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How to Convert Your RRSP to an RRIF
Converting your Registered Retirement Savings Plan (RRSP) into a Registered Retirement Income Fund (RRIF) is a key part of retirement planning for Canadians. This process allows you to transition the tax-deferred savings in your RRSP into an RRIF that provides regular retirement income.
While RRSPs help accumulate savings pre-retirement, RRIFs are specifically designed to generate income during retirement. Read on for a step-by-step guide to convert your RRSP to an RRIF.
RRSP vs. RRIF: Key Differences
Before diving into the conversion process, it’s important to understand the key differences between an RRSP and a RRIF:
| RRSP | RRIF | |
| Purpose | Retirement savings | Retirement income |
| Contributions | Allow tax-deductible contributions | No contributions allowed |
| Withdrawals | Allowed but taxed as income | Required annual minimum withdrawals |
| Tax Treatment | Contributions deductible, growth tax-deferred | Withdrawals taxed as income, tax-deferred growth |
Key takeaways: RRSPs help you save, and RRIFs provide income. In both accounts, taxes are deferred until withdrawal.
Now, let’s look at how to convert from an RRSP to an RRIF.
When Should You Convert Your RRSP to an RRIF?
You must convert your RRSP into an RRIF or other retirement income source by the end of the year you turn 71. However, you can convert earlier in certain situations.
Age 71 RRSP/RRIF Deadline
To avoid taxes and penalties, your RRSP must be converted into an RRIF or annuity by December 31st of the year you turn 71. If you fail to convert, the full RRSP balance will be taxed as income.
Converting to a RRIF keeps your savings invested tax-deferred and allows you to withdraw only what you need each year. Withdrawing the full lump-sum RRSP amount results in significant immediate taxation.
Before Age 71
You can convert your RRSP to an RRIF before age 71 if you need access to retirement income early. Reasons to convert early include:
- You’ve already retired and need funds
- You want flexibility beyond RRSP withdrawal rules
- To pension split or claim the pension credit if your spouse is younger
Just keep in mind that you’ll be required to take minimum RRIF withdrawals the year after opening your account.
Step-by-Step RRSP to RRIF Conversion Process
Follow five steps to seamlessly convert your RRSP into a RRIF:
1. Select a RRIF Provider
Decide where you want to open your RRIF account. Using your current RRSP provider often makes sense since your investments can easily carry over.
Banks, credit unions, brokerages and investment companies all offer RRIF products. Compare options to find the best fit.
2. Fill Out the RRIF Application
You’ll need to complete the paperwork to open a new RRIF account. Your advisor can assist with this application process. Information required generally includes:
- Your personal details
- Beneficiary designations
- Withdrawal instructions
- Investment selections
- RRSP transfer details
Take your time to provide accurate, up-to-date information.
3. Choose Your Beneficiary
Since an RRIF provides retirement income, you must designate a beneficiary who will receive any remaining RRIF assets upon your death.
Beneficiary options include your spouse, partner, kids, other individuals, or your estate. Consider any tax implications.
4. Decide on Withdrawal Details
Determine the payment frequency, timing, and amount for your RRIF withdrawals. You must take at least the yearly minimum payment.
Consider monthly, quarterly, semi-annual or annual withdrawals. Set specific dates or automatic deposits.
5. Consolidate Multiple RRSPs
If you have multiple RRSP accounts, you may wish to consolidate them into a single RRIF for simplicity. This streamlines administration and reporting.
Discuss with your advisor whether consolidation makes sense for you. Make sure to consider any fees or restrictions.
Following these steps will smoothly transition your savings from an RRSP to a RRIF.
How Much Do You Have to Withdraw from a RRIF Each Year?
RRIF accounts have government-mandated minimum withdrawal amounts based on your age and account balance. You can always withdraw more than the minimum if required.
RRIF Minimum Withdrawal Formula
The minimum annual RRIF withdrawal is calculated as:
RRIF Minimum Withdrawal = Market Value of RRIF × Withdrawal % Factor
The withdrawal percentage factor is set by the government of Canada and ranges from 5.28% at age 71 to 20% at age 95.
Here is an example for a 71-year-old with a $300,000 RRIF using the 5.28% factor:
- RRIF Market Value: $300,000
- Withdrawal % Factor: 5.28%
- Minimum Withdrawal = $300,000 x 0.0528 = $15,840
Consult the table below for the full schedule of RRIF minimum withdrawal percentages by age:
| Age on January 1 | Minimum Withdrawal % |
| 71 | 5.28% |
| 72 | 5.40% |
| 73 | 5.53% |
| 74 | 5.67% |
| 75 | 5.82% |
| 80 | 6.82% |
| 85 | 8.08% |
| 90 | 10.33% |
| 95 | 20.00% |
Your minimum withdrawal amount will increase each year as you age.
Strategies to Minimize Required RRIF Withdrawals
If you wish to withdraw less than the standard RRIF minimum amount for tax or estate planning purposes, you have two main options:
- Base minimum on spouse’s age: If your spouse or common-law partner is younger than you, you can use their age as the basis for calculating your minimum RRIF withdrawals. This results in a lower required withdrawal amount.
- Convert back to RRSP before age 71: You can convert your RRIF back into an RRSP before December 31st of the year you reach 71. But you will still need to take the minimum RRIF payment for that year.
Discuss these RRIF withdrawal minimization strategies with your financial advisor to see if they align with your overall retirement plan.
Can You Convert an RRIF Back to an RRSP?
In some cases, you can convert your RRIF back into an RRSP, but only if you are under the age of 71. Here are some key points:
- Can only revert before December 31st of the year you turn 71
- Any RRIF withdrawals not re-deposited will be taxed
- Still required to take minimum RRIF payment for that year
- No new RRSP contributions are allowed once converted back
Due to withholding taxes and the inability to contribute, most experts suggest leaving your savings in an RRIF once converted from an RRSP. Analyze your specific needs closely before deciding to switch back.
Tips for a Smooth RRSP to RRIF Conversion
Follow these tips when converting your RRSP to a RRIF:
- Start the RRIF conversion process 12+ months before your 71st birthday – Don’t wait until the December 31st RRSP conversion deadline. Give yourself plenty of time in case any issues arise.
- Shop around and compare RRIF providers – Compare product features, investment options, fees, and services across various providers to find the RRIF account best suited to your needs.
- Consider consolidating multiple RRSPs into one RRIF – This streamlines administration and the required minimum withdrawal calculations. However, consider any transfer restrictions or fees.
- Designate your spouse as successor annuitant – This enables tax-deferral of your remaining RRIF assets to your spouse upon your death.
- Set up automatic RRIF payments – Arrange for direct deposit of RRIF withdrawals into your bank account for convenience.
- Only withdraw what you need – Carefully consider taxes when taking more than the minimum to avoid unintentionally pushing yourself into a higher tax bracket.
- Ensure your RRIF holdings align with your risk tolerance – Revisit your RRIF investment selections whenever your risk profile changes.
- Review your RRIF details annually – Reassess your withdrawal rate, investments, beneficiary designations, and overall strategy over time as your needs and situation evolve.
Key Takeaways on RRSP to RRIF Conversion
Here are some key points to remember when converting an RRSP to a RRIF:
- RRIFs allow you to generate retirement income from your RRSP savings.
- Your RRSP must be converted by December 31st of the year you turn 71.
- Converting early can provide access to funds pre-age 71. Just remember the required minimum withdrawals.
- Follow the step-by-step process to seamlessly convert your RRSP into an RRIF.
- RRIF withdrawal minimums are based on your age and account balance on January 1st.
- Consider consolidating multiple RRSPs into one RRIF account.
- Work with a financial advisor to optimize your RRIF income, taxes, investments and estate planning.
Converting your RRSP into an RRIF is straightforward and, with proper planning, can provide tax-efficient retirement income for years to come.
FAQs on how to convert an RRSP to a RRIF
What is the deadline for converting an RRSP to an RRIF?
You must convert your RRSP into an RRIF or other retirement income source by December 31st of the year you turn 71. If you don't convert by this deadline, your RRSP will lose its tax-deferred status, and the balance will be fully taxed.
Where can I open a RRIF account?
You can open a RRIF at most banks, credit unions, brokerages, insurance companies and other financial institutions. Your current RRSP provider will often handle the RRIF conversion directly. Compare different providers' fees, investment options, and services.
Why convert an RRSP to a RRIF?
Converting your RRSP to an RRIF allows you to keep growing your savings tax-deferred while only needing to withdraw minimum amounts annually. This prevents a lump-sum RRSP withdrawal that could push you into a higher tax bracket. RRIFs also provide more flexibility than annuities.
When should you convert an RRSP to a RRIF?
While required by age 71, you can voluntarily convert your RRSP anytime if you need retirement income earlier. Reasons to convert early include already being retired or wanting to split the pension. Just remember that the required minimum RRIF withdrawals will begin.
Can I convert only part of my RRSP to an RRIF?
Yes, you can choose to convert just a portion of your total RRSP savings into an RRIF account. You can have multiple RRIFs and systematically convert parts of your RRSP to them over time. The rest can remain in your RRSP until the deadline at age 71.
How are RRIF withdrawals taxed?
RRIF withdrawals are taxed as ordinary income. Withdrawals include both required minimum amounts and any additional amounts. No taxes apply while savings remain inside the RRIF account. Minimum RRIF withdrawals are taxed at a lower rate during retirement.