RRIF or Annuity? Comparing Flexible and Guaranteed Income

Your RRSP is a registered retirement savings plan, and it can't stay one forever. The year of your 71st birthday is its last, and by that December 31 it has to become a RRIF, an annuity or cash. Two of those three keep it sheltered. One is a RRIF. That's a registered retirement income fund, and it keeps the money yours and invested, but it makes you take a set minimum out every year. A life annuity hands the money to an insurance company, and in return you get a payment that keeps arriving for life, however long yours runs. Neither one is better for everyone. Your RRIF gives you room to move and leaves whatever's left to your estate, and it can run out. Your annuity can't run out, and you can't get the money back. If you go that way, you'd most likely put part of your savings into the annuity, enough to cover what you can't cut, and leave the rest in a RRIF. A RRIF can always become an annuity later. It never goes the other direction.

Key takeaways

• Your RRIF stays your money. You're made to withdraw a minimum each year, 4% at 65 and 5.28% at 71, and the percentage keeps rising as you age. You can always take more, never less.
• A life annuity pays you one fixed amount, month after month, for life. The payment is fixed on the day you buy, and once you've signed you can't change it or get the money back.
• Tax doesn't settle it. Both are fully taxable, and from 65 both count as pension income, so you get the pension income amount with either one and you can split either one with your spouse or partner.
• You can move RRIF money into an annuity whenever you like, and you can never move annuity money back. That's why people who want a guarantee usually buy it with part of their savings, not all of it.

Two ways out of an RRSP, and only one can be undone

Once you're in the year of your 71st birthday, your RRSP has to go one of three ways. You can cash it out, and all of it is income that year. You can put it in a RRIF. You can turn it into an annuity.¹ Neither of the sheltered moves costs you tax at the time. Your RRSP issuer holds nothing back on a transfer to a RRIF, and nothing back on money that buys an annuity.¹

You don't have to pick just one. You can have several RRIFs,² and you can put part of your money into an annuity and the rest into a RRIF. You can also wait. Money sitting in a RRIF can buy an annuity at any point, so if interest rates are low on the day you'd otherwise have to decide, you can park the money in a RRIF and buy later, when a quote looks better.³

What you can't do is go back. Once you've signed for an annuity, you can't trade it for a different kind and you can't get the lump sum out again. Some contracts give you a cooling-off period, and cancelling after payments have started usually costs you a fee, often a share of your original deposit.⁴

What each one promises you

Your RRIF is still your account. You pick what it's invested in, the balance is yours, and the Canada Revenue Agency sets one rule about what comes out. Each year you're required to withdraw at least a minimum, worked out from your age when that year began, and you can take more but never less. The payout is meant to last as long as you do.⁵ Nothing guarantees that it will. Your balance drops when markets drop, and if you draw on it hard it can be gone while you still need it.

When you pass away, whatever's left in your RRIF is yours to leave. Its full value is counted as your income on your final tax return, taxed once, and the rest goes to whoever you named. If you named your spouse or partner as successor annuitant, nothing is counted at all and the RRIF simply carries on in their name.⁶

A life annuity is a contract with a life insurance company. You hand over a lump sum, and in return the company sends you a fixed amount for life, or for a set term if you buy a term-certain one.¹ Your payment is priced on the day you buy, from your age, your health, your sex, how much you put in, the options you add, and the interest rate that day.⁴ If you're a woman you'll be quoted less than a man your age, because you're expected to live longer.³

In most cases the payments end with you, and your estate gets nothing from the contract. You can add an option so your spouse or partner keeps being paid after you're gone, called joint and survivor, or a guarantee option so your estate gets something if you pass away within a set period, and every option you add shrinks the payment.⁴ If your insurer is a member of Assuris, the not-for-profit that protects Canadian life-insurance policyholders, and it failed, you would retain up to $5,000 a month or 90% of your promised monthly benefit, whichever is higher.⁷ You don't apply for that. It comes with the membership, and the list of members is public, so you can check yours.⁸

A minimum that rises every year, or a payment that never changes

With a RRIF, the minimum you're made to take isn't a fixed dollar figure. It's a slice of whatever the account holds, and that slice grows as you age. Under 71 the factor is one over however many years you're short of 90, so at 65 that's one over 25, which is 4%. At 71 it's 5.28%. By 80 you're past 6.8%, by 90 you're near 12%, and from 95 on you take out a fifth of whatever's left, every year.⁹ Opening year, nothing has to come out. The first minimum lands the year after.⁵

At 65, few people picture that climb. In your late eighties you're pulling out more than a tenth of what's left each year, needed or not, and paying tax on it. The calculator shows what your own balance would force out at every age. Run your own numbers. Every age from 71 on appears in the guide to RRIF minimums.

An annuity runs the other way. The payment you're quoted is the payment you get, and it keeps coming for life. It doesn't rise because you've aged and it doesn't fall because markets did. It doesn't rise with prices either, unless you buy an indexing option, which lifts the payment each year to keep pace with inflation and costs you part of the payment to have.³ One more rule applies if you're using registered money for a term-certain annuity. The term has to run until you're 90, so you can't buy a ten-year one at 71 with your RRSP.³

The years your savings have to cover

More years than most people plan for. On the current life tables, the average for someone who's 65 is about 21 more years, roughly 19 for a man and 22 for a woman.¹⁰ The spread matters more than the average. Of every 100 people alive at 65, about 86 are still here at 75, about 68 at 82, and about 36 at 90.¹⁰ Those are shares of a whole population, not odds for you. You don't know which group you're in, and neither does anyone else, which is the entire reason this product exists.

For an annuity, that spread is the entire point. Take one illustration. Put $100,000 into a life annuity at 65 and the payment is about $500 a month. At that rate your $100,000 has come back to you by around 82, and every payment after that is money the same $100,000 in your own account could never have paid you.⁴ It's an illustration, not a quote. Your payment depends on the day you buy and on you.

Where does the extra come from? Each payment you get is made of three things. Some is interest the insurer earned on your money. Some is your own capital, returned to you a bit at a time. And some is capital from people in the same pool who didn't live as long as expected, shared out among those who lived longer.⁴ That pooling is how a life annuity pays out more per dollar than you could draw from the same money yourself, and it's also the trade you're making. If you're gone at 72, the pool keeps what you didn't collect, unless you paid for a guarantee option. If you live to 95, the pool has been paying you for thirteen years past the point where your own money would have run out.

Does tax favour one over the other?

No. Both are fully taxable, because the money went in before tax. Every dollar paid out of your RRIF counts as income when it's paid to you,² and so is every annuity payment bought with RRSP money.¹ From 65 on, both count as pension income. That earns you the pension income amount, which is a federal credit calculated on up to $2,000 of that income each year. It also lets you move up to half of the income itself onto your spouse's or partner's return, if that lowers the bill between you.¹¹ Under 65, neither one counts, unless it came to you on the passing of your spouse or partner, or as split-pension income.¹¹

They differ in what comes off before the money lands in your account. Nothing is withheld on a RRIF minimum.¹² On anything over the minimum, your carrier holds tax back first. The rates are 10% on amounts up to $5,000, 20% on amounts exceeding $5,000 up to and including $15,000, and 30% on amounts over $15,000. In Quebec those federal rates are 5%, 10% and 15%. Quebec then withholds its own provincial tax as well.¹³ With an annuity, any tax the insurer took off shows in box 30 of your T4RSP slip.¹ Either way, withholding isn't your tax bill. It's a payment toward it, and it may not cover what you owe.¹³

Both are taxable income,²¹ so both count toward the line where your Old Age Security starts being clawed back, and neither one helps you there. The clawback guide has the threshold and the arithmetic.

What tips it one way or the other

Since tax is a draw, your own circumstances decide it, and a few of them swing it a long way.

• What you already have guaranteed. Canada Pension Plan, Old Age Security and a workplace pension all arrive for life. If they cover your essentials, you already own the guarantee an annuity sells. If they don't, the gap between them and your essentials is the amount you'd think about annuitizing. Your retirement income plan is where you add those up.
• Your health, and your family's ages. An insurer prices your quote on your age and health, and some will pay you more if you have a serious medical condition.³ If your parents lived into their nineties, a payment that can't stop is worth more to you. If your health is poor, a RRIF leaves the money to your family instead of to the pool.
• A spouse or partner. The joint-and-survivor add-on keeps the annuity paying them after you pass away, and it lowers your payment.⁴ Naming them successor annuitant on your RRIF costs nothing and hands them the entire account.⁶
• What you want to leave behind. Your RRIF leaves whatever is in it. A plain life annuity leaves nothing, and every guarantee you buy to change that comes out of your monthly payment.⁴
• The interest rate on the day you buy. Higher rates buy you a bigger payment for the same money. You don't have to buy at 71. You can move the money into a RRIF, wait, and buy from the RRIF when rates suit you.³
• How you'd handle a bad year. A RRIF makes you sell something to meet the minimum even when markets are down. An annuity doesn't care what markets did. If a sharp drop in your first year of retirement would keep you up at night, that matters more than the arithmetic. The guide to sequence risk shows why the first years count double.

What an annuity would pay you is a quote only an insurer can give you, and it changes with the day and the company. What a RRIF would make you take out is arithmetic, and the calculator does it for the balance and age you type in.

$300,000, three ways

Say you're 65 and you've got $300,000 of RRSP money to turn into income. Here is what a full year looks like three ways, once each one is running.

	All in a RRIF	$100,000 annuity, $200,000 RRIF	All in an annuity
Guaranteed for life	$0	$6,000 a year	About $18,000 a year
The minimum you must take, in a full year	$12,000	$8,000	None, it's all paid to you
Still yours and invested	$288,000	$192,000	$0
Goes to your estate if you pass away at 70	Whatever's left, taxed once	The RRIF balance only	Usually nothing

The middle column shows what the split does for you. About $6,000 a year arrives no matter what, and it always will. Your RRIF still holds $200,000 that's yours, still invested, and still there to leave, and it owes you at least $8,000 in a full year, rising to about $10,560 at 71 and $13,640 at 80 if the balance held steady.⁹ You've bought a guarantee for the spending that can't wait for a good market, and kept everything else flexible.

Your own version starts with one number. It's what a year you can't cut actually costs you, the rent or the property tax, the groceries, the heat. Joanne works that number out with Simon before she decides anything else, and it's the number any guaranteed payment has to cover.

How much of it needs to be guaranteed?

You don't have to choose all or nothing. Keeping some of your money in a RRIF alongside an annuity is a recognized approach,⁴ and it's what most of the people who buy one end up doing. They add up the income already arriving from CPP, from OAS and from any pension, buy an annuity for the slice of their essentials that's still exposed, and keep everything else in a RRIF where it can grow and where their family gets it.

If you have a solid pension from work, you already hold an annuity in all but name, and most people who have one skip buying a second. If you have no pension and the thought of running out keeps you awake, you're the reader most likely to buy more of the guarantee. If your health is poor, or you badly want the money to reach your kids, most people facing that stay with the RRIF. And plenty of people at 71 do neither yet. They open a RRIF, take the minimum, and leave the annuity for a year when rates are better or when they know more about their health. One practical check comes before any of it, because many providers may ask for at least $50,000 to write an annuity, so a small split may not be on offer.⁴ Your own answer turns on which parts of your spending you'd want covered no matter what.

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Common questions

Can I turn my RRIF into an annuity later?+

Yes. You can use the money in your RRIF to buy an annuity at any time, and you'll pay no tax to move it across. If rates are low at 71, you can open the RRIF, take the minimum, and buy your annuity in a later year.

Can I turn an annuity back into a RRIF?+

No. Once you've signed, you can't trade it for a different kind of annuity and you can't get your money back. Some contracts have a short cooling-off period, and cancelling after payments start usually costs a fee.

Can I buy a ten-year annuity with my RRSP money?+

Not at 71. If you buy a term-certain annuity with your RRSP or RRIF money, the term has to run until you're 90. That rule comes with the registered money, so a shorter term isn't on offer.

Is annuity income taxed differently from RRIF income?+

No. Both are fully taxable in the year they're paid to you, and from 65 both count as pension income, so you get the pension income amount either way and you can split either one with your spouse or partner. The difference is only in what's held back before you see it. Nothing comes off your RRIF minimum, while amounts over it have tax withheld at set rates.

Do I have to pick one or the other at 71?+

No. You're allowed more than one RRIF, and you can put part of your RRSP into an annuity and the rest into a RRIF. Splitting it is what most buyers end up doing.

Does either one affect my Old Age Security?+

Both count as income, so whichever you choose it pushes you toward the clawback line the same way. Neither one gives you an edge there. Splitting the income with your spouse or partner from 65 can help, and that'll work with either one.

Sources

1. CRAReceiving income from an RRSP: the three options by the end of the year you turn 71; no tax withheld on a transfer to a RRIF or on money used to buy an annuity; annuities offer a guaranteed income for life or a specified period; annuity payments in T4RSP box 16, tax deducted in box 30. Accessed 2026-09-04.
2. CRARegistered Retirement Income Fund (RRIF): amounts paid out of a RRIF are taxable on receipt; you can have more than one RRIF. Accessed 2026-09-04.
3. OSCGetSmarterAboutMoney, How annuities work: a RRIF can be used to buy an annuity later; term-certain annuities bought with RRSP or RRIF money must extend to age 90; the indexing option; what moves a quote, including sex, age, health and interest rates. Last updated 2025-06-27, accessed 2026-09-04.
4. FCACAnnuities: what each payment is made of; the $100,000 at 65 illustration paying $500 a month and returning the purchase price by about 82; payments usually stop when the holder passes away, with nothing to the estate unless an option is added; what the payment depends on; you can't switch or get your money back, cooling-off periods and cancellation fees; an annuity is not the only option and some money can stay in a RRIF; many providers may ask for $50,000. Accessed 2026-09-04.
5. CRAReceiving income from a RRIF: a yearly minimum starting the year after the RRIF is set up, based on your age at the beginning of each year; you can withdraw more but not less; the payout period is for your entire life; RRIF income and the pension income amount at 65 or older. Accessed 2026-09-04.
6. CRAInformation Sheet RC4178, Death of a RRIF Annuitant, PRPP member, or ALDA Annuitant: the fair market value of the RRIF is treated as received immediately before the holder passes away and is reported on the final return; a spouse or common-law partner named successor annuitant continues the RRIF instead. Accessed 2026-09-04.
7. AssurisPayout annuity: if your insurer fails you retain up to $5,000 a month or 90% of your promised monthly income benefit, whichever is higher. Accessed 2026-09-04.
8. AssurisHow am I protected: protection is automatic for policies with a member life and health insurance company, and the member list is published. Accessed 2026-09-04.
9. CRAChart – Prescribed factors: the 'All other RRIFs' factors used here (71: 0.0528; 75: 0.0582; 80: 0.0682; 85: 0.0851; 90: 0.1192; 95 and older: 0.2000) and the rule for 70 or younger, 1 divided by (90 minus the age). Accessed 2026-09-04.
10. Statistics CanadaTable 13-10-0114-01, Life expectancy and other elements of the complete life table, 2022 to 2024: life expectancy at 65 of 20.85 years (men 19.43, women 22.15); survivors at 65, 75, 82 and 90 of 88,760, 76,628, 60,338 and 31,846, from which the shares are derived. Accessed 2026-09-04.
11. CRAPension income splitting: eligible pension income at 65 or older includes annuity and RRIF payments and RRSP annuity payments; up to 50% may be allocated to a spouse or common-law partner; the pension income amount of up to $2,000. Accessed 2026-09-04.
12. CRARegistered plan administrators, RRSPs and RRIFs, withholding: no withholding is required on minimum amounts. Accessed 2026-09-04.
13. CRATax rates on withdrawals: 10% (5% in Quebec) on amounts up to $5,000, 20% (10% in Quebec) on amounts exceeding $5,000 up to and including $15,000, 30% (15% in Quebec) on amounts over $15,000; provincial tax also withheld in Quebec; the tax withheld may not be enough to cover what you owe. Accessed 2026-09-04.

Educational, not financial advice. Figures verified against primary sources on the date shown.

See it in a story: "Counting What's Already There," where Joanne adds up what a year of her life actually costs. For how an annuity itself is built and priced, see Annuities in Canada, or browse the whole retirement hub.