Helping you with year-end RRIF planning

By ATB Wealth 21 December 2022 2 min read


A Registered Retirement Income Fund (RRIF) is a tax-deferred investment account that transitions investors from retirement savings to retirement income. A Registered Retirement Savings Plan (RRSP) must mature by December 31 of the year you turn 71. Transferring your RRSP to a RRIF is one of the options available for establishing a retirement income stream from your registered investments.


Outlined below are three planning opportunities that may allow you to maximize the use of your RRIF:


Turning 71 years of age

If you will be turning 71 this year, you only have until the end of the year to make your final RRSP contribution. The deadline that applies to most other RRSP contributors (60 days after year-end) does not apply to you.

In some cases, it may make sense for those that are 71 to over-contribute to their RRSP before the end of the year and prior to transferring the RRSP to a RRIF. The first $2,000 of over-contribution has no penalty and, provided that you have earned income in the current year which would generate contribution room in the subsequent year, you would be able to deduct the contribution in the following tax year. You would still be subject to the 1% penalty tax and would be required to complete CRA form T1-OVP to report the over-contribution. The 1% penalty tax would apply for only one month, however, if the contribution was made in December.


Over age 71

If you are over 71 and no longer eligible to contribute to your own RRSP but still have available RRSP contribution room, you may have another option. If you have a spouse that is 71 or younger, you may be able to decrease taxable income by contributing to a spousal RRSP. This option is available until the end of the year that the younger spouse turns 71.


Age 71 or under

Although initiating income from your RRSP is not a requirement until age 72, those that are age 65 or older and do not receive income from an employer pension plan may wish to consider transferring some of their RRSP to a RRIF. By transferring enough to initiate a $2,000 RRIF withdrawal each year, a corresponding pension income credit will be generated. This tax credit will offset some, if not all, of the tax payable on the $2,000 of income.

This strategy is not for everyone. The payments will increase an individual’s income level and may affect your Old Age Security (OAS) and other government benefits. If this strategy is implemented, it is recommended that the $2,000 RRIF payment be transferred in-kind to a Tax Free Savings Account (TFSA) to continue its tax-efficient growth. Ultimately, you need to be aware of the consequences to your retirement savings if the payments are spent rather than reinvested.


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