Which of the following statements about RRIFs is correct?

A statement regarding Registered Retirement Income Funds (RRIFs) that mandates annual withdrawals is correct. RRIFs are designed to provide retirees with a steady income stream during retirement, and the Canadian government stipulates that a certain minimum amount must be withdrawn annually. This requirement is intended to ensure that the funds within the RRIF are utilized over the account holder's lifetime and not solely left to accumulate indefinitely. The minimum withdrawal amount is calculated based on the age of the holder and the value of the RRIF at the beginning of the year, with percentages increasing as the account holder ages.

The other statements fail for distinct reasons. While there is flexibility concerning withdrawals, it is misleading to suggest that no withdrawals are required until age 75, as annual withdrawals are necessary starting at the time the RRIF is set up. Additionally, comparing RRIFs to Locked-In Retirement Accounts (LIRAs) overlooks the fundamental purpose; RRIFs are for converting retirement savings into income, while LIRAs are intended to hold pension funds that are not yet accessible until retirement age. Lastly, stating that all withdrawals from RRIFs are tax-free is incorrect. Withdrawals from a RRIF are considered taxable income in the year they are withdrawn, meaning they will be