Turning 71 this year? It's RRIF time.
If you're about to turn 71, it's time to start thinking about the next phase of your investment plan. You have until December 31 of the year in which you turn 71 to convert your RRSP to an income-generating vehicle. The most popular choice is a Registered Retirement Income Fund, or RRIF.
Once you convert your RRSP to an RRIF you are required to withdraw a prescribed minimum payment each year. This minimum amount depends on a number of factors including whether you have a spouse and his or her age. There is no maximum annual withdrawal limit, but withdrawals over the minimum amount are subject to withholding tax.
Take control of your retirement income.
RRIFs are a powerful way to turn the funds in your RRSP into your own personal pension plan. Here's what a properly planned RRIF can help you do:
- Receive a monthly income as you start to draw from your RRIF.
- Determine a schedule that meets your needs for an adequate income over the long-term.
- Earn interest from investments held in your RRIF.
- If you wish, have additional control through a self-directed RRIF that can include a wide variety of investments.
Open up a locked-in plan with a LIF (Life Income Fund).
RRIFs are used to transfer your funds from your individual RRSPs. LIFs are used to transfer from a Locked-in Registered Savings Plan (LRSP), Locked-In Retirement Account (LIRA), and locked-in group RRSPs or other employer-sponsored pension assets. (There is also a Locked-In Retirement Income Fund or LRIF, in addition to LIFs, but these aren’t available in British Columbia.)
Converting your savings to income is a big step and can be confusing. It's very important that you minimize the tax bite in coming years and ensure that your money will be accessible when it's time to make each required withdrawal.