Reducing the Withholding Taxes on your Registered Retirement Income Fund payments

A Registered Retirement Income Fund (RRIF) is created from the Registered Retirement Savings Plan (RRSP) amount that you have accumulated. Payments from a RRIF become one of the sources of income in your retirement.

You can set up a RRIF at any age but when you reach age 71 you have three choices; cash out your RRSPs, change them into a registered annuity or  convert them into a RRIF.

With a RRIF, you will be required to withdraw a pre-determined minimum amount each year (commencing at age 72). There are no taxes withheld on this minimum amount, but it is still taxable income. 

The minimum amount will increase each year until your RRIF amount is depleted or until you die, whichever comes first. When you reach age 95 this minimum amount will be set at 20% of your portfolio and remains there for the rest of your life (your RRIF will quickly deplete at this point).

If you withdraw more than the minimum amount in a given year your financial institution must remit withholding taxes to the Canada Revenue Agency (CRA) for that year.

Since 2012, the CRA determined that the total of monthly withdrawals in any given year will be used to determine the appropriate withholding tax for that year.

The amount of tax withheld is shown in the following schedule:-

Yearly Amount Withdrawn in Excess of Minimum

 Percentage of Taxes Withheld

Up to $5,000


$5,000 to $15,000


Over $15,000


For example, a $1,200 per month withdrawal could have 20% tax withheld (depending on the predetermined minimum amount), whereas $2,500 per month will likely have a withholding tax of 30%.

(Note: The above applies to all provinces except Quebec.)

There are circumstances in which the withholding tax that your Registered Retirement Income Fund administrator has to deduct is higher than the net taxes you end up owing to the CRA for that year.

Yes, you will get a tax refund but is that what you want? Wouldn’t you prefer to have the money in your pocket today? We know that the CRA is not generous enough to pay interest on this money, so why pay them more than you have to?

Suppose you withdraw $1,800 per month from your Registered Retirement Income Fund. Your total income for the year, including Canada Pension and Old Age Security, totals $34,600. You are over 65 years old so you benefit from the Basic Personal Amount, Age Amount and Pension Amount Credits. (For information on these three items follow the TD1 Personal Tax Credit form link below.)

Assuming that you have no other deductions and that you live in Alberta, the net taxes you would pay the CRA are $5,640 which is 16.3% of your total income.

Let’s say, in this example, that your Registered Retirement Income Fund withdrawal has slotted you into the 20% withdrawal tax, why then would you pay 20% only to receive a refund at the end of the year?

If you are in a position to be able to predict your yearly income and taxes due, then it could be worth while pursuing this tax saving strategy.

To reduce the amount of taxes withheld and remitted to the CRA, you can complete a TD1 Personal Tax Credit Form and send it to the financial institution that administers your RRIF.

They can then reduce the withholding taxes according to your request.

Enjoy your hard earned money!