RRSPs RRIFs and TFSAs -> Conversion of an RRSP to a RRIF
Income earned in a RRIF is not taxable while it remains in the RRIF, including interest, dividends and capital gains, so can grow tax free until the money is withdrawn.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 RRSP.
A Registered Retirement Savings Plan (RRSP) must be converted to a Registered Retirement Income Fund (RRIF) by the end of the year in which the owner turns 71, but can be converted at any time before that. RRIF owners are required to withdraw a minimum amount each year, starting the year after the RRIF is established. Your financial institution will likely send you a notification about the necessary conversion quite a while before year end, and if you don't initiate the conversion by a certain time they will likely start the conversion automatically. This may cause a hiccup with your financial institution if you plan to use the age of a younger spouse to calculate your minimum withdrawals.
There is no minimum age for conversion to a RRIF, but in most cases, there is no advantage gained by converting your RRSP to a RRIF before the year in which you turn 65. However, if you plan to make regular withdrawals from your RRSP before you turn 65, check to see if the fees charged by your financial institution would be less if the RRSP, or a portion of it, was converted to a RRIF. These fees are not tax deductible. RRSP withdrawals are not eligible for pension income splitting or for the pension income tax credit, while RRIF withdrawals are eligible for both, for a taxpayer over 65.
One difference between RRSP withdrawals and RRIF withdrawals is that there is no withholding tax deducted from RRIF minimum withdrawals.
When the time comes to convert your RRSP to a RRIF, it is not necessary to sell the investments in the RRSP - the investments can just be rolled over to a RRIF (transferred "in kind"). If you are doing this prior to age 71, a partial rollover can be done.
By converting some of your RRSP to a RRIF in the year you turn 65, you can take advantage of the pension income tax credit and pension income splitting with your spouse. See our article on creating pension income.
If your financial institution says that you can only convert your entire RRSP to a RRIF, not just a portion of it, question this! We had a query from a person who had an RRSP holding a few GICs maturing on different dates. This person wanted to transfer funds into a RRIF as each GIC matured, but were told they could not do that, by an experienced investment advisor who had been with the bank for decades. We eventually confirmed that the advisor was incorrect. If in doubt, call the phone number on the back of your bank card (if the RRSP is with a bank, not a brokerage). The first person you talk to may give you the wrong answer - this happened when I called. I asked them to check on this, and they came back saying yes, a partial conversion could be done. They had answered no in the first place because it was not something they had come across previously. In fact, the GIC does not have to be matured to transfer it to a RRIF - the GIC itself could be transferred to a RRIF. However, apparently this is not true of all financial institutions. Tangerine has previously indicated it does not process transfers in kind, so a client would not be able to do a transfer of an unmatured GIC. However, when a client turns 71, all RRSP funds will be automatically converted to a RRIF by Tangerine regardless of the RRSP account type, and a GIC term and interest rate won't be affected by the conversion to a RRIF.
If you have earned income and thus contribution room after age 71, you can make contributions to the RRSP of a spouse who is 71 or younger.
The RRSP/RRIF withdrawal calculator will show you your minimum withdrawals, and will help you plan how much to withdraw annually from your RRSPs/RRIFs.
TaxTips.ca ResourcesUsing Age of Spouse to Calculate Minimum RRIF Withdrawals
Final RRSP Contribution Age 71 (excess contribution)
Tax Tip: Convert some of your RRSP to a RRIF at age 65 in order to take advantage of the pension income tax credit and pension income splitting with your spouse.
Revised: October 12, 2021
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