Why You Might Want to Start Your RRIF Before Age 71

You must convert your RRSP into a Registered Retirement Income Fund (RRIF) or life annuity by December 31 of the year you turn 71. What many people don’t realize is that it can sometimes make sense to start a RRIF earlier.

There is no minimum age to convert an RRSP to a RRIF. Once you open a RRIF, you must withdraw at least the government-prescribed minimum each year starting the following year. The minimum is based on your age or your younger spouse’s age, if you choose that option when opening the RRIF.

Starting a RRIF before 71 isn’t about paying more tax now. It’s about paying less tax over your lifetime and reducing the taxes your family may face in the future.

You Can Split RRIF Income With Your Spouse After Age 65

Once you turn 65, RRIF income becomes eligible pension income, which means you can split up to 50% of it with your spouse or common-law partner. Your spouse does not need to be 65. Only the RRIF owner must be age 65 or older. RRSP withdrawals cannot be split. Only RRIF withdrawals can be split (after age 65).

Income splitting can:

• Reduce your combined tax bill

• Keep both spouses in lower tax brackets

• Reduce or prevent OAS clawback

• Increase after-tax household income

You can also choose to base the minimum withdrawal on your younger spouse’s age, permanently lowering the minimum and giving you better control over your taxable income.  You can also transfer your RRIF back into an RRSP if you have not reached the age of 71 if required.

Early RRIF Withdrawals Can Reduce the Tax Bill on Death

When someone dies, the remaining RRSP/RRIF is usually taxed as income all at once (unless transferred to an eligible spouse or dependent). This often pushes income into the highest tax bracket, creating a significant tax bill.

Example – Mary dies with $550,000 in her RRIF (no spouse). At a tax rate of 53.53%, her estate pays approximately $294,414 in tax, leaving only $255,600 for her beneficiaries.

Taking planned RRIF withdrawals earlier at lower tax rates can reduce the size of the account at death and substantially reduce estate taxes.

Early RRIF Income Helps You Plan for the Long Term

If you wait until 71, your RRIF minimums may grow very large, which can:

• Push you into higher tax brackets

• Trigger OAS clawback

• Increase lifetime taxes

• Reduce flexibility later in life

An early RRIF withdrawal strategy helps smooth taxable income over time instead of letting it spike later.

You May Be in a Lower Tax Bracket in Your Late 60s

Between age 60 and 71, many people:

• Are retired

• Have modest income

• Haven’t started CPP or OAS

This creates a low-tax window, ideal for drawing from an RRSP/RRIF. It may also allow you to defer CPP and OAS beyond age 65 creating larger lifelong benefits and inflation protection.

Coordinating RRIF withdrawals with CPP, OAS, pensions, TFSAs, and non-registered accounts is key to maximizing after-tax income.

Helps Reduce OAS “Clawback” Later

RRIF minimums rise significantly as you age. Early RRIF withdrawals can:

• Reduce future mandatory minimums

• Help keep income below the OAS clawback threshold

• Protect OAS and GIS benefits

Why Taking More Than the Minimum After Age 71 Can Also Make Sense

Even after mandatory minimum withdrawals begin at age 71, there are many situations where withdrawing more than the minimum is beneficial. The reasoning is very similar to the benefits of starting RRIF income early.

• You are currently in a lower tax bracket

• You want to prevent future OAS clawback

• You want to reduce taxes on death.

• You are delaying CPP and/or OAS

• You want more tax-efficient savings options

• You want to reduce forced withdrawals later in life

• Your spouse is in a lower tax bracket

Summary

When Starting Early May Be Right for You

1. You want to split income with your spouse

2. You’re in a low tax bracket in your 60s

3. You have a large RRSP/RRIF

4. You want to avoid OAS clawback

5. You want to reduce estate taxes

6. You want smoother, more predictable lifetime income

7. You want to coordinate RRIF income with delaying CPP/OAS

When You Might Wait Until 71

1. You’re still working and earning a high income

2. Your RRSP is small

3. You plan to spend savings naturally over time

4. You prefer to maximize tax-deferred growth

5. Your future RRIF minimums are unlikely to cause tax or clawback issues