When to convert your RRSP to a RRIF

The latest you can close your Registered Retirement Savings Plan (RRSP) and transfer the mutual fund investments to a Registered Retirement Income Fund (RRIF) is December 31 of the year you turn 71. There is no minimum age requirement.

When it comes to the timing of converting an RRSP to a RRIF, the first basic guideline is to open a RRIF when you need the funds for retirement income – regardless of your age. The second guideline is to wait until you’re 71 if you have other income sources to support your retirement. Waiting gives mutual funds in your RRIF more time to grow tax-deferred and can save you tax while you draw retirement income from sources that are more tax-efficient than RRIF withdrawals.

Factors and strategies

Some retirees can simply follow one of these two general rules, but there are exceptions to the rules – so the timing decision should be made with the guidance of your advisor.

Triggering a tax credit. The pension income tax credit applies to $2,000 of eligible pension income, which includes RRIF withdrawals. You can open a RRIF at age 65 and transfer just enough mutual fund investments from your RRSP to make a $2,000 annual RRIF withdrawal from age 65 to 71.

Delaying government benefits. Do you plan on delaying Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) and Old Age Security (OAS) benefits to age 70? You could open a RRIF – or make RRSP withdrawals – to help provide retirement income in your 60s.

Splitting pension income. You may want to open a RRIF at age 65 to save tax through pension income splitting. Up to 50% of RRIF withdrawals can be allocated to your spouse.

Controlling your minimum RRIF withdrawals. For some retirees, their minimum RRIF withdrawal at age 71 or 72 would push their income to a higher tax bracket. One solution is to transfer some mutual fund investments from their RRSP to a RRIF from age 65 to 71, making annual withdrawals. The result is a smaller RRIF at 71 and a lower minimum withdrawal.