RRIF Planning: The Retirement Tax Nobody Plans For
The RRIF conversion at 71 is one of the most tax-significant events in a Canadian's retirement. Suddenly, your tax-deferred RRSP becomes a mandatory income source — and every dollar withdrawn is taxed as ordinary income. Without proper planning, this can push retirees into unexpected tax brackets, trigger OAS clawbacks, and deplete portfolios faster than necessary.
CRA prescribed minimum rates
CRA sets the minimum RRIF withdrawal percentage by age. These rates increase every year, reflecting the expectation that RRIF funds will be drawn down over your remaining lifetime. You must withdraw at least the minimum each year — there is no penalty for withdrawing more, but every dollar over the minimum is additional taxable income.
| Age | Minimum Rate | On $500K RRIF | Age | Minimum Rate |
|---|---|---|---|---|
| 65 | 4.00% | $20,000 | 80 | 6.82% |
| 71 | 5.28% | $26,400 | 85 | 8.51% |
| 72 | 5.40% | $27,000 | 90 | 11.92% |
| 75 | 5.82% | $29,100 | 95+ | 20.00% |
The OAS clawback: the stealth tax
For 2026 income, OAS clawback begins at $95,323 of net income. Every dollar above this threshold triggers a 15% OAS recovery. At a maximum OAS of $713/month ($8,556/year), the benefit is fully clawed back at approximately $152,000 of income. RRIF withdrawals are counted as income. This is why TFSA drawdown — invisible to CRA — is so powerful in retirement.
Strategies to minimize RRIF tax
Several strategies can reduce RRIF tax burden: melt down your RRSP early (between retirement and age 71) at a lower rate before CPP and OAS kick in; use TFSA to receive excess RRIF funds tax-free; use a younger spouse's age for calculating minimums; split RRIF income with a spouse (pension income splitting); and consider charitable donations using in-kind RRIF transfers.