If you already have a good company pension, and do not need to supplement it with the RRSP, should you still convert the RRSP to RRIF or should you just start cashing the RRSP out?

April 17, 2023


Great question and it really depends on your situation.  For many of my clients in the same situation I have worked on many of the trade offs you propose.  However, I have found that depending on when you begin drawing your pension(s) and what type of pension you have, you may be surprised to hear that what seemed like an adequate cashflow initially may fall short years down the line.  Having that extra money in the RRSP may turn out to be more important later, or provide extras not originally anticipated. 


Assuming the above is not the case, and it will be surplus income, we need to understand what your current and future tax rates are.  If it is higher now versus later, you may want to hold on and take it later, or you may defer CPP and OAS pensions and pull the money out in chunks like you suggested now to lower your future taxable income (and possibly reduce or eliminate OAS claw backs) and get higher pensions later. 


Putting tax aside, if there are things you could use the money for now, and you are sure you will not need that tax sheltered growth of capital later in the future, it might make sense to withdraw some of this money.


Finally, there are situations (such as lowering future OAS claw backs) where moving out some of the money from your RRSP if you have room in your TFSA can make sense; with the added benefit of being able to designate a beneficiary allowing for the transfer of assets outside of probate.


When assisting clients with all these scenarios, we usually build comprehensive Wealth Plans that can take into consideration compounding, inflation and tax that make these decisions easier. 


In general, though, I typically recommend its better to have a surplus then a deficit, so I likely would tell you to leave it in the RRSP.

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