RRSP Maturity Options
On December 31st in the year an RRSP annuitant turns 71 years of age, his/her RRSP has legally matured and the account must be converted into one of the maturity options available.
Upon the RRSP maturity date, the Canada Revenue Agency (CRA) dictates that the annuitant must begin receiving an income from the accumulated registered assets. To begin receiving a taxable income from the registered assets, the CRA requires the RRSP to be converted into any one or any combination of the following maturity options:
- Transfer the RRSP assets into a Registered Retirement Income Fund (RRIF) and begin receiving a minimum annual payment from the RRIF account.
- Use the assets of the RRSP account to purchase an annuity and begin receiving taxable payments.
- Withdraw the RRSP assets, include their current market value in the annuitant’s income tax return, and pay the resulting income tax.
The following diagram outlines RRSP maturity options:
The CRA guidelines also provide for the conversion of an RRSP into an annuity or RRIF at any time prior to the plan’s maturity date. You do not have to wait until you are 71 years of age to begin receiving an income from your registered retirement savings.
Converting your RRSP into either an RRIF or an annuity is considered to be a transfer of assets that remains sheltered from income tax, therefore, converting your RRSP savings does not trigger a taxable event and your taxable income is not impacted by the conversion. In addition, your financial institution will not deduct withholding tax from the RRSP assets transferred, as the transfer remains sheltered in registered accounts.
Transferring assets from an RRSP to a RRIF is not reported in your income tax return and your financial institution will not issue any income tax slips or contribution receipts.
There is tremendous flexibility in converting your RRSP savings, but you cannot withdraw the RRSP savings in cash and later re-contribute the funds to an RRIF or annuity. Any funds withdrawn from your RRSP must be included in your taxable income.
For individuals older than 71 years of age, you can no longer qualify as an annuitant for an Individual RRSP and, as a result, you are no longer able to contribute to an RRSP for yourself, even though you may still earn allowable RRSP contribution room in subsequent years.
However, if your spouse or common-law partner is 71 years of age or younger, even though you are over 71, you can still contribute to a Spousal RRSP and claim the resulting contribution credit on your personal income tax return.
For more information on maturity options see the FAQ section.