TaxTips.ca
Canadian Tax and
Financial Information
RRSP Conversion to RRIF

Ads keep this website free for you.
TaxTips.ca does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?
See
USTaxTips.net

Need an accounting, tax or financial advisor? Look in our Directory.      Stay Connected with TaxTips.ca!

Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Provincial Budgets
Statistics etc.
Glossary
Site Map
Directory
Advertise With Us
Contact Us/About Us
Links & Resources



RRSPs RRIFs and TFSAs -> Conversion of an RRSP to a RRIF

Converting Your 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while it remains in the RRIF, including interest, dividends and capital gains, so can grow tax free until the money is withdrawn.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.  RRIF owners are required to withdraw a minimum amount each year, starting the year after the RRIF is established.

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.

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.

Partial Conversion of RRSP to RRIF Prior to Age 71

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 recently 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 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.

Contribution Room After Age 71

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.

RRSP/RRIF Withdrawal Calculator

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.

See also:

Using Age of Spouse to Calculate Minimum RRIF Withdrawals

Making "in kind" withdrawals from your RRSP or RRIF

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 28, 2018

 

Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved.  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  Google + |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.