2015 RRIF Re-contribution Deadline & Tips

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The 2015 Federal Budget changed the rules governing registered retirement income funds, or RRIFs, to allow seniors to preserve their tax-sheltered assets for longer. These changes apply to all types of RRIFs, including Life Income Funds (LIFs) and other locked-in retirement accounts. The government lowered the RRIF minimum withdrawal percentages that apply from age 71 to 94. The rate is 2.1 percent lower at 71; so 5.28% down from 7.38%. This rule came into effect for tax year 2015.

In fairness, RRIF holders who at any time in 2015 withdrew more than their new minimum annual withdrawal amount are permitted to re-contribution the ‘excess’ to their RRIF. Excess means the difference between the amount withdrawn using the previous 2015 minimum and the new withdrawal amount. You may re-contribute any amount up to, but not exceeding the difference. At age 71, on $100,000 of RRIF capital, the re-contribution opportunity is $2,100. 2015 RRIF re-contributions are permitted until February 29, 2016.

Who might benefit?

  • The rule change favours those who don’t need the funds for living expenses.
  • Individuals who pay higher marginal tax rates due to RRIF withdrawals.
  • Seniors who are subject to the Old Age Security (OAS) clawback. Avoiding the 15% OAS recovery tax on $2,100 that’s re-contributed saves $315.

A re-contribution amount will be tax deductible for tax year 2015. You receive an official tax receipt that indicates it is a 2015 RRIF re-contribution. That way, you report the net reduced 2015 RRIF minimum amount in taxable income—T4RIF Box 16 Taxable amounts less 2015 RRIF re-contribution deduction.

Check with your tax adviser on the merits of a re-contribution for you. Take action with your investment manager before the deadline.