A Registered Retirement Income Fund (RRIF) is the most common option people choose when they must turn thir RRSP savings into retirement income. A simplified way to look at RRIFs is to think of them as the opposite of RRSPs. With RRSPs you are making deposits to save up for retirement. With RRIFs, you take the money back out to provide you with retirement income.

Although the Tax Act currently states that you must convert your RRSPs into RRIFs by the end of the year in which you turn 71, you are allowed to convert some or all, of your RRSPs any time you wish. Once an RRSP has been converted to an RRIF, you are required to withdraw a minimum amount, beginning in the year after you convert. (If you convert your RRSPs into RRIFs this year because you are now 71, you don’t need to take any money out until the next calendar year.) However, you can choose to start taking the funds immediately if you wish.

To get an idea of what your RRIF minimum withdrawal will be based on the funds currently in your RRSP, you can work out the math yourself (take 90 minus your age and then divide the result into 1), or you can try this handy calculator. For example, if you are 50 today, you would take 90 - 50 (your age) = 40. Then take 1 divided by 40 = 0.025. If you multiply that result by 100, you would get 2.5% as your minimum withdrawal amount of your RRIF.

One thing to keep in mind when taking minimum payments from your RRIF is that the Income Tax Act does not require taxes to be withheld on your minimum payment. This could mean a bit of a tax hit when you file your taxes next year, because all money withdrawn from your RRIF is taxable in the year you get it back. (Remember that RRSPs and RRIFs are tax deferral plans, not tax avoidance plans. You get a tax break when you put the money into the RRSP, but have to pay tax when you eventually take the funds back out.)