Convert RRIF to Annuity

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bill2009
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Convert RRIF to Annuity

Post by bill2009 »

Does anyone know whether you can convert all or part of a RRIF to an annuity once it's set up? All the wording i find just describes the choice like it was a one-time thing - either withdraw, convert to a rrif, or buy an annuity.

EDIT: I now know that you can convert a rrif at any age to an annuity - the sending institution will have to do the minimum withdrawal before the transfer. Still not sure about the partial but I'm guessing yes.
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ghariton
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Re: Convert RRIF to Annuity

Post by ghariton »

bill2009 wrote: 27 Aug 2017 17:18 Still not sure about the partial but I'm guessing yes.
Yes.

Splitting one's RRSP between an annuity and a RRIF is generally recommended by financial advisers who take the annuity option seriously. The split between the two will depend on a number of factors, including your attitude toward longevity and other risks.

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Re: Convert RRIF to Annuity

Post by twa2w »

You can convert all or a portion of your RSP into multiple RIF's and or annuities. Or merge multiple rsps into one RIF or annuity.

And once your rsp is converted to a RIF, you can convert a portion to an annuity or multiple annuities at anytime. You can also convert all or a portion of your RIF back to an RSP if you are below the age cutoff for conversion. (as long as sufficient remains in RIF to pay minimum paymemt for the yesr).

Lots of options depending on needs. Some of the flexibility depends on your age of course.
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Re: Convert RRIF to Annuity

Post by bill2009 »

thanks very much for all responses.
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Quebec
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Re: Convert RRIF to Annuity

Post by Quebec »

twa2w wrote: 27 Aug 2017 21:30 And once your rsp is converted to a RIF, you can convert a portion to an annuity or multiple annuities at anytime.
I'm looking for an official source in support of that statement, which also appears in finiki.

I can only find paragraph 50 in IC 78-18R6:
A RRIF annuitant can use Form T2030, Direct Transfer Under Paragraph 60(l)(v), to request a direct transfer of a payment exceeding the minimum amount of the RRIF to a person licensed or otherwise authorized under the laws of Canada or a province to carry on an annuities business in Canada for the purchase of an annuity for the annuitant.
What confuses me is the "payment exceeding the minimum amount of the RRIF" language. Can this be interpreted to mean "A RRIF can be converted to an annuity at any age"? Thanks.
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twa2w
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Re: Convert RRIF to Annuity

Post by twa2w »

You may want to look at this https://www.canada.ca/en/revenue-agency ... perty.html

Applicable section

Excess amounts from a RRIF
Your excess amount is any payment you receive from your RRIF that is above the minimum amount required to be paid out for the year.

These amounts can be transferred directly to your RRSP, RRIF, SPP, or PRPP, or to purchase an annuity.

Note
Amounts cannot be transferred to an RRSP if you were over 71 years old at the end of the tax year.
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Re: Convert RRIF to Annuity

Post by Quebec »

So the minimum RIFF withdrawal for the year is paid in cash, and taxable. Then you use Form T2030 to transfer an "excess amount" to an annuity tax-free. Is that the correct interpretation? Can the full RIFF balance be transferred this way in one operation?
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AltaRed
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Re: Convert RRIF to Annuity

Post by AltaRed »

Quebec wrote: 24 Mar 2018 10:08 So the minimum RIFF withdrawal for the year is paid in cash, and taxable. Then you use Form T2030 to transfer an "excess amount" to an annuity tax-free. Is that the correct interpretation? Can the full RIFF balance be transferred this way in one operation?
I suspect that should be possible. Think about a person about age 75 who wants to revert to an annuity arrangement going forward. There would still be the minimum RIFF withdrawal requirement in the year that the annuity was purchased, but then the balance of the RIFF could be transferred to an annuity which starts to pay out either right away, or perhaps the first month of the following tax year.
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longinvest
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Re: Convert RRIF to Annuity

Post by longinvest »

Quebec wrote: 24 Mar 2018 10:08 Can the full RIFF balance be transferred this way in one operation?
Based on the text you found, I would say no (except in the year the RRIF was set up). And, this actually makes sense.

In the year the RRIF is set up, no minimum withdrawal applies. So, during that year, the full RRIF balance can be transferred into an annuity.

In any later year, if the RRIF has money in it on January 1st, one has to withdraw the minimum amount (which becomes taxable). One knows about it at the start of year and can act on it. During the year, any amount in excess of the minimum withdrawal that was determined on January 1st can be transferred into an annuity.
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AltaRed
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Re: Convert RRIF to Annuity

Post by AltaRed »

I disagree. From IC 78-18R6 there appears to be no restriction on 'excess'
50. A RRIF annuitant can use Form T2030, Direct Transfer Under Paragraph 60(l)(v), to request a direct transfer of a payment exceeding the minimum amount of the RRIF to a person licensed or otherwise authorized under the laws of Canada or a province to carry on an annuities business in Canada for the purchase of an annuity for the annuitant. You must report the minimum amount for the year and the transferred payment on a T4RIF slip. The issuer of the annuity should issue a receipt (see 39) showing the date and amount of the single payment used to purchase the annuity.

51. The annuity that is purchased can be for the life of the annuitant or for the lives jointly of the annuitant and the annuitant's spouse or common-law partner, with or without a guaranteed term. The guaranteed term cannot be more than 90 years minus:

(a) the annuitant's age at the time of purchase; or

(b) the age of the annuitant's spouse or common-law partner at the time of purchase.

The annuity can also be a fixed-term annuity with a term equal to 90 years minus:

(a) the annuitant's age at the time of purchase; or

(b) the age of the annuitant's spouse or common-law partner at the time of purchase.

The annuity has to begin making payments no later than a year after it is purchased. The annuity cannot provide for any payments except:

(a) annual or more frequent periodic payments that are equal to each other or unequal only because of adjustments described in subparagraphs 146(3)(b)(iii) to (v); and

(b) payments in full or partial commutation of the annuity and, when the commutation is partial, annual or more frequent periodic payments after the commutation that are equal to each other or unequal only because of adjustments described in subparagraphs 146(3)(b)(iii) to (v).
IOW, transfer 100% of the excess.

Added Example: RRIF has $500k in it and minimum withdrawal is 5%. Take the the 5% out in cash ($25k) Jan 2nd, and transfer $475k to an annuity provider for the purchase of an annuity.
Last edited by AltaRed on 24 Mar 2018 13:23, edited 1 time in total.
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longinvest
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Re: Convert RRIF to Annuity

Post by longinvest »

AltaRed wrote: 24 Mar 2018 13:19 I disagree. [...]
IOW, transfer 100% of the excess.
How is that different from what I wrote?
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Re: Convert RRIF to Annuity

Post by brucecohen »

FWIW, until the mid-1970s -- I forget the exact year -- a life annuity was the ONLY maturity option for an RRSP. It could be purchased as early as age 65 and had to be purchased by the end of the year in which the RRSP holder turned 71.
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Re: Convert RRIF to Annuity

Post by AltaRed »

longinvest wrote: 24 Mar 2018 13:21
AltaRed wrote: 24 Mar 2018 13:19 I disagree. [...]
IOW, transfer 100% of the excess.
How is that different from what I wrote?
You disagreed with Quebec, who wrote:
So the minimum RIFF withdrawal for the year is paid in cash, and taxable. Then you use Form T2030 to transfer an "excess amount" to an annuity tax-free. Is that the correct interpretation? Can the full RIFF balance be transferred this way in one operation?
What Quebec wrote seems to me to be exactly like the example I provided and what CRA says can be done. Take your minimum in cash and transfer the balance, i.e. 100% of the remainder in one operation to an annuity provider. What am I missing? Or are we simply misinterpreting each other?
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longinvest
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Re: Convert RRIF to Annuity

Post by longinvest »

AltaRed wrote: 24 Mar 2018 14:00
longinvest wrote: 24 Mar 2018 13:21
AltaRed wrote: 24 Mar 2018 13:19 I disagree. [...]
IOW, transfer 100% of the excess.
How is that different from what I wrote?
You disagreed with Quebec, who wrote:
So the minimum RIFF withdrawal for the year is paid in cash, and taxable. Then you use Form T2030 to transfer an "excess amount" to an annuity tax-free. Is that the correct interpretation? Can the full RIFF balance be transferred this way in one operation?
What Quebec wrote seems to me to be exactly like the example I provided and what CRA says can be done. Take your minimum in cash and transfer the balance, i.e. 100% of the remainder in one operation to an annuity provider. What am I missing? Or are we simply misinterpreting each other?
I was more precise:
  1. In the year the RRIF is set up, the entire amount (or less) can be transferred into an annuity. There's no minimum withdrawal.
  2. In any later year, the minimum amount (determined on January 1st) has to be withdrawn. The excess amount (or less) can be transferred into an annuity.
(Actually, I see that I had misread Quebec's question. I shouldn't have written "no" as an answer, but Quebec should probably have asked "Can the full excess RIFF balance be transferred this way in one operation?", as this is clearly what he meant.)
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Re: Convert RRIF to Annuity

Post by Quebec »

Ok, thanks guys. I've linked the CRA documents and this topic in finiki.
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