Registered Retirement Income Funds
Converting to a RRIF @ age 71
If you hold a Registered Retirement Savings Plan (RRSP), you face a major decision in the year you turn 71 – what to do with your money.
There are basically two choices:
- Cash in your RRSP and claim it all as taxable income
- Transfer your RRSP to a Registered Retirement Income Fund (RRIF)
The first choice generates a hefty tax bill and eliminates many of the advantages of having an RRSPin the first place, so generally speaking your most attractive option is likely a RRIF.
You must roll your RRSP to a RRIF before the end of the year in which you turn 71. The following year you must make at least the minimum annual withdrawal from the newly established account. Any income received from a RRIF is considered to be taxable income. The minimum payment is calculated as a percentage using the balance in your account on December 31 of the previous year and your age.
When a RRIF holder dies, the money in the plan is tax deferred if the beneficiary is a spouse or a dependent child or dependent grandchild. If none of these tax deferred options can be used then the full amount of the RRIF is considered taxable income in the year of the account holder’s death. For this reason we always recommend advanced planning when it comes to RRIF accounts. Please keep in mind that 71 is the latest you can convert your RRSP to a RRIF, but often times it makes sense to do this before based on your income and some input from your tax professional.
If you are preparing for retirement please give us a call or send us an e-mail so that we can discuss the many options you have and devise a plan to set-up your RRIF in the most efficient way.
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The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your circumstances. This article was written by Kerry Adams, for the benefit of Kerry Adams, Mutual Fund Representative with the Adams Financial Group, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.
