What happens to my Registered Retirement Savings Plan (RRSP) when I retire?

Aeronn Zlotnik
B.A.

When you retire you have 3 options when it comes to your RRSP. The first option would be to cash it in. If you do this you will receive the entire value of your RRSP portfolio. You will; however, have to pay income tax on the full amount of the withdrawal in the year that you take out the funds.

The second option would be to purchase a life or term annuity. The annuity would pay you an amount of income for either a predetermined number of years or for the rest of your life. Only the amount of income that you take in any given year will be taxable.

The third and most common option is to convert your RRSP to a Registered Retirement Income Fund (RRIF). You can continue to invest funds in your RRIF the same way it was invested in your RRSP. The only difference is that a RRIF requires that you withdraw money from the plan every year. The percentage you are required to take out increases every year.

It is important to note that if you retire and do not need the income, you can wait until you are 71 years old before you are required to pick any of the options discussed above.