What Happens to Your RRSP at Age 71? Three Options and the Trade-offs

Turning 71 triggers one of the few genuinely hard deadlines in Canadian retirement planning. Your RRSP cannot remain an RRSP past December 31 of the year you turn 71, and there is no extension available. Before that date, you need to decide what happens to the money, and the decision does not have to be all-or-nothing: the three options below can be combined in whatever proportion suits your situation.

There are three maturity options, and you can blend them in any proportion that suits you. You can convert some or all of the RRSP to a Registered Retirement Income Fund (RRIF), the most common choice, which keeps the money invested while you draw an income each year. You can use some or all of it to buy an annuity from an insurance company, trading a lump sum for a guaranteed income stream for as long as you live. Or you can withdraw some or all of it as a lump sum in cash, which gives you full access to the money right away, though usually at a real tax cost.

The tax treatment differs across the three, and it is worth understanding at a general level before the December deadline arrives. A RRIF requires a minimum withdrawal each year, a percentage that rises with age, and each withdrawal is taxed as ordinary income in the year you receive it. Annuity payments are also taxed as income as they arrive, spread across the years you receive them. A lump-sum cash withdrawal works differently: the entire amount becomes taxable income in the year you take it, which can push a large withdrawal into a much higher tax bracket than spreading the same money out through a RRIF or annuity would. None of this is personalized tax advice; your own bracket, other income, and provincial rules all factor into what it means for you specifically.

Because the three options can be blended, the mix often matters more than picking just one. Converting the full amount to a RRIF may preserve the most flexibility of the three, though it leaves the balance exposed to markets and to the rising mandatory withdrawal rates our RRIF withdrawal rate table lays out. Blending in an annuity for part of the balance can add a floor of guaranteed income once other guaranteed sources like CPP and OAS are already in place, as we explored in our look at annuities versus GICs, though that certainty usually comes with less flexibility and less left for the estate. There is no universally right mix; it depends on your other income, your health, and what you want to leave behind.

These are the kinds of trade-offs we explore together, using your actual numbers rather than a hypothetical example, and adjusting the mix until the picture feels right. Our RRSP-to-RRIF guide walks through the RRIF side of this in more depth, including the minimum withdrawal schedule and the younger-spouse election.

This content is for general information only and is not personalized tax, legal, or financial advice. RRSP maturity rules and RRIF minimum withdrawal factors are prescribed by the Canada Revenue Agency under the Income Tax Act. Your actual choice among these options should consider your individual circumstances. Consult a qualified professional for advice specific to your situation.