Because withdrawals from a RRIF are
eligible for the pension income tax credit, it may be useful to
convert at least a portion of RRSPs to a RRIF in the year in
which the taxpayer turns 65. The amount converted
should be sufficient to allow withdrawals of at least $2,000
per year for 7 years (age 65 to 71 inclusive), until all
RRSPs must be converted to RRIFs. If there is a
spouse, twice as much could be converted to take advantage
of the pension
splitting available. The spouse might also be able to take advantage
of the pension tax credit, depending on
Keep in mind that
administration fees may be charged on a RRIF with a low
See our RRIF calculator
for calculating minimum withdrawals, fixed annual withdrawals adjusted for
inflation, or withdrawals using a fixed number of years.
Tax Tip: Ask your
advisor about converting a
portion of RRSPs into RRIFs at age 65 to take advantage of
the pension income tax credit and pension splitting.
ii. Purchase an annuity with
Annuity payments from an RRSP qualify for the pension
income tax credit for taxpayers 65 and over. An annuity will usually provide a
lower rate of return than investments in securities in a
self-directed RRSP, so a comparison should be done to
determine which method provides the best after-tax return.
Tax Tip: Compare your
options carefully to get the best after-tax return.
Back to Pension Income Tax
Revised: October 22, 2012