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Blog: The Mechanics of Converting Your RSP Into a RRIF

By Jeff Pollock

If you’re 71 years old, it’s time to convert your Registered Retirement Savings Plan (RRSP, or RSP – they’re both the same thing) into a Registered Retirement Income Fund (RRIF) by the end of the year.

Once converted, you must start withdrawing funds from your RRIF each year and no later than the year after the account is created. The required amount starts small but grows larger and larger each ensuing year. For example, at 72, you have to take out 5.4% of the RRIF’s value. That percentage keeps growing incrementally each year until eventually capping out at 20.0% by the time you turn 95. If your partner is younger than you are, you can use their age to calculate the minimum amount that must be withdrawn each year.

Withdrawals can be made monthly, quarterly, semi-annually, or annually.

Unfortunately, the money you take out from a RRIF is taxed as income. For this reason, it can be argued that contributing to an RSP is only a tax deferral strategy. The good news is that the money in your RSP rolls over to the RRIF on a tax-free basis.

You can hold the same kinds of investments inside a RRIF as you did in the RSP. For example, stocks, bonds, and preferred shares are all fine to continue owning. When you sell a position, just like the RSP, there’s no tax event. You only pay tax based on the amount of money you withdraw from the RRIF each year.

Upon your death, any value inside the RRIF goes to the beneficiary listed on the account.

When we have a client approaching the age requiring this conversion, we explain the logistics, put together the paperwork, and get the account opened so that the process is as seamless as possible.

DISCLAIMER: The opinions expressed in this publication are for general informational purposes only and are not intended to represent specific advice. The views reflected in this publication are subject to change at any time without notice. Every effort has been made to ensure that the material in this publication is accurate at the time of its posting. However, Schneider & Pollock Wealth Management Inc. will not be held liable under any circumstances to you or any other person for loss or damages caused by reliance of information contained in this publication. You should not use this publication to make any financial decisions and should seek professional advice from someone who is legally authorized to provide investment advice to assess your goals and objectives, personal circumstances, and make an informed suitability assessment.

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