Rules For Converting Your RRSP To A RRIF

by Mike Holman

My parents are in the process of getting their RRSP accounts converted to RRIFs (Registered Retirement Income Fund) since they are turning 71 this year.  After answering a few of their questions I thought I would do a post covering some of the basic rules and strategies of converting a RRSP account to a RRIF account.

For the majority of readers who are nowhere near the age of 71 I suggest you read this anyways.  If you have any of your money in RRSPs then one day you probably will have a RRIF and it makes sense to understand all the rules since a RRIF account is basically the sequel to your RRSP account.  There are a lot of similarities between a RRSP account and a RRIF account.  The main difference between the two is that the RRSP account is used to accumulate money via contributions whereas the RRIF account disperses money via withdrawals.

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Rules for converting RRSP to RRIF

  • You have until Dec 31 of the year when you turn 71 to convert the account to a RRIF.
  • Some institutions will do it automatically so even if you don’t do anything – you will be the proud owner of a RRIF account on Jan 1 of the year you turn 72.
  • You can convert your RRSP to a RRIF anytime you want before the deadline.  One reason someone might convert early (ie at age 55) is so they can set up regular withdrawals from the account which most institutions won’t allow for RRSP accounts.
  • Mandatory or minimum payments – these start in the year after you set up your RRIF account.  There is a set minimum percentage amount determined by the government that you have to withdraw each year.  The percentage withdrawal amount increases as you get older.
  • There is no maximum withdrawal amount except for the amount of money you have in the account.
  • All withdrawals from a RRIF count as taxable income (including the mandatory withdrawal).
  • A RRIF account can hold the same investments as an RRSP account.  Most financial institutions that offer RRSP accounts also offer RRIF accounts so you shouldn’t have to switch institutions.
  • Money in a RRIF account is still “registered” so you don’t pay any tax on any income and there is no capital gains/losses.  Same as your RRSP.
  • You can’t make any contributions to a RRIF account.
  • You don’t have to spend all of your RRIF withdrawals.  You can save the money.
  • You don’t need to sell the actual investments in your RRIF to complete a withdrawal.  Most institutions will allow you to transfer your investments “in kind” to an non-registered account or TFSA account.
  • You can have more than one RRIF account.
  • Some people create a small RRIF account at age 65 in order to make annual $2,000 withdrawals which will qualify for the pension credit.
  • You can make multiple transfers to the same RRIF acount from your RRSP account.

What to do with your new RRIF account?

One of the main differences between a RRIF and an RRSP is that you have to make at least one withdrawal per year from your RRIF account starting in the year you turn 72.  To make that happen you have to set up some sort of payment method for your RRIF account.

Some RRIF payment options:

The government rules say that you have to withdraw the mandatory amount from your RRIF by Dec 31 of that year.  How you get your payment is up to you.  You should check with your financial institution but here are some options that you will probably have available to you:

  • Payment frequency – Do you want 1 lump sum payment at the beginning of the year?  Or 1 payment on Dec 31?  Would you like 12 monthly payments or some other option such as weekly payment?  Just ask.
  • Payment form – You can get the money as a cheque or EFTed to your bank account.  You can also get it transferred to an open or TFSA account in the same institution.
  • Withholding tax – Unlike a RRSP where there are set minimum percentages for the withholding tax depending on the withdrawal amount, there is no minimum withholding tax on the mandatory withdrawal amount, so you can elect to not have any withholding taxes taken from the withdrawals.  If you take more than the mandatory amount then there are minimums, which is the same as a RRSP withdrawal.  In either case you can (and probably should) ask the company to withhold a higher percentage.  The amount withheld will create a tax credit on your next tax return but you could still owe more money on it especially if you have other income sources.

More than one RRIF account

If you have more than one RRIF account, the mandatory amount has to be taken out of each account.

What if I don’t want a RRIF account?

No problem – just use the money in your RRSP to purchase an annuity before the end of the year you turn 71 and you will be good to go.

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{ 44 comments… read them below or add one }

1 Mike Holman

@e schembri – No – RRIF = RIF and RSP = RRSP.

@John – You should check with your financial institution.

@Anne – If you don’t have any pension income that qualifies for the pension credit, then having some money in a RRIF and withdrawing $2,000 per year can save some taxes. Another benefit is that if you are planning to make regular withdrawals – most institutions will allow you to do this from a RRIF, but not an RRSP.

2 researcher

Thank you very much for this informative article.
I require clarification :
You stated ” Rules for converting RRSP to RRIF
You have until Dec 31 of the year when you turn 71 to convert the account to a RRIF. ”
Then in response in number 84 you state ” At the end of the year you turn 72, you have to convert your RRSP to a RRIF. ”

Is 72 years of age only applicable when money was used from rrsp to purchase a home ?

Thank you

3 researcher

You stated “If you have more than one RRIF account, the mandatory amount has to be taken out of each account.”
The above causes me concern due to my lack of knowledge regarding RRSPs.

I have numerous separate no risk type RRSPs with different maturity dates ( ie year 2014, 2015, 2016, 2017 ) which are all held within one in Financial Institution member account.

I will be 71 years of age in year 2014 , thus will be required to transfer to RRIF and mandatory withdrawal completed in 2014.

RRIF withdrawal in year 2014 as I require the income tax pension credit(s) due to year 2014 income will consist of OAP and CPP payments only

Due to the fact that all RRSPs are held under one account number under my name that this is the definition of “ one account” which will become one RRIF account upon transfer ?

Thank you in advance for your assistance

4 Mike Holman

@researcher – Sorry, I made a mistake when I mentioned year 72 for RRSP conversion. I’ve fixed the comment. The RRSP has to be converted to a RRIF by Dec 31st of the year you turn 71.

#2 – Yes, that is one account. It’s important to understand the terminology – an “RRSP” is an investment account. The investment products you buy (ie GICs, mutual funds) are not RRSPs, but can be purchased within an RRSP account.

In my article I was talking about the situation where you might have RRSP or RRIF accounts at different institutions which are considered different accounts.

5 Freda

Hi Mike,
Do you get the same tax benefits when you are putting money back into your HBPlan? as you do when you contribute to your RRSP?
Thanks
Freda

6 Mike Holman

@Freda – No, when you are repaying the HBP, there is no tax benefit like when you are making a contribution to an RRSP.

7 researcher

Thank you very much for the clarification and additional information.
Very helpful
Greatly appreciate the sharing of your knowledge/expertise.

You have provided information which has saved money, time ,the income taxation legislation and the ability to make the correct decision(s) applicable to this individual which affects financial situation for future years.

I realize the RRIF mandatory withdrawl must be as first payment is December 31st in the year you turn 72.

Again, thank you very much
(Also, it is appreciated that other individuals post comments with suggestions, personal experience, etc.)

8 Larry

I have to convert all my RRSP,s to RRIF,s this year. The spousal RRSP,s that I contibuted to are in my wifes name. These can be converted to RRIF,s when she turns 71. Is this correct?

9 Dave

I understand that it is beneficial to have three non-contributing years before withdrawing money from an RRSP. Does the same rule hold if one rolls the RRSP into a RRIF, or by doing so can one avoid the need to wait three years?

10 Abe Paul

I was born in 2943. I assume that means I need to transfer my RSP funds to a RIF by end of next year and make my first mandatory withdrawal by end of 2015. Is that right?
I will also have about 4 payments left under my HBP at $1333 per year.
My intention was to withdraw about $5000 each year from RIF, which presumably is taxable income.
If I do nothing in 2015, would this be considered the equivalent of withdrawing $5333 from RIF, or do I need to deposit the $5333, before making a mandatory withdrawal, even if it happens to be the same $5333 amount?

11 Ron

My mom has been called into the bank to meet with a FA, as she currently has approx $29,000 in RRSP’s. She turned 65 back in Feb. When she divorced with my dad she was given ownership of the house. So years back she made a large RRSP withdrawal and paid off the rest of the existing mortgage. I guess she got tired of making the mortgage payments on her own. My question is with regards to the $29,000 left in RRSP’s. Would it be a wise move to transfer all in-kind into a RRIF, TFSA, or just leave the RRSP until 71. She still works part-time and making less than $19,000.

12 LYNNB

I am 68 this year and have 2 RRSP accounts. I want to turn one of the RRSP accounts to a RRIF and leave the other as an RRSP

Can I do that?
Thank you

13 Mike Holman

@Lynn B – Yes.

14 Ted Wolch

Would appreciate some info.
I was born August 21,1942, my wife was born October 23,1964.
What is the correct way to set up my RIFF

15 WendyS

My husband and I were wondering, since we are beneficiaries on each other’s RRIF would it have to all be income in one year for the survivor and also taxed as such?

16 Richard

If I convert my RRSP to a RRIF early, but then unexpectedly decide to return to work, can I establish a new RRSP, while continuing to receive income on my RRIF?

17 stanley roth

Hello…..I am retiring at the age of 56 with a big rrsp(to be moved into a rrif at a later date) and a $100,000 pay-out pention . I want to withdraw $1000 from the rrif /pention every month as my income. . How much , if any, income tax will I have to pay if that is my only income for the year?

18 D. Lugo

I turned 71 in 2014 and will convert my RRSP to RIF. According to my CRA Assessment Notice for year 2013, I have $1,000 overcontribution in my RRSP.

Can I leave this overcontribution in RRSP and let it flow to RIF? Can I deduct it from my income and RIF withdrawals in the next year?
Thanks!

19 Erika Poole

My question is that if my current RRSP holds a combination of securities and cash – the securities are often changing in value daily – do I have to liquidate the securities or is there a Valuation Date (1st day of the year I turn 72) as the value of all of my investments for the purpose of calculating the mandatory annual withdrawal. I obviously would like to keep the option of continuing to hold securities in my plan for future capital and dividend gains.

thank you

20 Bruce F

I have to convert my RRSP to a RRIF soon. Can I convert it to a RRIF now and then later on convert all or part of it to an annuity, if I want?

21 Robert

My wife who turns 71 this year has a RRSP account which is largely comprised of securities. She wants to keep the securities and perhaps transfer them to a TFSA going forward. Is there a tax advantaged way in which she can accomplish this? Thanks

22 Liz

Some of my rrsp’s are in term deposits that will mature after the end of the year in which I turn 71. Do I have to cash them in before they mature? Won’t I lose interest if I do that?

23 Michael Campbell

Does the entire amount of the RRSP have to be transfered to the RRIF. I am 56 years old and retired, requiring a monthly income from both my LIF and RRIF, the later to supplement the LIF. I want the flexibility of being able to contribute further in the future and am concerned I may have exhausted my TFSA room

24 Barry Howarth

Can I make an RRSP contribution in March (after the deadline) and then covert my RRSP to a RIF later that year? If so, will I still get the same tax benefit from that (what would be my final) RRSP contribution? Thanks.

Barry

25 Diane

Is there a charge for turning RRSP into a RRIF?
Can you just take a annualy amount and turn into a RRIF and received monthly payments?

26 Sharon Hurly

I will be 70 on December 17, 2015. I am still working full-time and intend to work for another three years. I have three RRSP accounts. One at Great West Life through my employer; one at Tangerine and one at a brokerage. I understood that I could contribute to my RRSPs until December 31 of the year that I turn 71 (which would be 2016). Is this correct?
If I am to understand what you have written I should start converting my RRSPs at the beginning of my 71st year, January 1, 2016.
Because my employer RRSP is like a pension plan they will match up to 7% of what I contribute although I am contributing more than the 7%.
This is just so very confusing and I guess my bottom line question is when should I start talking to a FA at my bank and set up a RIF and start transferring my money over.
Also, I do understand that income that I save in the years that I am working beyond my 71st year is taxable income. Should I be putting that into a savings account?
Thanks for any advice you can give me. It is very much appreciated.

27 roger

I turn 71 this year & understand that I have to convert to a RRIF next year; however, with my wife’s age of 67 this year, can I piggy back on her age & only withdraw the minimum % based on her age & What is that % based on this info?

28 Ron

I am a non-resident of Canada holding an RRSP. As such, I understand that I can not buy a new fund. But can I roll my current fund over from RRSP account to a new RRIF account? I have received conflicting statements from TD Waterhouse.

29 Mike M

Mike,

You say:
■Some people create a small RRIF account at age 65 in order to make annual $2,000 withdrawals which will qualify for the pension credit.

Does this mean that I can’t set one up now, since I am only 61?
I am collecting CPP already.

Mike M

30 Edith

we take everything out of the rrsp. If it goes into an annuity does the full amount become taxable at time of withdrawal.

31 Nagla Toma

I currently reside in the USA, what are the tax implications of converting RRSP to RRIF and transferring the money to the USA?

32 Jan

Where do I find the answers to some of the [above] questions on your website? In particular, #106?

33 Amy

Can I hold RIF and RSP because I am still working and making contribution to RSP?

34 Tony Ercolani

When does the RIF end (zero balance). I was under the impession that all funds must be withdrawn by age 90 or thereabouts. Thank you

35 Peter Noble

I have been a US resident since 1995 and both my wife and I have some retirement funds “frozen” in our Canadian RRSPs. We are thinking that we would like to convert these into annuities rather than RRIFs but our broker says we cannot change the way our funds have been invested and can only transfer them “as is” into an RRIF. Can you clarify.

36 Doug Caldwell

I am retired, 59 years old. I have around $40k in debts I would like to clear up. Can I use money from mr RRSP’s or convert to a RIF to pay down my debt. What are the minimum and maximum amounts I can withdraw and what would the tax % be. I cashed a $5000 rrsp 1st year I retired to help pay my income tax, withholding fees and add income made this not so worthwhile. Any help would be greatly appreciated.

Thanks,
Doug

37 Rick

I am 60 and planning to access the pension income deduction at 65 by converting RRSP to a RRIF. Do I have to convert all of my RRSP’s to a RRIF ?

38 Marilyn Petric

Wish all these questions were answered

39 Edale Levene

I have just noticed that I have a rrsp that matures in January of the year I turn 72 how do I prevent being taxed on the whole amount of the rrsp?

40 Susi

so at age 60…i fill out a form at my bank and that will convert my rsp to a rif? my rsp’s are diverse. with different maturity dates. but thats ok. i can withdaw ‘in kind’..am i correct?

41 David

Hi, i found your article very helpful and informative. Just one related question: can i have both rrif and rrsp accounts at the same time, meaning still contributing to my rrsp at one bank, while withdrawing minimum annually from my rrif at another bank?

42 Colleen

I have a government registered RSP maturing May 15th this year. I am 56 years old. This is from a company I used to work for. I am now working for someone else with a different plan that works the same way. My credit union said they will transfer these funds from the maturing RSP over to a RRIF , but if I want any of the money, I have to pay them $50 for paperwork each time I do a withdrawl and then pay a notary to witness it each time I remove money. DOES THIS SOUND CORRECT?? I did want this money to purchase a vehicle to see me into my senior years, but am now considering an annuity with a totally different financial institution…

43 Doug

I posted a question months ago and have not recieved an answer. It appears there are lots of questions here but no answers?

44 suzanne

I am 61 yrs old born 1955, my husband is 70 born in 1946. We are both still working. I will retire in 2017, that year my husband turn 72, when he must start withdrawing from his RIF.
My QUESTION IS, since my husband still has room in his RSP contribution but I don<t , would it be wise to contribute to a spousal contribution for the 2016 year?

Thank you,.

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