Taking RRIF withdrawals in kind

As a retiree with a Registered Retirement Income Fund (RRIF), you have a minimum amount you must withdraw each year, starting no later than the year after you opened the RRIF.

But what if you have one or more years when you don’t need the entire amount, or any of it, to support your retirement lifestyle? Also, what if you want to keep the investments you would be cashing out?

Keeping the investments in kind

You can make an in-kind transfer of investments from your RRIF to a non-registered account, or to a Tax-Free Savings Account (TFSA) if you have contribution room. The assets are transferred just as they are, without any selling or buying.

One reason to transfer investments in kind is that the investments have been performing well, you believe they still hold promise and you want to keep them.

When markets are down

Another reason is that the markets are down, and withdrawing your minimum amount would mean selling investments that have lost value. By making an in-kind transfer to your non-registered account or TFSA, you give the investments an opportunity to regain their value when the markets, hopefully, recover.

Your tax situation remains unchanged. The amount of the in-kind transfer is added to that year’s income, so the tax payable is the same as if you withdrew the amount in cash.

Note that some retirees use another strategy to avoid selling RRIF investments when markets are down. You can keep a reserve of cash-equivalent or low-risk fixed-income assets in your RRIF, which you can tap to make your annual minimum withdrawal.