What is a common strategy for minimizing tax on RRIF withdrawals?

Withdrawing only the minimum amount required from a Registered Retirement Income Fund (RRIF) is a common strategy for minimizing tax on withdrawals because it allows individuals to manage their taxable income more effectively. Each year, the government requires a minimum withdrawal amount based on factors like age and the balance of the RRIF. By sticking to this minimum, retirees can avoid pushing themselves into a higher tax bracket, which could result in a larger tax bill.

This strategy is particularly useful because it allows for the continued growth of investments within the RRIF, which can provide a greater income stream in the long run while minimizing current taxable income. It’s a key component of tax planning in retirement, allowing individuals to optimize their overall tax situation throughout their retirement years.

Options that involve withdrawing large amounts or making rollover contributions to other accounts can lead to higher tax liabilities in the year of withdrawal or may not be viable depending on the individual's financial strategy and tax situation. Withholding tax at the time of withdrawal is a part of the process, but it does not minimize the total tax owed; the focus should be more on the amount withdrawn rather than the withholding aspect.