Converting Your RRSP to a RRIF

The deadline: December 31 of the year you turn 71

By the end of the year you turn 71, your RRSP has to be converted into a Registered Retirement Income Fund (RRIF), used to buy an annuity, or withdrawn. If nothing is done, the whole balance can be treated as taxable income for that year, so most institutions contact you well before the deadline.

Your three options

1. Convert to a RRIF. Your savings stay invested and tax-sheltered, and you take at least a minimum amount out each year. This is the most common choice.
2. Buy an annuity. An insurance company pays you a set income for life or for a fixed term. It removes investment and longevity risk, but once purchased, the money generally can't be withdrawn.
3. Withdraw it as cash. The full amount is taxable income in the year you take it, which for most people means a large tax bill. It's rarely the best choice for a sizeable RRSP.

You don't have to pick just one. A common approach is to use part of your savings for an annuity that covers core expenses alongside CPP and OAS, and keep the rest in a RRIF for flexibility.

Converting before 71

You can open a RRIF at any age. From 65, RRIF payments count as eligible pension income. That means they qualify for the federal pension income credit on up to $2,000 a year, plus a smaller Ontario credit, and can be split with a spouse on your tax returns. Lump-sum RRSP withdrawals don't qualify. For some retirees, converting part of an RRSP at 65 is worth a look.

RRIF minimum withdrawals

There's no minimum in the year you open the RRIF. From the next year on, you have to withdraw at least a set percentage of the balance on January 1. Before 71, the percentage is 1 divided by (90 minus your age). From 71, it follows a federal table. You can choose to base it on a younger spouse's age when you set up the RRIF, which lowers the minimum.

The dollar column assumes the same $500,000 balance at each age, for comparison only. Your actual minimum is based on your own balance each January 1. The minimums are set by the federal government and have been debated recently, so check the current rules before each year's withdrawals.

Withholding tax

Nothing is withheld from the minimum withdrawal. On amounts above the minimum, the institution withholds tax on the excess: 10% if it's $5,000 or less, 20% if it's over $5,000 and up to $15,000, and 30% if it's over $15,000. Withholding is only a prepayment. Your actual tax is settled when you file your return, and many retirees owe more because RRIF income stacks on top of CPP, OAS and any pension.

RRIF withdrawals and the OAS clawback

Old Age Security is reduced by 15% of your net income above a threshold, which is $95,323 for the 2026 income year. Large RRIF withdrawals in your 70s and 80s can push you over it. Ways to plan around it, worked out with your accountant, include drawing more from your RRSP or RRIF in lower-income years before 71, splitting eligible pension income with a spouse, basing minimums on a younger spouse's age, and moving withdrawals you don't need into a TFSA.

What to hold inside a RRIF

A RRIF can hold the same kinds of investments as an RRSP. We offer two that suit the income years:

• Segregated funds. Depending on the contract, 75% to 100% of deposits are protected at death or maturity. Naming a successor annuitant or beneficiary lets the plan pass outside your estate. Fees are higher than for mutual funds.
• Annuities. Registered savings can buy a set income for life or a fixed term. Rates depend on your age and interest rates when you buy, and the money generally can't be withdrawn afterwards.

See segregated funds and annuities for more.

What happens to a RRIF at death

If your spouse is named as successor annuitant or beneficiary, the RRIF can generally pass to them without immediate tax. Otherwise, the whole remaining balance is usually taxed as income on your final return, which can push much of it into the top tax bracket. That's one of the main reasons people over 60 look at permanent life insurance: to pay that tax so the full value reaches their family.

Business owners with an Individual Pension Plan

An Individual Pension Plan follows pension rules rather than RRIF rules, with minimum withdrawals starting in the year you turn 72. If you have both an IPP and RRSP savings, plan the two together.