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Should RRIF withdrawals be based on the younger spouse’s age?


When can you convert an RRSP to a RRIF?

Registered retirement savings plans (RRSPs) are tax-deferred accounts meant primarily to fund retirement with withdrawals taken at that time. You can, though, take an RRSP withdrawal at any time. There are no restrictions on withdrawals, except if you have a locked-in retirement account (LIRA) that came from a pension plan transfer. The only drawback of RRSP withdrawals is that they are considered fully taxable income, with the exception of eligible withdrawals for a home purchase or post-secondary education.

You can contribute to an RRSP until the end of the year you turn 71. By no later than December 31 of the same year, you must cash in your entire account (not advisable), buy an annuity from an insurance company (not common) or convert your RRSP to a registered retirement income fund or RRIF (most common).

You can convert an RRSP to a RRIF before age 71, and this is common for retirees in their 60s. As you obviously know, Bernie, you can base your withdrawals on either your age or your spouse’s age. A spouse can be a legally married spouse or a common-law spouse.

What are the minimum RRIF withdrawals?

The minimum RRIF withdrawals are a set percentage of your account’s value on December 31 of the previous year. The withdrawals rise each year.

For example, at age 65, the minimum withdrawal is 4% of your account value. At age 71, it is 5.28%. By age 80, the minimum is 6.82%, and it is 11.92% by age 90. The result is that the account value generally starts to decline over retirement. The government also gets to tax the tax-deductible contributions and growth that accumulated over the years.

If your spouse is younger than you and you base your withdrawals on their age, Bernie, the minimum withdrawals are lower. You make this election when you convert your RRSP to a RRIF, along with deciding how frequently you want to take withdrawals (monthly, quarterly, annually) and whether you want any additional withholding tax to be taken by the financial institution. There is no tax required on minimum withdrawals, but you may owe tax when you file your tax return.

It bears mentioning that the RRSP-to-RRIF conversion deadline (December 31 of the year you turn 71) is based on your age, even if your spouse is younger. Only the withdrawals can be based on a younger spouse’s age, not the conversion deadline.

Interestingly, if you have a younger spouse who has a spousal RRSP, you can contribute to their RRSP as long as you have RRSP room, even if you are 72 or older. However, you can no longer contribute to your own RRSP.


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