Be Careful With ‘Old’ RRIF’s

In the February 1992 budget, the federal government changed the rules so that RRIFs could extend throughout your lifetime, rather than to the previous cut-off at the age of 90.

This change necessitated creating two categories of RRIFs, those established before December 31, 1992, called “qualifying” RRIFs, and those established after January 1, 1993, called “non-qualifying” RRIFs. Qualifying RRIFS are subject to the old minimum withdrawal rates until age 78, when they become identical to the new non-qualifying rates.

The new rates translate into much higher minimums from the ages of 71 through 77. So you have to take more money out of the plan during those years, even if you don’t need it, and pay more tax as a result.

If you have a qualifying RRIF and don’t want to take more than the minimum, do not add any new RRSP funds to it. Doing so will make it ineligible for the lower rates.