Every RRSP has an expiry date. By December 31 of the year you turn 71, the plan has to be closed, and the money has to go somewhere. For most people that somewhere is a Registered Retirement Income Fund, or RRIF. The conversion is routine paperwork, but the decisions around it are not.
The short version: you have three choices, a RRIF, an annuity, or taking it all as cash. Cash is almost always the worst, because the whole balance is taxed in one year. A RRIF keeps the money invested and pays you a required minimum each year, and that minimum is what drives the planning.
Your Three Options at 71
| Option | What happens | Who it suits |
|---|---|---|
| Convert to a RRIF | Money stays invested. You must withdraw a minimum each year, and you can take more. | Most people. It is flexible and keeps control with you. |
| Buy an annuity | You hand the money to an insurer for a guaranteed payment, often for life. | Someone who wants certainty and has little pension income. The money is no longer yours or your estate’s. |
| Withdraw it all | The full balance is added to your income in one year. | Almost no one. A large balance can push you into the top tax bracket and trigger the OAS clawback. |
When You Actually Have to Start Withdrawing
This is where people get confused. You must convert by the end of the year you turn 71, but the first required withdrawal is not until the following year, when you are 72. That means there is no required withdrawal in the year you convert. You can also convert earlier, at any age, if you want to start drawing income sooner.
How the Minimum Is Calculated
The minimum is a percentage of the RRIF’s value on January 1, set by the government and rising with age. If you have a younger spouse, you can choose to use their age, which lowers the required minimum.
| Age | Minimum | On a $400,000 RRIF |
|---|---|---|
| 72 | 5.40% | $21,600 |
| 75 | 5.82% | $23,280 |
| 80 | 6.82% | $27,280 |
| 85 | 8.51% | $34,040 |
| 90 | 11.92% | $47,680 |
| 95 and over | 20.00% | $80,000 |
You can always withdraw more than the minimum. Tax is not withheld on the minimum, but it is on anything above it. Remember that the minimum is a floor: a 72-year-old with $400,000 who spends less than $21,600 will still have to take it, and pay tax on it.
Where the Tax Planning Is
- Pension income splitting. From age 65, RRIF income qualifies for splitting with a spouse, and for the pension income credit. For a couple with unequal incomes, that can be worth thousands a year.
- OAS clawback. The minimum is forced income. With CPP, OAS and a workplace pension on top, it can push you over the clawback threshold, which is in the mid-$90,000s in 2026. This is why many people are better off drawing the RRSP down earlier, in their 60s, rather than waiting.
- Converting early on purpose. If you retire at 62 and have low income until CPP and OAS start, a partial early conversion lets you fill low tax brackets deliberately.
Mistakes to Avoid
- Missing the deadline. If you do nothing, the CRA treats the RRSP as fully withdrawn on December 31, and the entire balance is taxed in that year.
- Selling investments to convert. Most institutions can transfer your holdings into the RRIF as they are, called an in-kind transfer. Selling at the wrong time to convert is unnecessary.
- Not naming a successor. If your spouse is named as the successor annuitant, the RRIF simply continues in their name. If they are named only as beneficiary, the money can still roll over tax-free, but the account is closed and a new one has to be opened, which means more paperwork and a delay.
- Forgetting the estate. A RRIF still has to be taxed at death. A surviving spouse can roll it over tax-free, but for a single person or the second spouse, the full balance lands on the final return.
Where to Start
The conversion is simple. The planning behind it is not, and it works best when it starts years before 71, not in the year you are forced to decide. If you are within ten years of that date, the choices you make now about how and when to draw the RRSP will decide how much of it the tax system keeps.
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