# RRIF withdrawal formula

Question: In a recent broadcast warning of the difference between an RRSP and a RRIF, Gordon Pape mentioned a 65-year-old having to withdraw 4% from a RRIF. My understanding is RRSPs don’t need to be converted into a RRIF until the end of the year the investor turns 69, even if the investor is not earning any income from employment between 65 and 69. And if they are earning income, then they could continue to contribute to an RRSP, until the end of the year in which they become 69. Retirement is mandatory for me when I turn 65 in May of 2001. Surely I don’t have to withdraw any money from my RRSP then – but instead, when I’m 69, convert this into a RRIF, and then begin withdrawing?

Gordon Pape answer: You don’t have to convert your RRSP to a RRIF until age 69, but you can do so any time sooner if you wish. Some people set up a small RRIF at age 65 to take advantage of the pension tax credit, which applies to the first \$1,000 of pension income.

Also, some people who retire before 69 prefer the steady cash flow they can arrange from a RRIF to making periodic withdrawals from an RRSP.

Up to age 71, the formula for calculating the minimuannual RRIF withdrawal is the market value of the assets in the plan on Jan. 1 divided by 90 minus your age on Jan. 1. If you subtract 65 from 90, you get 25. That’s where the 4% comes from (1/25 of 100).

If you convert to a RRIF at age 69, the minimum withdrawal in the first year will be 4.76% of the plan’s market value.