured under the Canada Deposit Insurance Corporation Act.
Using borrowed money to finance the purchase of securities involves greater risk than using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of your purchase declines.
We are here for you.
Welcome to the bank that actually puts customers before profits and who is winning customers with service, products and total transparency that truly puts the good in banking.
Stay in touch. Be the first to know about news, promotions and announcements. Signup Now!