The year your RRSP stops being your decision

An RRSP is the one retirement account with an expiry date. For forty years it is entirely your business how much goes in and when anything comes out. Then a specific date arrives and the account cannot continue in that form — and unlike most tax deadlines, missing this one has a consequence that cannot be undone by filing something late.

The date is 31 December of the year you turn 71.

The deadline, precisely

The Canada Revenue Agency puts it plainly: 31 December of the year you turn 71 is the last day you can contribute to your own RRSP. By the end of that year the plan has to be wound up into something else.

Two details are worth being exact about, because both get muddled:

• It is the year you turn 71, not your 71st birthday. Someone born in November has until 31 December of that same year — not until the following November.
• It is a calendar-year deadline, not the usual RRSP contribution deadline in the following March. The March date does not extend it.

Three options, and only three

At the deadline the money goes one of three ways. It can be transferred to a registered retirement income fund, used to buy an annuity, or taken in cash. The options can also be combined — part to a RRIF, part to an annuity — which is often the sensible answer and is frequently not mentioned.

The RRIF

This is what most people do. A RRIF is an arrangement between you and a carrier — a bank, trust company or insurance company — registered with the CRA. You transfer property into it from an RRSP, and the carrier makes payments to you.

The characteristics that matter:

• Earnings inside a RRIF are not taxed while they remain there. The shelter continues.
• Amounts paid out are taxable on receipt. The tax is deferred, not forgiven.
• The investments can usually carry over. Converting is a change of account type, not a forced sale of what is inside it — a point worth confirming with your carrier, because the common fear is that everything must be liquidated.
• You can hold more than one, and self-directed RRIFs exist, broadly following the same rules as self-directed RRSPs.

A RRIF also generates income that can qualify for the pension income amount once you are 65 or over, and that may become eligible for pension income splitting — neither of which is true of money sitting in an RRSP.

The annuity

An annuity converts the capital into a contracted stream of payments. It removes the investment decisions and the longevity risk: the payments continue regardless of how markets perform or how long you live.

What you give up is flexibility and, generally, the balance. The capital is gone in exchange for the income stream, subject to whatever guarantee period or survivor provision the contract contains. Annuity payments are taxable, and can also qualify for the pension income amount at 65 or over.

The decision between a RRIF and an annuity is a genuine trade-off between control and certainty, it depends on your other income, your health and your view of your own longevity, and it is exactly the kind of question to put to an advisor rather than to an article.

Taking the cash — and why people regret it

You can simply withdraw the whole thing. The entire amount becomes taxable income in that year.

For a large RRSP, that is usually the worst available option by a wide margin: a lifetime of sheltered savings lands on one tax return, very likely at the highest marginal rate the person will ever pay, and with knock-on effects on the OAS recovery tax and any income-tested benefit. For a small residual balance it can be perfectly reasonable. The size of the account is what decides it.

The minimum withdrawal

Once there is a RRIF, a minimum amount has to come out each year, starting the year after the RRIF is entered into. The minimum is a prescribed percentage of the account value, and the percentage rises with age — so the mandatory withdrawals grow over time, both as a share and often in dollars.

Three implications:

1. It is a floor, not a ceiling. You can always take more; you cannot take less.
2. It is taxable income whether or not you need it. The withdrawal is compulsory even in a year when the money is not wanted, which is what makes RRIF income awkward for anyone near an income threshold.
3. The percentage is based on age. Where one spouse is younger, the minimum can generally be calculated on the younger age, which lowers the mandatory withdrawal. It is a straightforward election to ask the carrier about and it is easy to miss at set-up.

Where it ripples outward

RRIF income is ordinary taxable income, so it counts toward net income — and net income drives several other things:

• The OAS recovery tax, which begins above a published threshold.
• The Guaranteed Income Supplement, which is income-tested and recalculated annually.
• The age amount, which reduces as income rises.
• Provincial income-tested programmes, which vary.

This is why the conversion is not purely a product decision. The shape of the withdrawals over the following twenty years has tax and benefit consequences that compound, and the year before the deadline is the right time to look at them — not the year after.

The spousal RRSP wrinkle

The deadline applies to your own RRSP. Where your spouse or common-law partner is younger than 71, contributions to a spousal RRSP can generally continue, subject to your available contribution room.

For a couple with an age gap it is one of the few genuinely useful structural options still open at 71, and it is routinely overlooked because the conversation at that point is all about winding down rather than continuing.

If you do nothing

Nothing is not a neutral option. An RRSP that is not converted by the deadline does not quietly continue — the consequence is a deemed inclusion of the plan’s value in income, which produces exactly the outcome described in the cash-out section, without anybody having chosen it.

Carriers generally write to clients well in advance, and many will convert to a RRIF by default. Relying on that is a poor plan: a default conversion is unlikely to reflect either the younger-spouse election or the split between a RRIF and an annuity.

What to do, and when

At 69 or 70, not at 71: find out what the plan is worth, ask the carrier what a RRIF with the younger spouse’s age would require as a minimum, and work out what the withdrawals do to your net income against the thresholds that matter to you. The deadline itself is trivially easy to meet. It is the shape of what comes after it that is worth the thought.

Candy On Bone is published by SPV Consulting Estonia OÜ and provides general information about Canadian public pensions and taxes. It is not a Government of Canada, Service Canada or Canada Revenue Agency publication and has no affiliation with them. Nothing here is financial, tax or legal advice, and no figure in this article is a promise, quotation or entitlement for any individual reader. Benefit amounts and tax rules depend on personal circumstances and change over time; the figures cited were taken from the official sources listed above on 19 October 2026. There is no application, registration or fee on this website for any government benefit. Never give your Social Insurance Number, banking details or government account credentials to a website in response to an article. Use My Service Canada Account or contact Service Canada for anything concerning your own payments.