FAQs
Converting your RRSP
Should you convert RRSP to annuity? ›
Why Purchase an Annuity? Annuities take the uncertainty out of converting your retirement savings into reliable monthly retirement income. Once you have purchased the annuity, you don't have to decide how to invest your retirement savings. You don't have to worry about stock market volatility.
Is it better to withdraw from RRSP or RRIF? ›
No Withholding Tax From RRIF Minimum Withdrawals
One difference between RRSP withdrawals and RRIF withdrawals is that there is no withholding tax deducted from RRIF minimum withdrawals. However, the withdrawal amount will be included in taxable income on your tax return.
What are the disadvantages of RRIF? ›
Because RRIF withdrawals are considered taxable income, taking money out too early or more than you need could put you in a higher tax bracket and leave you with a larger tax bill. Withdrawals could also potentially reduce certain government benefits, like Old Age Security (OAS).
What happens if I don't convert my RRSP to a RRIF? ›
If instead of transferring into a RRIF, you choose to withdraw your RRSP as a lump sum, then it is treated as taxable income – which could result in a substantial tax hit.
What is better, a RRIF or annuity in Canada? ›
See what an annuity could do for you
While both options provide income in retirement, an annuity offers unique benefits: Guaranteed income for life—you'll never outlive your retirement assets. A potentially higher rate of return versus a conservative RRIF.
Why don t retirees like annuities? ›
Annuities are considered poor investments for many reasons. Depending on the annuity, these include a variety of high fees, with little to no interest earned, an inability to keep up with inflation, and limited liquidity.
What is the best way to withdraw RRSP in Canada? ›
Convert your RRSP to a RRIF
Once you convert to a RRIF, you can start receiving payments from it. The CRA sets the minimum amount you must withdraw based on your age and a percentage of the market value of the RRIF. All money withdrawn from a registered account is fully taxable in the year you withdrawn it.
What are the benefits of transferring RRSP to RRIF? ›
Table of contents
- Grow your savings tax-deferred with a RRIF.
- RRIFs provide a regular income stream with no withholding taxes on the minimum payment.
- You can base your RRIF payments on your younger spouse's age (if applicable)
- You can split your pension income up to 50%
If you have an RRSP and you move out of Canada permanently, you can either choose to: Make a lump sum withdrawal and deregister your RRSP. You'll have to pay withholding tax and income tax on the amount withdrawn. Keep your RRSP and have your investments grow tax-deferred for Canadian tax purposes.
A Life Income Fund (LIF) or, in some provinces, a Locked-In Retirement Income Fund (LRIF) are other options where you convert your Locked-In Retirement Account (LIRA) or Locked-In RRSP, much like a RRIF.
Is there a fee to withdraw from RRIF? ›
You'll pay withholding tax on any withdrawals from your RRIF that exceed the minimum amount set by the government.
Can I have an RRSP and a RRIF at the same time? ›
Can I have a RRIF and an RRSP? Yes. You can choose to have both an RRSP and a RRIF. However, by the end of the year you turn 71 you must convert your RRSP to a RRIF or other retirement income option.
What is an RRSP annuity? ›
Annuities offer a guaranteed income for life or for a specified period. Your RRSP issuer will not withhold tax on amounts that are used to purchase an annuity. You may have to pay tax on the income when you start receiving payments.
Can non-residents convert RRSP to RRIF? ›
RRSP Withdrawal Tax for Non-Residents
If you convert your RRSP into a Registered Retirement Income Fund (RRIF), you can withdraw your funds as periodic pension payments. This will lower the non-resident withdrawal tax to just 15% per the US-Canada tax treaty.
What is the age limit for the RRIF? ›
A registered retirement income fund (RRIF) is an account registered with the federal government. You can convert your RRSP to a RRIF any time, as long as you do so by December 31 of the year you turn 71.
What is the best way to withdraw money from RRSP? ›
Convert your RRSP to a RRIF
Once you convert to a RRIF, you can start receiving payments from it. The CRA sets the minimum amount you must withdraw based on your age and a percentage of the market value of the RRIF. All money withdrawn from a registered account is fully taxable in the year you withdrawn it.
What do you do with the money in an RRSP when you retire? ›
At any age up to the end of the year you turn 71, you can choose one of the following options for your RRSPs:
- You can transfer your RRSP funds to a registered retirement income fund (RRIF).
- You can use your RRSP funds to purchase an annuity.
- You may have received commutation payments from an RRSP.
Having an annuity can make it easier to create a budget and manage your money. It's especially the case if it's your only regular source of retirement income. However, an annuity is not always the best option for you. Your regular income and savings may already cover your expenses when you retire.
What is the disadvantage of an annuity? ›
Key Points. Annuities can offer guaranteed income in retirement, but there are pros and cons. Pros include guaranteed income, customization, and tax-deferred growth. Cons include complexity, high fees, and less access to your money if you need it early.
