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An exit strategy for your RRSP

Published on: December 13th, 2019

When is the best time to begin converting your Registered Retirement Savings Plan (RRSP) assets into retirement income? There is no one right or wrong answer, but here are your options.

Age 71 at latest
You’re not required to convert your RRSP into a source of income — usually a Registered Retirement Income Fund (RRIF) or annuity — until the end of the year in which you turn 71. Delaying until then allows your assets to grow and compound on a tax-deferred basis. Provided you have available contribution room, you can continue to add to your RRSP in the intervening years. And if your spouse is younger than you, you may be able to contribute to a spousal RRSP beyond the end of your 71st year. The typical retirement age, however, is 65. That’s when your Old Age Security (OAS) payments will kick in, providing you meet the eligibility requirements.

Before age 65
You might choose to retire before age 65, or circumstances (health issues, for example) might make converting sooner the best option because you need the income payments. You can then use your RRIF or annuity payments to supplement other income sources and fully enjoy your retirement lifestyle right from the start.

With professional advice, you can avoid the extremes — withdrawing too much money too soon and depleting the funds, or waiting too long and taking so little money that you don’t enjoy your retirement. A sound retirement income plan, based on your unique needs, will allow you to make the most of your retirement savings.

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