RRSP to RRIF tips and advice

Most Canadians understand the importance of saving for retirement and putting money into their Registered Retirement Savings Plan (RRSP). However, there is a bit more confusion when it comes to how and when you can start to access those funds.

A Registered Retirement Income Fund (RRIF) is a common way to turn your retirement savings into income.

When you reach the age of 71, you are required to transfer your funds from your RRSP to a RRIF. By law, you must convert your RRSP by December 31 of the year you turn 71.

Here are 7 tips that could help you get the most out of your RRIF account:

Tip #1: Before the end of the year when you turn 71, make one final contribution to your RRSP. Try to make this last contribution as large as possible, while staying within your contribution limit.

Converting to a RRIF essentially makes your RRSP a stream of income. Once you switch to a RRIF, you must begin withdrawing money by at least the end of the year that you turn 71.

Tip #2: Your RRIF can be broken into monthly installments, or annual payments, whatever fits into your life best. You can speak with an advisor if you have any questions, and they will help determine the optimal amount to withdrawal each year for you.

If you’re interested in learning more, or if you have any questions, give us a call at 1.866.863.6237.

Try our to RRIF calculator estimate your withdrawal amount.

RRIF Calculator

Tip #3: Avoid taking money out too early (or more than you need).

While it might be tempting to give yourself a bigger retirement paycheque, the income you withdrawal from a RRIF is taxable. That extra income could place you in a higher marginal tax bracket for the year you withdraw it and reduce your tax deferral for future years. Because of this, avoid taking money out before you need it, or taking more than you require.

Tip #4: If your spouse/partner is under 71 and you have contribution room in your RRSP, did you know you can contribute to their plan until December 31 of the year they turn 71? This is a great way to lower your taxable income and optimize your RRSP contributions!

Tip #5: Contribute extra cash from your RRIF to your TFSA.

If you don’t need your full RRIF withdrawal, you can contribute the excess to a Tax-Free Savings Account (TFSA) where your funds can potentially continue to grow tax-free (assuming you have TFSA contribution room leftover).

Tip #6: Choose the best investments for your RRIF.

Your RRIF will continue to grow just like your RRSP. When you convert your RRSP to a RRIF, the investments in your RRSP can transfer directly to your RRIF. You don’t have to make any changes to them unless you want to.

You can have a variety of investments within your RRIF, such as GICs, mutual funds and ETFs that will all grow tax free and help meet your retirement needs.

Tip #7: Be aware of your government benefits.

Your taxable income (including RRIF withdrawals) may impact your eligibility for certain government benefits, such as Old Age Security. A larger RRIF withdrawal could mean a reduction of some of these benefits, so be sure to carefully plan the timing and amount of your RRIF withdrawals.

If you have any questions about RRSPs or RRIFs, or you want to learn more, please give us a call at 1.866.863.6237. We’re here to help!