# How do financial institutions process minimum RRIF withdrawals?



## martik777 (Jun 25, 2014)

Do they physically sell the underlying security or can it be transferred 'in -kind' to a cash or TFSA account?
Is this process automatically done by the institution when you turn 72 and thereafter, if no action is taken by the RRIF owner?


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## AltaRed (Jun 8, 2009)

You have to be more clear because what a bank or CU might do could be different from what a brokerage might do which might be different from...... And it will vary by institution.

By law, the institution must convert the RRSP to a RRIF in the year one turns 71. At least some will initiate the process and send you the paperwork to sign.

The minimum annual withdrawals can be made in various ways, in-kind to a non-registered account, or in cash. At the time you sign the paperwork for the RRIF, you will indicate how you want to start withdrawals and where transferred funds are to go. If you take no action, I suspect almost every FI will mature/sell something to raise enough cash to meet minimum annual withdrawal requirements.

Added: In my case, I turn 71 this year. Scotia iTrade will send me the forms to sign before the end of this year and I will indicate when I want the minimum withdrawals made, whether monthly or annually, and to which account the funds will be transferred too. It is then up to me to make sure the RRIF has the cash available in the account before the payment date.

Added: Bottom line - you need to check with your specific institution on processes and actions to be taken.


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## martik777 (Jun 25, 2014)

Thanks, I will check my FI's out, I have a few years to go. I was mostly concerned about being forced to sell in a down market but the in-kind xfer to a registered acct eliminates that issue.


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## AltaRed (Jun 8, 2009)

As far as your other question on in-kind transfers from RRIF to TFSA, see In Kind Transfers.


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## Topo (Aug 31, 2019)

martik777 said:


> Thanks, I will check my FI's out, I have a few years to go. I was mostly concerned about being forced to sell in a down market but the in-kind xfer to a registered acct eliminates that issue.


I don't think an in-kind transfer would solve that problem, because you would owe taxes anyway. Whether you sell the securities at a loss in the RRIF and buy the same securities immediately in a non-registered account or transfer them in-kind, you need to come up with cash for the taxes. If the investments are esoteric with no market, then there could be a difference.


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## martik777 (Jun 25, 2014)

An in kind transfer does not involve selling the underlying securities at all, just changing the acct type from a RRIF to non-registered or am I missing something. I'm not concerned with the tax impact nor would I need the cash to pay them until next year since no tax is payable on min withdrawals.


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## Money172375 (Jun 29, 2018)

I do recall years ago that TDDI would allow accounts to enter a negative cash balance. Ie. they would make a cash withdrawal from the account for the RIF payment Without selling anything. They would then send letters to you advising you of the “margin call”, instructing you to cover it immediately. Not sure if it was a system glitch or designed that way. I suspect that selling securities to cover negative balances or margin Is a manual (human eyes) process and that they are prepared to take their chances on what are fairly stable RIF accounts.


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## OptsyEagle (Nov 29, 2009)

Money172375 said:


> I do recall years ago that TDDI would allow accounts to enter a negative cash balance. Ie. they would make a cash withdrawal from the account for the RIF payment Without selling anything. They would then send letters to you advising you of the “margin call”, instructing you to cover it immediately. Not sure if it was a system glitch or designed that way. I suspect that selling securities to cover negative balances or margin Is a manual (human eyes) process and that they are prepared to take their chances on what are fairly stable RIF accounts.


I would bet that is the more common method of dealing with it. The FI's computer would automatically send the minimum amount of money required, out of the RRIF, to the owner. That account would then be subjected to whatever rules surrounded a registered account carrying a negative balance. I agree, they would probably send some notice but very, very quickly they would want to shore up that account. To do that something would need to be sold.

So if the owner wants to NOT sell something, doing nothing would be a very bad idea.


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## like_to_retire (Oct 9, 2016)

I wonder if someone has a single annual date for minimum withdrawal (i.e. Dec 15) and the person has already removed the minimum withdrawal before that date, would the institution see this and not make the withdrawal?

ltr


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## AltaRed (Jun 8, 2009)

Topo said:


> I don't think an in-kind transfer would solve that problem, because you would owe taxes anyway. Whether you sell the securities at a loss in the RRIF and buy the same securities immediately in a non-registered account or transfer them in-kind, you need to come up with cash for the taxes. If the investments are esoteric with no market, then there could be a difference.


The OP was wanting to avoid selling securities low with an in-kind transfer out of the RRIF, but is mistaken in that any such transfer out is no different than selling those securities for cash inside the RRIF, using the cash for the withdrawal, and then re-purchasing those same securities in a non-reg account, and transferring them into the TFSA.... OR simply moving the cash from the sold securities in the RRIF to TFSA via the non-reg account and buying the securities back once the cash is in the TFSA. 

The only real difference between a straight in-kind transfer from RRIF to TFSA, and going to cash first, is the 1-3 days being 'out of market' with a sale/purchase. As you already noted, the taxes on minimum annual withdrawal will still be due in April the following year.


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## AltaRed (Jun 8, 2009)

like_to_retire said:


> I wonder if someone has a single annual date for minimum withdrawal (i.e. Dec 15) and the person has already removed the minimum withdrawal before that date, would the institution see this and not make the withdrawal?
> 
> ltr


I would imagine the FI would already have recorded the withdrawals YTD and not proceed with the scheduled annual withdrawal on Dec 15th. BUT one needs to ask their FI how that works.

My RRSP with Scotia iTrade must be converted to RRIF this year and my plan is to have a single minimum annual withdrawal on Dec 1st of each year (the first being Dec 1, 2021) to accommodate maturity dates on my GIC/bond ladder. That all said, I plan to make the actual withdrawal when that maturity happens, whether it be Jan 15th or Nov 15th so it will be important for me to establish with Scotia iTrade that I have the flexibility to do that and not be dinged with an automatic scheduled withdrawal on Dec 1st as well. Will sort all this out over the next 3 months.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> My RRSP with Scotia iTrade must be converted to RRIF this year and my plan is to have a single minimum annual withdrawal on Dec 1st of each year (the first being Dec 1, 2021) to accommodate maturity dates on my GIC/bond ladder.


That is exactly my situation. I want to keep my GIC ladder going and so the maturities will be through the year, at which time I'll set aside the cash and rebuy into the ladder with the remainder. That cash held back would be inefficient sitting in the RRIF waiting until Dec 15th when the broker takes the minimum withdrawal and so I would want to remove it out of the RRIF immediately.

I guess as you say I will have to be sure to inform TDDI of that when the time occurs (not too far away).

ltr


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## Money172375 (Jun 29, 2018)

like_to_retire said:


> I wonder if someone has a single annual date for minimum withdrawal (i.e. Dec 15) and the person has already removed the minimum withdrawal before that date, would the institution see this and not make the withdrawal?
> 
> ltr


I believe that’s the case. Once the withdrawal is made (which meets the AMP), then there Should not be further Automated withdrawals. Assuming one was on an annual payment freq.


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## OptsyEagle (Nov 29, 2009)

like_to_retire said:


> I wonder if someone has a single annual date for minimum withdrawal (i.e. Dec 15) and the person has already removed the minimum withdrawal before that date, would the institution see this and not make the withdrawal?
> 
> ltr


That has always been the case in the FI I have been involved with. As long as you have taken out at least the minimum, they will leave your account alone.


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## like_to_retire (Oct 9, 2016)

Great, thanks for the responses. It looks like I'll be able to do this as planned.

ltr


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## AltaRed (Jun 8, 2009)

But do validate with your own FI. I plan to do exactly that when I am finalizing the RRIF paperwork.


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## agent99 (Sep 11, 2013)

martik777 said:


> An in kind transfer does not involve selling the underlying securities at all, just changing the acct type from a RRIF to non-registered or am I missing something. I'm not concerned with the tax impact nor would I need the cash to pay them until next year since no tax is payable on min withdrawals.


We opened RRIF accounts several years prior to turning 71. Just small ones to allow for early RRIF withdrawals because they are considered pension income and for that you get a credit. You can open a RRIF any time.

At 71, your RRSP must convert to a RRIF. This may need some paper work - as suggested, discuss with your FI. Can't recall, but ours may have just merged with existing RRIFs.

Once you are 72, you do have to make a minimum withdrawal. The bank or brokerage will normally determine the amount, based on your previous end of year RRIF holdings. This may be slightly different from what you think it should be. It helps if the holdings are all in one place. I just call BMOIL and tell them what I want to withdraw, using their calculated amount. Sometimes even a mix of Canadian and US funds and shares. They figure out the exchange equivalents while on the call!

We make our min withdrawal in January of each year. I usually make in-kind withdrawals of shares plus cash. Cash is often partly US$ that has accumulated in RRIFs. I use the C$ cash for TFSA contributions and somegoes to bank A/C for taxes. I try to withdraw dividend paying securities in-kind that will fit well in our taxable portfolios. In-kind transfers to TFSA don't work too well, because the amounts are small.

For those with RRSPs in several places, it might simplify things if they were consolidated in one place. Never had to deal with this myself but it seems a possible added complication trying to withdraw portions of GICs or whatever.


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## Topo (Aug 31, 2019)

AltaRed said:


> The OP was wanting to avoid selling securities low with an in-kind transfer out of the RRIF, but is mistaken in that any such transfer out is no different than selling those securities for cash inside the RRIF, using the cash for the withdrawal, and then re-purchasing those same securities in a non-reg account, and transferring them into the TFSA.... OR simply moving the cash from the sold securities in the RRIF to TFSA via the non-reg account and buying the securities back once the cash is in the TFSA.
> 
> The only real difference between a straight in-kind transfer from RRIF to TFSA, and going to cash first, is the 1-3 days being 'out of market' with a sale/purchase. As you already noted, the taxes on minimum annual withdrawal will still be due in April the following year.


I wonder if an in-kind transfer allows one to defer withholding taxes on the RRIF. If so, there would be a small advantage for an in-kind transfer.


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## AltaRed (Jun 8, 2009)

There is no required withholding tax if the withdrawal is at, or below, the annual minimum....regardless of an in-kind transfer or cash withdrawal. In-kind transfers have a cash equivalent value and CRA will want its share for that component that exceeds annual minimums.

Guess it depends on one's perception of the time (investing) value of any 'taxes withheld' in any event. They are still due next April.

Edit: spelling


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## agent99 (Sep 11, 2013)

Topo said:


> I wonder if an in-kind transfer allows one to defer withholding taxes on the RRIF. If so, there would be a small advantage for an in-kind transfer.


There are no withholding taxes on RRIF withdrawals, unless you withdraw more than the minimum.


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## Topo (Aug 31, 2019)

In that case only fees on buying and selling are saved with an in-kind transfer.


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## AltaRed (Jun 8, 2009)

Topo said:


> In that case only fees on buying and selling are saved with an in-kind transfer.


And possible time out of market (good or bad result). Some consider that important.... I wouldn't.


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## Topo (Aug 31, 2019)

AltaRed said:


> And possible time out of market (good or bad result). Some consider that important.... I wouldn't.


True. It could be minimized if one has the cash (or margin) to immediately buy the securities in non-reg as one is selling inside RRIF. In the case of mutual funds that trade at NAV, placing both orders on the same day will automatically solve the problem.


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## Retired Peasant (Apr 22, 2013)

@*like_to_retire *I'm with TDDI, and they keep track of withdrawals before your planned yearly withdrawal. If you've already made the minimum, they leave your account alone


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## agent99 (Sep 11, 2013)

AltaRed said:


> And possible time out of market (good or bad result). Some consider that important.... I wouldn't.


If you were prepared to move the stock from RRIF to Taxable account, you probably are not interested in trading anyway. I don't recall it taking very long - maybe a day or two. Certainly no longer than buying and selling which in fact is the way it shows up in transactions.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> The OP was wanting to avoid selling securities low with an in-kind transfer out of the RRIF, but is mistaken in that any such transfer out is no different than selling those securities for cash inside the RRIF, using the cash for the withdrawal, and then re-purchasing those same securities in a non-reg account, and transferring them into the TFSA.... OR simply moving the cash from the sold securities in the RRIF to TFSA via the non-reg account and buying the securities back once the cash is in the TFSA.
> 
> The only real difference between a straight in-kind transfer from RRIF to TFSA, and going to cash first, is the 1-3 days being 'out of market' with a sale/purchase ...


I guess it depends on what one considers real enough to change one's method.

An in-kind transfer likely would avoid paying two commissions as well as avoid time out of the market but be more complicated.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> An in-kind transfer likely would avoid paying two commissions as well as avoid time out of the market but be more complicated.


Which is what was discussed up thread.....


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## Eclectic12 (Oct 20, 2010)

Topo said:


> I wonder if an in-kind transfer allows one to defer withholding taxes on the RRIF. If so, there would be a small advantage for an in-kind transfer.


My understanding is that withholding taxes (WHT) are due when the withdrawal is made. 

Should one like the idea of keeping the same investment, skipping the commissions and staying invested - one would need to be like the OP and withdraw at or below the minimum annual withdrawal. Otherwise, one needs enough spare cash in the RRIF to cover the WHT on the over amount to avoid some of the investment being sold.








TaxTips.ca - Making in kind withdrawals from an RRSP or a RRIF


TaxTips.ca - In kind withdrawals can be made from RRSPs and RRIFs, transferring investments without having to convert them to cash.




www.taxtips.ca





When that year's tax return is filed the following April, any variation will be dealt with.

Cheers


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