Registered Retirement Income Funds

The Income Tax Act states that a RRSP matures by December 31 of the year in which the planholder reaches age 71. At the time an RRSP matures, planholders must choose what they want to do with the retirement savings they’ve been deferring from taxes. Three options – or a combination of them – are available:

  • Cashing in the RRSP
  • Purchasing an Annuity
  • Converting the RRSP to a Registered Retirement Income Fund (RRIF)
A RRIF can be opened at any age, but new contributions can not be made to a RRIF. The most common way money gets into a RRIF is through a rollover from a RRSP. When an RRSP is rolled into a RRIF, no taxes are payable on the transferred funds. As in a RRSP, tax is generally only payable on amounts actually withdrawn from a RRIF, allowing the remaining assets to continue to grow on a tax deferred basis until you need them.

Many plan holders find the tax rate on RRIF withdrawals much lower than the tax rate they faced while employed because their income in retirement is not as a high. This is one of the benefits of the RRSP/RRIF system: RRSP contributions are often made and deducted from income that is taxed at high marginal rates, while RRIF withdrawals are often included in income and taxed at much lower rates.

For more information contact one of our certified LCU Financial associates.


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