RRIF Withdrawals in Kind: You Have to Withdraw, Not Sell
The letter from your carrier says you have to take money out of your RRIF this year. It is right. What it usually does not say is that RRIF withdrawals in kind exist, that the minimum amount can be paid to you in shares rather than cash, and that nothing in the rules forces you to sell a holding you would rather keep.
That matters most in the year you least want to act, because the minimum is set by the fund’s value on January 1 and a prescribed factor for your age. If the market falls in February, the minimum does not fall with it. Meet it by selling and you have crystallized a bad price on a schedule somebody else set.
Where the minimum comes from
Two inputs decide it: the fair market value of the fund’s property on January 1, and the prescribed factor for your age in Income Tax Regulations section 7308(4). The factor is 0.0528 at 71, 0.0540 at 72, 0.0582 at 75 and 0.0682 at 80. Multiply the two and that is the minimum amount for the year.
Take a fund holding $520,000 of property on January 1, with the annuitant age 72 on that date. The factor is 0.0540, so the minimum amount is $28,080.00. Every example in this article is an Ontario resident at 2026 rates, and the figures are illustrative arithmetic on the stated balances rather than a projection of anyone’s actual plan.
Your own answer turns entirely on your January 1 value and your age on that date, so reading across from a $520,000 example is the wrong way to plan. Put those two inputs into our RRIF minimum withdrawal calculator first.
You still pay tax on the minimum. ITA 146.3(5) includes in income all amounts received in the year out of or under a registered retirement income fund. On the $28,080.00 inclusion, at 2026 federal and Ontario rates, data as of September 21, 2026:
| Other income | Tax on the inclusion | Average rate on it |
|---|---|---|
| $25,000 | $5,349.24 | 19.05% |
| $40,000 | $6,552.19 | 23.33% |
| $55,000 | $8,096.72 | 28.83% |
| $75,000 | $8,475.39 | 30.18% |
| $110,000 | $11,729.24 | 41.77% |
The part almost nobody uses
The minimum can be paid in property. CRA says so in Information Circular IC78-18R7, Registered Retirement Income Funds, at paragraph 5: “The minimum amount may be paid in a form other than cash as the Act does not prohibit an in-kind payment of the minimum amount.” That circular carries a date modified of June 5, 2025.
And no tax comes off it. CRA’s instructions for the T4RIF slip, box 28, are one line: “Do not withhold income tax from the minimum amount.”
The reason sits in the regulations rather than the guidance. Income Tax Regulations section 103 is the withholding machinery, and paragraph 103(6)(d.1) treats a RRIF payment as a lump sum payment “other than a payment to the extent that it is in respect of the minimum amount”. Carve the minimum out of that definition and the withholding table never reaches it.
So the annuitant moves $28,080.00 of shares out of the RRIF and into a non-registered account. Withholding is $0.00. Holdings that must be sold: $0.00. The same shares arrive in the same quantity, and the transaction is a change of address rather than a trade.
Above the minimum, the arithmetic turns
Push past the minimum and the carve-out stops protecting you. The excess is a lump sum payment. CRA’s T4RIF instructions say that “You have to withhold tax from the excess amount (amount reported in box 24)”, and the rates in Regulation 103(4) apply. Outside Quebec, per CRA’s page on tax rates on withdrawals, data as of September 21, 2026:
| Lump sum payment | Outside Quebec | Quebec (federal portion) |
|---|---|---|
| Up to $5,000 | 10% | 5% |
| $5,001 to $15,000 | 20% | 10% |
| Over $15,000 | 30% | 15% |
Quebec residents also face provincial withholding through Revenu Quebec on top of that federal portion. And CRA is explicit that what is withheld is a deposit rather than a settlement: “The tax that was withheld may not always be enough to account for the tax you owe at your tax bracket.”
Now the problem. Tax cannot be withheld from a share certificate. If the plan owes withholding it needs cash, and if no cash is sitting in the account, something gets sold. That is where “I do not want to sell” collides with the rules.
The gross-up loop
Say the same annuitant wants $60,000.00 of shares out of the RRIF this year, not just the $28,080.00 minimum.
The excess over the minimum is $31,920.00. That is over $15,000, so the Regulation 103(4) rate is 30% and the withholding comes to $9,576.00. If the annuitant writes a cheque for that $9,576.00 from a chequing account, the story ends there. All $60,000.00 of shares move out, nothing inside the plan is sold, and the tax is paid with outside money.
Most people do not do that. They tell the carrier to take the withholding out of the plan, and that is where it starts to chase its own tail, because the cash used to pay the withholding is itself part of the withdrawal.
Sell $9,576.00 of shares to cover the tax and the total leaving the plan is no longer $60,000.00. It is the $60,000.00 of shares plus that cash. A bigger total means a bigger excess over the minimum, and 30% of a bigger excess is more than $9,576.00, which means selling more, which enlarges the total again, which enlarges the withholding again. Done by hand, the loop never lands.
The way out is to solve it in one step. The withholding W has to equal 30% of the amount by which the total withdrawal T exceeds the minimum, and T less W has to leave $60,000.00 of shares in the annuitant’s hands. Solve W = 30% x (T minus the minimum) and it settles at a total withdrawal of $73,680.00, an excess of $45,600.00, and withholding of $13,680.00. Check it both ways: 30% of $45,600.00 is $13,680.00, and $73,680.00 less $13,680.00 leaves the $60,000.00 of shares that were the point of the exercise.
Two consequences, and both of them surprise people.
First, the holdings that actually have to be sold are $13,680.00, not the $9,576.00 the first calculation suggested. Funding the tax from inside the plan means selling more stock than the headline withholding figure implies.
Second, and worse, the income inclusion for the year is $73,680.00, not the $60,000.00 that was requested. That is 22.80% more income than intended, reported on the slip and stacked on top of every other dollar earned that year. The annuitant asked for $60,000.00 of stock and ended up with a $73,680.00 line on the return.
None of this happens at or below the minimum, where the withholding is zero and the loop never starts.
An RRSP is not a RRIF
If the account is still an RRSP there is no minimum and therefore no carve-out. Regulation 103(6)(c) does the same job for RRSPs that 103(6)(d.1) does for RRIFs, except that it has no equivalent exception: every payment out of an RRSP in the annuitant’s lifetime is a lump sum payment, other than a periodic annuity payment. ITA 146(8) brings it into income.
| Shares moved out in kind | RRIF | RRSP |
|---|---|---|
| $28,080.00, withholding funded from outside | $0.00 withheld | $8,424.00 withheld |
| $28,080.00, withholding funded from the plan | $0.00 sold | $12,034.29 sold, total withdrawal $40,114.29 |
| $60,000.00, withholding funded from outside | $9,576.00 withheld | $18,000.00 withheld |
| $60,000.00, withholding funded from the plan | $13,680.00 sold, total withdrawal $73,680.00 | $25,714.29 sold, total withdrawal $85,714.29 |
Read the second row on its own. A RRIF moves $28,080.00 of shares out with a forced sale of $0.00. The identical $28,080.00 out of an RRSP forces a sale of $12,034.29 once the withholding comes from the plan.
The price you book matters, and in a RRIF it matters twice
When shares leave a registered plan somebody assigns them a value, and that value is not a formality. ITA 146.3(4) provides that where a RRIF trust disposes of property for less than fair market value, two times the difference is included in the annuitant’s income. IC78-18R7 restates it at paragraph 68: where a RRIF trust “disposes of property for a consideration less than the FMV at that time or for no consideration, the annuitant of the RRIF at that time must include twice the difference between the FMV and the consideration”. The RRSP equivalent, ITA 146(9), charges the difference once, not twice.
Suppose $28,080.00 of shares are booked out at a price $2,080.00 below fair market value, on a stale quote or a thinly traded name. The RRIF adds 2 x $2,080.00, or $4,160.00, to income. The RRSP adds $2,080.00. The extra tax, on top of the tax on the $28,080.00 itself:
| Other income | RRIF | RRSP | Difference |
|---|---|---|---|
| $25,000 | $929.79 | $448.27 | $481.52 |
| $40,000 | $1,233.44 | $616.72 | $616.72 |
| $55,000 | $1,233.44 | $616.72 | $616.72 |
| $75,000 | $1,309.57 | $654.78 | $654.78 |
| $110,000 | $1,805.84 | $902.92 | $902.92 |
A small valuation error, a doubled penalty. Ask the carrier what price they used and on what date, and keep the answer in writing.
What the shares cost you once they are outside the plan
Here the published guidance is thin, and it is better to say so than to guess. The amount that lands on your T4RIF or T4RSP is an income inclusion. It is not a cost base, and the slip will not tell you what the shares cost you. ITA 52(1) adds to the cost of property an amount in respect of the property’s value that was included in computing the taxpayer’s income for a taxation year, but 52(1)(c) carves out property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust. IC78-18R7 does not address the annuitant’s cost of property paid out in kind at all.
So do not assume the figure on the slip is your cost base on the way out. Record the fair market value of the shares on the day they left the plan, keep the carrier’s written confirmation of that value, and confirm the treatment with the carrier or a tax professional before you rely on it.
Whatever number you settle on is the one you will report against for years, because cost base is what decides every future tax bill on shares now sitting in a taxable account. Our guide to adjusted cost base sets out how that figure is tracked and why it moves.
What paying in kind does not change
Paying in shares changes what leaves the account. It does not change the tax on what left. ITA 146.3(5) and ITA 146(8) include the amount received in income either way, so your bracket sees the same figure, the OAS recovery tax sees the same figure, and the slip reports the same figure. The benefit is narrower and more useful than a tax saving: you satisfy the withdrawal without realizing a price you did not choose, and the holding keeps compounding outside the plan instead of being replaced by cash.
One more thing worth knowing first, because the reverse trip runs on entirely different rules. When you are moving shares the other way, into a TFSA or RRSP, the transfer is treated as a deemed sale in which a gain is taxable and a loss is denied.
If you take one thing from the arithmetic above, make it this. At or below the minimum, a RRIF lets you move the shares themselves and sell nothing. Above it, every dollar of withholding funded from inside the plan pulls more out than you asked for.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions.
