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Before making a major financial decision you
should consult a qualified professional.
Registered retirement savings plans
(RRSPs) must be cashed out (taxable) or converted to RRIFs (tax-free) no later than the year in which
the RRSP holder turns 71. The 2007 Federal budget revised
this age from 69 to 71, for both RRSPs and RPPs. See the article on conversion
of RRSP to RRIF, on the RRSPs/RRIFs page, for special rules for
RRIF holders who turn 70 or 71 in 2007.
Income earned in a RRIF is not taxable while it remains in
the RRSP, including
interest, dividends, and capital gains, so can grow tax free until the
money is withdrawn. There may be tax withheld from dividends received
from some foreign investments, but not from dividends received from US
corporations. See our article on which
investments should be held inside vs outside an registered account.
Once the RRSP is converted to
a RRIF, the holder must withdraw a minimum amount
each year, except in the year that the RRIF is established. These
withdrawals are taxable to the holder. The
withdrawals qualify as pension income for purposes
of the pension income tax credit for taxpayers 65 and over.
Starting in 2007 the withdrawals may be split with a spouse (pension
It may be beneficial to convert at least a
portion of an RRSP to a RRIF when the taxpayer
turns 65, in order to generate income eligible for
the pension tax credit, and for pension splitting.
The holder of a self-directed RRIF controls what
investments are held in the account.
calculator can be used to calculate your minimum RRIF withdrawals, fixed annual withdrawals adjusted for
inflation, or withdrawals using a fixed number of years, even if you have not yet converted to a RRIF.