Your RRSP becomes an RRIF at 71 - here's what that means

Your RRSP stops being an RRSP the year you turn 71. The CRA forces it to become a RRIF - a Registered Retirement Income Fund - whether you want withdrawals or not.

The conversion happens automatically on December 31st of the year you turn 71. One day it's an RRSP where you control when money comes out. The next day it's a RRIF where the government sets minimum withdrawals you have to take every year.

What changes when your RRSP becomes a RRIF

A RRIF is the same money, same investments, same tax-sheltered growth. The only difference: mandatory minimum withdrawals that start the year after conversion.

At 72, you must withdraw at least 5.4% of your RRIF's value. At 75, it's 5.82%. At 80, it's 6.82%. The percentage keeps climbing - by 90, you're withdrawing 11.92% per year.

These aren't suggestions. Miss the minimum withdrawal and the CRA hits you with a 1% penalty per month on the shortfall. Take out $8,000 when you owe $10,000, and you pay $20 per month until you catch up.

Every withdrawal gets taxed as regular income at your marginal rate. If you're in Ontario pulling $30,000 from your RRIF on top of $25,000 in other income, roughly $6,500 goes to tax.

Why the CRA forces this

The government gave you tax deductions when money went into your RRSP. They want their tax back eventually. The RRIF ensures they get it.

Without forced withdrawals, you could leave RRSP money growing tax-free indefinitely, then pass it to beneficiaries who'd also delay withdrawals. The CRA cuts that off at 71.

Your options at 71

You don't have to convert everything to a RRIF. At 71, you can:

• Convert to a RRIF (most common)
• Buy an annuity with some or all RRSP funds
• Withdraw everything as cash (terrible idea - massive tax hit)
• Mix these options

Most people go with the RRIF conversion because it keeps investments growing tax-sheltered while meeting CRA requirements.

The spouse exception

If you're married to someone younger, you can base RRIF withdrawals on their age instead of yours. Marry someone 10 years younger and your mandatory withdrawals start lower and climb slower.

This isn't automatic. You have to elect it when converting to a RRIF, and you can't change your mind later.

What this means for your 60s planning

Knowing your RRSP becomes a RRIF at 71 shapes decisions in your 60s. If you retire at 65 with $400,000 in RRSPs, that money will start coming out whether you need it or not six years later.

Some people begin strategic RRSP withdrawals in their 60s to spread the tax hit. Take $20,000 per year from 65 to 71, and there's less in the RRIF to generate forced withdrawals later.

The 2025 RRSP contribution deadline is March 3rd, 2025. If you turn 71 this year, that's your last chance to contribute.

Once you're 71, retirement account strategy shifts from accumulation to withdrawal management. The RRIF conversion marks that shift - your RRSP money starts its mandatory journey back to taxable income.