What happens to my RRSP when I turn 71?
By Krystian Urbanski, CIM, CIWM, FCSI, PFP · Chief Retirement Strategist, RetirementIQUpdated · 3 min read
Your RRSP must be wound up by December 31 of the year you turn 71. You can convert it to a RRIF, buy an annuity, cash it out, or combine these. Most people choose a RRIF, which keeps the money invested and tax-sheltered but requires a minimum taxable withdrawal every year starting the following year.
Your three options
- Convert to a RRIF. Your investments move across as they are, stay tax-sheltered and keep growing. You must withdraw at least a minimum each year from the year after you open it.
- Buy an annuity. An insurance company pays you guaranteed income for life or a set term. Simple and predictable, but usually irreversible.
- Cash it out. The full amount is taxable in one year, often at the top rate, and can wipe out your OAS. This is rarely the right choice for a sizeable RRSP.
If you do nothing, your financial institution will usually convert it to a RRIF for you, but with default choices you may not want.
You do not have to wait until 71
You can convert all or part of an RRSP to a RRIF at any age. Converting some at 65 lets you claim the federal pension income credit (on up to $2,000 a year) and split RRIF income with your spouse. Withdrawing earlier in lower-income years can also reduce the size of future minimums and the OAS clawback.
Use the younger spouse’s age
When you open a RRIF you can base the minimum withdrawals on your spouse’s or common-law partner’s age. If they are younger, your required minimums are lower, which keeps more money growing tax-deferred. You must choose this before the first payment, and you cannot change it later.
Joan turns 71 this year with $600,000 in her RRSP and a husband who will be 66 on January 1 next year. She converts it to a RRIF in November, keeping the same investments, and elects to use her husband’s age. Assuming the value stays at $600,000, her first minimum next year is $25,000 (1 ÷ 24) instead of $31,680 (5.28%).
What to do next
- Decide between RRIF, annuity or a mix before the autumn of the year you turn 71.
- Consider converting part of your RRSP at 65 to use the pension credit and splitting.
- Elect your spouse’s age if they are younger.
- Name your spouse as successor annuitant on the RRIF.
Free tools that help
Related questions
Can I still contribute to an RRSP after 71?
Not to your own RRSP. But if you have contribution room and a spouse aged 71 or younger, you can contribute to a spousal RRSP until the end of the year they turn 71.
Is converting an RRSP to a RRIF taxable?
No. Moving your RRSP into a RRIF is not taxable. Only the withdrawals from the RRIF are taxed, as income.
Do I have to sell my investments to convert?
No. Investments can usually be transferred in kind from the RRSP to the RRIF without selling them.
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