BMO Nesbitt Burns
401-115 Hurontario Street
Your RRSP Maturity Options
At some point you’ll want to use the money you’ve accumulated in your RRSP for income in retirement. By law, you must convert your RRSP to a retirement income option by December 31st in the year you celebrate your 71st birthday. Be sure to review your options carefully before maturing your RRSP.
Your retirement income options
You will be required to take a minimum amount into income each year no matter which retirement income option you select. Canada Revenue Agency allows you to choose one or a combination of the following:
Which retirement income options you choose will depend on your income from other sources, the amount of income you need from your RRSP assets and your tax situation.
- A lump sum cash withdrawal. This amount will be fully taxed in the year you receive it.
- A life annuity. This is a contract that guarantees a fixed income payment for the rest of your life. It is based on your age and the interest rates when you enter into the contract.
- A Registered Retirement Income Fund (RRIF). An RRIF lets you continue to control how your funds are invested. You have the same eligible investments as with your RRSP. While there is a minimum withdrawal, there is no maximum limit. An RRIF gives you the most flexibility in managing cash flow in retirement.
What happens to your registered savings when you die?
At your death the remaining fair market value of your RRSP or RRIF is included as income in your final tax return. For many people, this pushes them into the highest tax bracket, often causing them to pay more tax in the year of death than when living. Is this what you want for your registered assets?
Name your spouse as beneficiary
Plan to transfer the remaining funds to your spouse tax-free by naming him or her as the beneficiary of your RRSP or RRIF. At your surviving spouse's death any remaining value is fully taxable in his or her final tax return.
Insure against the tax liability
You can purchase life insurance to cover the tax liability of your registered assets. The cost of life insurance can be a fraction of the cost of paying the tax that will be due at death. And either you or your heirs can pay for the policy.
To learn more
If you'd like to preserve the value of your registered assets, consider life insurance as a cost-effective solution. To learn more about this strategy, we can introduce you to one of our Estate & Insurance Advisors. For more information or to arrange an appointment, please contact us directly: Helen Fraser 705 446 1751 or 647 519 3190.