RRIF Withdrawals in Falling Markets

As a RRIF account holder, the Income Tax Act requires you to withdraw a minimum amount each year from your RRIF plan based on your age (or your spouse's age) and the market value of your account as at the beginning of each year. You may be concerned about selling investments in your portfolio due to fallen market values especially since capital losses within the RRIF cannot be used to offset capital gains in taxable accounts.

We want to remind our RRIF clients that they have the option of making RRIF withdrawals on an in-kind basis rather than in cash. This choice ensures that you do not have to sell your investments now at a loss and can instead hold onto your investments and sell them at a later time thereby providing you with greater flexibility.

As part of our ongoing commitment to our clients, we have included some general information below related to in-kind withdrawals and their tax implications that may help as you consider your options regarding your current and future annual RRIF payments.

An in-kind RRIF withdrawal may be suitable if you:

  • Have not yet made the minimum required withdrawal from your RRIF. If you have already taken your minimum withdrawal for the year you are not required to make any further withdrawals.

  • Do not need the cash from your RRIF to fund immediate expenses.

  • Do not want or need to sell any securities.

  • Have a non-registered account that can hold the securities/investments withdrawn from your RRIF. If you do not have a non-registered account, one will have to be set up for you.


General tax implications of an in-kind withdrawal:

  • The aggregate amount of any cash withdrawals and the market value of investments withdrawn in-kind from your RRIF must be at least equal to the minimum withdrawal required from the RRIF.

  • The market value of the investments withdrawn will be taxable (you will receive a T4RIF slip for the value of the investments withdrawn in-kind).

  • The amount withdrawn will be taxable, even though you have not received cash.

  • As long as only the minimum amount is withdrawn from your RRIF, no withholding taxes will be charged.

  • The tax cost base for an investment withdrawn in-kind is the market value at the time of the withdrawal - not the price originally paid for the investment.

  • When the investment is later sold, any increase in the value of the investment after the withdrawal will be considered a taxable capital gain - any subsequent decline in value will be considered a capital loss for tax purposes.