The Age 71 RRSP-to-RRIF Conversion Requirement

The RRSP is an excellent tool for building retirement savings with tax-deferred growth. However, it isn’t designed to be permanent. Canadian tax rules require that by December 31 of the year you turn 71, your RRSP must be converted to a Registered Retirement Income Fund (RRIF), an annuity, or fully withdrawn.

This mandatory conversion is a significant retirement planning milestone. Understanding the rules and implications ensures you transition smoothly from saving to spending—without triggering unnecessary taxes.

The Age 71 RRSP Conversion Rule: What You Need to Know

The Canada Revenue Agency (CRA) requires you to close or convert your RRSP by December 31 of the year you turn 71. At this point, you have three options:

Option	Description	Tax Impact
Convert RRSP to RRIF (most common)	Continue growing investments tax-deferred while taking structured withdrawals	Withdrawals fully taxable as income
Purchase an annuity	Provides guaranteed lifetime income	Payments taxed as income annually
Withdraw full RRSP balance as lump sum	Take all funds at once	Entire amount taxed in the year of withdrawal, likely at a high rate

For most retirees, converting to a RRIF is the preferred option because it allows you to continue growing investments tax-deferred while providing flexible income through structured withdrawals.

Why This Rule Exists

RRSPs are designed for tax-deferred retirement savings, not indefinite tax sheltering. The government mandates conversion to ensure these savings are eventually drawn down and taxed as income.

The age 71 rule strikes a balance—giving you decades to accumulate tax-deferred growth, while requiring income to be generated from these funds in retirement.

Implications of Converting Your RRSP to a RRIF

Converting to a RRIF brings several important implications for your retirement plan:

Mandatory minimum withdrawals begin in the following year (age 72), with percentages increasing annually.
Withdrawals are fully taxable as income.
You maintain control over your investments and can withdraw more than the minimum if needed.
Conversion timing can impact government benefits, such as Old Age Security (OAS), due to increased taxable income.

At Optimize, we help you plan this conversion proactively, ensuring it aligns with your income needs and tax strategy.

Planning Considerations Before Age 71

While conversion is mandatory by age 71, it may be strategic to convert earlier or withdraw funds from your RRSP before this deadline to:

Manage tax brackets by spreading withdrawals over more years.
Reduce the size of future mandatory RRIF withdrawals, lowering potential OAS clawback exposure.
Align retirement cash flow with lifestyle needs, rather than waiting for the forced conversion.

Optimize helps you explore whether early conversion or withdrawals make sense in your personal situation.

How Optimize Helps You Navigate the RRSP to RRIF Conversion

At Optimize, we don’t just focus on the age 71 deadline—we help you make the transition work for you. Our approach includes:

Planning your RRSP to RRIF conversion in advance, ensuring it fits your broader retirement strategy.
Modeling the tax impact of required RRIF withdrawals, so you stay ahead of potential tax liabilities.
Advising on early withdrawals or partial conversions, when beneficial.
Coordinating your RRIF strategy with other income sources, smoothing out your retirement cash flow.
Reviewing your plan regularly, adapting as your retirement evolves.