Skip To Main Content
senior couple using laptop and a calculator to go over their finances together
Financial literacy

How best to convert RRSP to RRIF

Depending on your situation, it might make sense to convert your RRSP earlier or later. Here are some key factors to consider.

senior couple using laptop and a calculator to go over their finances togetherWhen you’re setting up your RRIF and before you have received any payments, you can select either your own age or your spouse or common-law partner’s age as the basis for the calculation (Getty Images/PeopleImages)

If you decide to convert your RRSP into an RRIF, there are a number of budgetary and income-tax considerations you should take into account to guide your timing. For example:

  • You can convert your RRSP early (before age 71). You don’t need to convert the entire plan. As Michael Deepwell, CPA, CA, principal at Lamp Financial, explains, you can convert a portion to minimize the annual minimum withdrawals until age 71.
  • If you are 65 years of age or older, you can also do a partial conversion to receive the pension income-tax credit, explains Deepwell. (This is a federal, non-refundable tax credit on the first $2,000 of pension income. There is also a provincial credit although the amounts vary by province/territory.)
  • If you want to lower your overall household tax bill, you can notionally split up to 50 per cent of your eligible pension income (which includes RRIF from age 65 onwards) with your spouse or common-law partner, says Deepwell. 
  • You can base your withdrawals on your spouse’s age. When you’re setting up your RRIF and before you have received any payments, you can select either your own age or your spouse or common-law partner’s age as the basis for the calculation. “If your spouse is younger, it can be useful to use their age, as it results in a lower minimum withdrawal rate,” says Deepwell.

Of course, any techniques you use or decisions you make about how to use your RRIF will necessarily be very personal ones, based on your own sources of income and your expected lifestyle. “Everyone has their own map,” says Deepwell. “If you plan yours out, you’ll have a precious guide to navigate your retirement years.” 

PREPARE FOR RETIREMENT

CPA Canada has a full suite of resources that can help with retirement planning, including Understanding RRSPs and TFSAs and The Procrastinator’s Guide to Retirement. To plan a financial literacy session in your community, see Planning for retirement.