Proteau Financial Group
There’s no minimum age requirement to open a Registered Retirement Income Fund (RRIF). As for the maximum age, retirees who wish to convert their Registered Retirement Savings Plan (RRSP) to a RRIF must do so by the end of the year they turn 71.
In fact, waiting until age 71 to open a RRIF is often the preferred choice for retirees in their 60s who can support their retirement income from favourably taxed sources, such as non-registered investments. This strategy delays RRIF withdrawals as long as possible, which is desirable because these withdrawals, including mandatory minimum withdrawals, are more highly taxed as income.
Opening a RRIF at age 71 isn’t for everyone. For some retirees, it makes sense from a tax perspective to open a RRIF in their 60s, even if the withdrawals aren’t needed as income. It’s all about projecting whether mandatory RRIF withdrawals down the road will push you into a higher tax bracket. If so, you could be better off making earlier withdrawals to draw down RRIF assets and consistently pay tax at a lower marginal tax rate.
You may wish to open a RRIF at age 65 to benefit from the pension income tax credit, which applies to $2,000 of eligible pension income annually. If you transfer just enough funds from your RRSP to enable RRIF withdrawals of $2,000 each year, you can claim the maximum credit. Also, if it suits your situation, you can withdraw $4,000 of RRIF funds each year, transfer $2,000 to your spouse, and both claim the pension income credit.