By December 31 of the year you turn 71, you must close your RRSP. The most common choice is converting it to a RRIF, which keeps your money invested and pays it out to you over time. If you do nothing, the full value of your RRSP is added to your income and taxed in that calendar year — which is almost always the wrong outcome.

What “Closing Your RRSP” Actually Means

The CRA requires that your RRSP mature — meaning it must be wound down — by December 31 of the year you turn 71. You have three options:

Option 1: Convert to a RRIF

A Registered Retirement Income Fund (RRIF) is the most common choice. Your RRSP rolls over into a RRIF on a tax-deferred basis — no tax is triggered at conversion. The investments stay in place. The difference is that a RRIF requires you to withdraw a minimum amount each year, and those withdrawals are fully taxable as income.

Option 2: Purchase an Annuity

You can use your RRSP proceeds to buy a life annuity from an insurance company. An annuity pays a guaranteed monthly income for life (or a fixed term), eliminating both investment risk and the risk of outliving your money. The tradeoff is that you give up flexibility and access to the capital.

Option 3: Take the Cash

You can collapse your RRSP and take the full value as cash. The entire amount is added to your income in that year and taxed accordingly. On a $400,000 RRSP, this could mean a tax bill well over $150,000. This option is rarely advisable.

Most Canadians convert to a RRIF. The rest of this article focuses on that path.

How RRIF Minimum Withdrawals Work

Once your RRIF is established, you must withdraw at least a minimum amount each year. The government sets these minimums as a percentage of your RRIF’s value at the start of each year, and the percentages increase with age:

• Age 72: approximately 5.40%
• Age 80: approximately 6.82%
• Age 90: approximately 11.92%
• Age 95 and older: 20.00%

If you convert to a RRIF in the year you turn 71, no minimum withdrawal is required in that first calendar year. Withdrawals begin the following year.

There is no maximum — you can always withdraw more than the minimum. But all withdrawals are fully taxable as income in the year they are taken.

Using Your Spouse’s Age to Lower Your Minimums

If your spouse or common-law partner is younger than you, you can elect to base your RRIF minimum withdrawals on their age instead of yours. Because younger ages carry lower minimum withdrawal percentages, this reduces how much you are required to take out each year — which can lower your annual tax bill and allow the remaining balance to grow longer.

This election is made once, at the time the RRIF is set up, and cannot be changed afterward.

The Pension Income Tax Credit

RRIF withdrawals made after age 65 qualify for the federal pension income amount — up to $2,000 of eligible pension income that attracts a 15% federal credit, plus provincial credits on top. The savings are modest but real.

This is also why some Canadians convert a small portion of their RRSP to a RRIF at age 65 — not because they need the income, but to access this credit earlier. Even a modest annual RRIF withdrawal starting at 65 begins using the credit before it would otherwise apply.

What Happens to Your RRIF When You Die?

Your RRIF does not automatically end at death. What happens depends on how your estate is structured:

Spouse as Successor Annuitant

Your spouse takes over the RRIF as their own, with no immediate tax triggered. This is the most tax-efficient outcome.

Spouse as Named Beneficiary

The RRIF value transfers to your spouse and can be rolled into their RRSP or RRIF, also on a tax-deferred basis.

Anyone Else as Beneficiary, or the Estate

The full fair market value of the RRIF is included in your income in the year of death and taxed accordingly. On a large RRIF, this produces a significant tax bill for the estate.

Beneficiary designation is not something to leave as a default. Review it deliberately.

When Converting Before 71 Makes Sense

You are not required to wait until age 71. Converting part of your RRSP to a RRIF earlier — particularly at age 65 — can be worth considering if:

• You want to access the pension income tax credit sooner
• You are executing a planned RRSP/RRIF drawdown strategy to reduce future mandatory withdrawals and limit OAS clawback exposure
• You want to shift income into lower-earning years before CPP and OAS begin

Key Takeaways

• Your RRSP must be closed by December 31 of the year you turn 71
• Converting to a RRIF is the most common option — no tax is triggered at conversion
• RRIF minimum withdrawals begin the year after conversion and increase with age
• You can elect to use a younger spouse’s age to reduce annual minimum withdrawals
• RRIF income after age 65 qualifies for the federal pension income tax credit
• Beneficiary designation on your RRIF has major tax consequences for your estate

This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP® professional.