RRIF Conversion and Minimum Withdrawals for Cross-Border Filers

Every RRSP must be converted to a Registered Retirement Income Fund (RRIF) or used to purchase an annuity by December 31 of the year the holder turns 71 (ITA 146(2)(b.4)). For cross-border filers who have moved to the US, the RRIF conversion triggers a new set of rules: RRIF payments are subject to 25% Canadian Part XIII withholding, the treaty cuts that to 15% for periodic payments (for a RRIF, payments up to the greater of twice the minimum or 10% of the plan’s value at the start of the year), anything above that line is withheld at 25%, and the US taxes the entire withdrawal as ordinary income. Getting the mechanics right can save thousands in unnecessary withholding and allow the RRIF to stretch further.

When must I convert?

The RRSP must be collapsed, annuitized, or converted to a RRIF by December 31 of the year the holder turns 71. If you do nothing, the financial institution collapses the RRSP and pays out the full balance as a lump sum, subject to 25% Part XIII withholding (no treaty reduction on lump sums).

• Converting before 71. You can convert to a RRIF at any age. Some cross-border filers convert early to begin tax-efficient withdrawals while their US income is low (between jobs, semi-retirement, early retirement). The minimum withdrawal in early years is low (4.00% at age 65, increasing each year), so even withdrawals of twice the minimum stay inside the 15% treaty rate while preserving the bulk of the account for growth.
• Non-resident conversion. You can convert an RRSP to a RRIF from the US. The financial institution handles the conversion internally; no funds leave the account. The conversion itself is not a taxable event in either country.

How is the RRIF minimum calculated?

The RRIF minimum withdrawal is calculated as a percentage of the account balance on January 1 of each year. The percentage increases with age:

Age	Minimum withdrawal (% of Jan 1 balance)
65	4.00%
70	5.00%
71	5.28%
72	5.40%
75	5.82%
80	6.82%
85	8.51%
90	11.92%
94	18.79%
95+	20.00%

For ages under 71 (your age on January 1), the formula is 1/(90 minus age). From 71 on, the percentages are prescribed in the regulations. You can also base the minimum on a younger spouse’s age, which lowers the minimum and stretches the account.

How is the minimum taxed for non-residents?

Canadian side. RRIF payments to non-residents are subject to 25% Part XIII tax under ITA 212(1)(q), minimums included. For a US resident, the treaty caps the tax on periodic pension payments at 15% (Article XVIII(2)(a)). Under the Income Tax Conventions Interpretation Act, RRIF payments in a year count as periodic up to the greater of twice the minimum amount or 10% of the fund’s value at the beginning of the year; payments above that are withheld at 25%.

The financial institution calculates the minimum and the periodic limit and withholds 15% once your NR301 is on file (25% without it). If your withdrawals in the year go past the periodic limit, the excess is withheld at 25%.

• US side. The US taxes RRIF withdrawals as ordinary income (IRC 408A does not apply; the RRIF is not a US plan). The treaty election under Article XVIII(7) (made through annual reporting on Form 8891, now automatic per Rev. Proc. 2014-55) defers US tax on RRIF income until it is actually withdrawn. When withdrawn, the full amount is taxable as ordinary income.
• The FTC for the Canadian tax withheld is claimed on Form 1116.

Should I use the Section 217 election?

The Section 217 election allows a non-resident to file a Canadian return and calculate tax on RRIF income at graduated rates instead of the flat Part XIII rate. This can be beneficial when:

• Your total Canadian-source income is low enough that the graduated rate is below 15% (the treaty rate on periodic payments)
• You have Canadian deductions or credits (medical expenses, charitable donations) that reduce the tax

For non-residents with only RRIF income and no other Canadian-source income, the Section 217 election can produce a lower effective Canadian rate than the 15% treaty rate on periodic withdrawals. Even if you are withdrawing only the minimum, the 15% is still withheld, so the election can pay off whenever your graduated Canadian rate on the total would come in under 15%.

The Section 217 election is most useful when your graduated rate on the total withdrawal would be lower than the flat 15% (or 25% on payments above the periodic limit).

What about the spousal age election?

You can elect to base the RRIF minimum on your spouse’s or common-law partner’s age instead of your own. If your spouse is younger, this reduces the minimum percentage, which means:

• Less forced income each year (smaller minimum withdrawal)
• More of the account stays invested and grows tax-deferred
• Lower US taxable income from the RRIF in each year

The election is made when the RRIF is set up and cannot be changed once established. If you converted to a RRIF while still in Canada, the election may have already been made. Check with your financial institution.

What about FBAR and Form 8938 reporting?

The RRIF is a foreign financial account for FBAR purposes and a specified foreign financial asset for Form 8938 purposes. The full balance (not just the withdrawal) is reported on both forms each year.

For the FBAR, the maximum value during the year is reported. For Form 8938, the maximum value during the year is also reported (if the aggregate of all foreign financial assets exceeds the applicable threshold).

What are common RRIF mistakes for cross-border filers?

Taking the lump sum instead of converting. Collapsing the RRSP as a lump sum triggers 25% Part XIII withholding with no treaty reduction, and the full amount is ordinary income on the US return in one year. Converting to a RRIF and taking periodic withdrawals spreads the income over decades and keeps the Canadian withholding at the 15% treaty rate.

Not filing the NR301 or NR5. Without the NR301 or NR5 on file, the financial institution may withhold 25% instead of the treaty rate of 15%. File the form with your RRIF custodian.

• Forgetting the US reporting. The RRIF withdrawal is taxable on the US return even though the treaty deferred the income while it was in the RRIF. The withdrawal triggers ordinary income, and missing it triggers accuracy-related penalties.
• Not using the spousal age election. If your spouse is younger and you do not need the income, the spousal age election reduces forced withdrawals and preserves the account balance.

What should I do next?

If you have an RRSP and have moved (or are about to move) to the US, model the RRIF conversion timeline against your age, income, and US tax bracket. If you are already past 71 and have not converted, act immediately to avoid the lump-sum collapse.

• RRSP lump sum vs periodic RRIF, the withdrawal strategy comparison
• Section 217 election, when graduated rates beat the flat rate
• NR301: treaty-reduced withholding, the form that gets you 15% instead of 25%
• RRSP for non-residents, the account rules after departure
• How to report an NR4 on a US return, where the RRIF income goes on your 1040

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.