Is a RRIF Halal? Turning Your RRSP into Halal Retirement Income
Assalamu alaikum. As the year winds down, I hear the same question from many families: "My father turns 71 this year. What happens to his RRSP, and can he keep it halal?" Let me walk you through it.
What happens to an RRSP at 71
An RRSP cannot stay an RRSP forever. By December 31 of the year you turn 71, you need to decide what happens to it. The Canada Revenue Agency outlines three main options:
- Transfer it to a RRIF (Registered Retirement Income Fund)
- Use it to buy an annuity
- Withdraw it, which means the amount is added to your income for that year
You do not have to wait until 71. You can convert to a RRIF earlier if you would like income sooner.
Is the RRIF itself halal?
A RRIF is simply a container, just like a TFSA or RRSP. What makes it halal or not is what you hold inside it. Many conventional retirement income plans lean heavily on GICs, bonds and other interest based products, which raises concerns about riba. Conventional annuities are generally backed by interest bearing investments as well.
When the investments inside your RRIF are Shariah screened, the account works the same way for you while avoiding interest based holdings and prohibited industries such as alcohol, gambling and conventional banking.
How RRIF payments work
- A yearly minimum payment begins the year after you open the RRIF
- The minimum is based on your age at the start of each year
- You can base it on your spouse's or common law partner's age instead, but you must choose this when you open the RRIF, and it cannot be changed later
- A direct transfer from your RRSP to a RRIF is not taxed at the time of transfer; the payments you receive are reported as income
For tax advice specific to your situation, I work alongside your accountant.
How I help
I offer a Shariah compliant mutual fund portfolio from Mackenzie, certified by Ratings Intelligence. It can be held in a RRIF, as well as in a TFSA, RRSP, FHSA, RESP, RDSP, non registered account, corporate account or IPP. That means you can move from saving to drawing income without leaving your values behind.
For personal religious questions, such as how zakat applies to your RRIF, please speak with a scholar you trust.
Let's talk before December 31
If you or a parent is turning 71, or you simply want your retirement income to reflect your faith, I would be happy to help. Book a complimentary Financial Needs Analysis with me and we will look at your options together.