A $500,000 Registered Retirement Income Fund (RRIF) can force $27,000 onto a retiree’s tax return at age 72, whether the money is needed or not. If the balance remains unchanged, the minimum reaches $34,100 at 80. That makes this retirement nest egg a tax trap, and the CRA keeps opening it wider. With that in mind, let’s look at seven traps worth disarming before they begin taking bites.
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1. Waiting until the age-71 deadline
December 31 of the year a Canadian turns 71 is the deadline to withdraw a Registered Retirement Savings Plan (RRSP), transfer it to a RRIF, or buy an annuity. A direct RRIF transfer doesn’t trigger tax immediately, but taking the cash does. Leaving the decision until the holidays is one festive tradition worth skipping.
2. Choosing the wrong age
An RRIF minimum may be based on a younger spouse’s age, but that choice must appear on the original application and generally can’t be changed. At 72, using the owner’s age requires 5.4%. Using a 65-year-old spouse’s age requires 4%, reducing a $500,000 minimum from $27,000 to $20,000.
3. Confusing no withholding with no tax
RRIF carriers don’t normally withhold income tax from the required minimum. The withdrawal remains taxable and stacks on top of the Canada Pension Plan (CPP), Old Age Security (OAS), pensions, and other income. Spending the entire deposit can turn spring into a rather expensive sequel.
4. Trusting withholding too much
Amounts above the minimum federal withholding rates of 10%, 20%, or 30% outside Quebec. That’s only a tax prepayment, not the final bill. A retiree in a higher marginal bracket may still owe money, while systematic excess withdrawals can be assessed using the total annual request.
5. Crossing the OAS line
The estimated 2026 OAS recovery threshold is $95,323. The repayment equals 15% of net world income above it, so an extra $10,000 over the line can cost $1,500 of OAS in addition to ordinary income tax. RRIF withdrawals, capital gains, and other income therefore need an annual group chat.
6. Missing the pension breaks
Canadians aged 65 or older may claim up to $2,000 through the pension income amount for eligible RRIF income. Couples may also jointly elect to split as much as 50% of eligible pension income using Form T1032. CPP and OAS don’t qualify, and skipping the calculation can waste a lower-income spouse’s tax bracket.
7. Assuming death erases the bill
The CRA generally treats the entire RRIF value as income immediately before death, potentially creating the account’s largest tax bill in one year. A qualifying spouse or common-law partner may receive a tax-deferred transfer, and a properly named successor annuitant can continue the RRIF. Beneficiary forms, wills, and professional advice need to agree before the paperwork becomes someone else’s problem.
Move unneeded cash beyond the RRIF
A withdrawal can’t simply be stuffed back into the RRIF. Retirees with available contribution room could move unneeded after-tax cash inside a TFSA, where future income and withdrawals won’t affect OAS or GIS.
TC Energy (TSX: TRP) offers one possible home for part of that money. Its natural-gas pipelines and Bruce Power interest earn from electricity, liquefied natural gas, and data centre demand. Second-quarter comparable earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to $2.9 billion from $2.6 billion, and management expects 2026 results at the upper end of its guidance range.
At about $88 at writing, the $0.8775 quarterly dividend produces a 3.9% yield. Debt, regulation, construction costs, and weaker project demand remain risks, so neither the dividend nor the share price is guaranteed. TC Energy belongs among diversified Canadian dividend stocks, not in every available chair.
Bottom line
RRIF tax can’t be eliminated, although its timing can often be managed. Making the right elections early, coordinating income every year, and sheltering suitable surplus cash could leave the CRA its share without inviting it back for seconds.
