- An RRSP is a tax-deferral vehicle, not a permanent tax shelter.
- When your RRSP matures, you generally have three choices, and you can also combine them by splitting your RRSP across more than one option.
- A RRIF holds the same kinds of investments your RRSP did — it isn't a different investment product, just a different withdrawal structure.
An RRSP isn't meant to last forever. The Income Tax Act requires every RRSP to mature by the end of the year in which the holder reaches an age set out in the legislation, and most Ontarians meet that deadline by converting their RRSP into a Registered Retirement Income Fund, or RRIF. The conversion isn't optional, but it's also not something to leave until the last minute — the choices you make at maturity shape how your retirement income is taxed for years afterward.
This article explains what a RRIF is, what your options are at RRSP maturity, and how minimum withdrawals work once the account converts.
Why RRSPs Have a Maturity Date
An RRSP is a tax-deferral vehicle, not a permanent tax shelter. The Income Tax Act sets an age by which every RRSP holder must wind down the plan — converting it, cashing it out, or using the funds to buy an annuity. Because that age threshold can be adjusted through legislative change over time, confirm the current maturity age directly with the CRA or your RRSP issuer rather than relying on a number here; what matters for this article is the mechanics that follow once maturity arrives.
Your Three Options at Maturity
When your RRSP matures, you generally have three choices, and you can also combine them by splitting your RRSP across more than one option.
- Convert to a RRIF. The most common choice. Your RRSP assets transfer into a RRIF, keeping their tax-deferred status, and you begin taking mandatory minimum withdrawals starting the following calendar year.
- Purchase an annuity. An insurance company pays you a fixed income stream, typically for life or for a set term, in exchange for your RRSP funds.
- Cash out the RRSP entirely. The full value becomes taxable income in the year you cash out — for most people, this results in a large, often unwelcome tax bill, since the entire amount is taxed at once rather than spread over future years.
Doing nothing is not a safe option: if you take no action by the deadline, your financial institution will typically be required to treat the plan as fully collapsed, triggering the full cash-out tax consequence by default.
How a RRIF Works Once It's Set Up
A RRIF holds the same kinds of investments your RRSP did — it isn't a different investment product, just a different withdrawal structure.
- Mandatory minimum withdrawal. Each year, you must withdraw at least a minimum amount, calculated as a percentage of the RRIF's value that increases as you age. The exact percentage schedule is set by CRA regulation and adjusted periodically, so confirm the current factor for your age directly with your RRIF issuer or the CRA rather than assuming a fixed rate.
- No maximum (in most cases). Unlike some other registered products, a regular RRIF has no upper withdrawal limit — you can withdraw more than the minimum if you need to, though larger withdrawals mean more tax in that year and less tax-deferred growth going forward.
- Withholding tax on withdrawals above the minimum. The mandatory minimum withdrawal itself is generally not subject to withholding tax at source, but amounts withdrawn above the minimum are — the funds are still fully taxable as income either way when you file.
- Continued tax deferral on unwithdrawn funds. Assets that remain in the RRIF continue to grow tax-deferred, just as they did in the RRSP.
RRIF vs. Annuity vs. Cashing Out
| Feature | RRIF | Annuity | Cash out |
|---|---|---|---|
| Continued tax deferral on remaining funds | Yes | No (income only) | No |
| Flexibility to control withdrawal timing | High (above the minimum) | Low (fixed schedule) | N/A — one-time event |
| Investment control | You choose investments | Insurer manages funds | N/A |
| Immediate full tax hit | No | No | Yes, in year of cash-out |
| Estate flexibility | Remaining balance passes to beneficiaries | Depends on annuity terms | N/A |
Planning Considerations Before You Convert
- Income splitting. RRIF income can, in some circumstances, be split with a spouse for tax purposes — a strategy worth discussing with a tax professional before you finalize your withdrawal plan.
- Timing your first withdrawal. You are not required to take a minimum withdrawal in the same calendar year the RRIF is opened, only starting the following year — useful to know if you're converting late in the year.
- Multiple RRIFs. If you hold RRSPs at more than one institution, you can convert some and leave others as RRSPs (until the final deadline), which can help manage cash flow in early retirement.
- Impact on income-tested benefits. RRIF withdrawals count as income and can affect benefits or credits that are calculated based on your total income, so factor this into how much you withdraw above the required minimum.
Frequently asked questions
Do I have to convert my entire RRSP to a RRIF at once?
No. You can convert only part of your RRSP holdings and leave the rest as an RRSP, as long as you meet the overall maturity deadline for any remaining RRSP funds. Splitting across a RRIF and an annuity, or across multiple RRIFs, is also common.
Can I still contribute to a RRIF the way I did to my RRSP?
No. Once funds are in a RRIF, you cannot make new contributions to it. If you still have RRSP contribution room and want to keep contributing, you'd do so to a separate RRSP you haven't yet converted, subject to the overall age-based deadline.
What happens to my RRIF when I die?
A RRIF can transfer to a named spouse or common-law partner beneficiary on a tax-deferred basis, continuing as their own RRIF or RRSP. Without a qualifying spousal beneficiary, the RRIF's value is generally included in the deceased's income for their final tax return, subject to certain exceptions. An estate planning lawyer can help make sure your beneficiary designations reflect your intentions.
Is converting to a RRIF the same as retiring?
No. Converting your RRSP to a RRIF is a tax and income-planning requirement tied to age, not to your employment status. Many people convert while still working, and simply delay drawing more than the mandatory minimum until they actually need the income.
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