Do you know what the tax complications may be as you turn your RRSP (Registered Retirement Savings Plan) to a RRIF (Registered Retirement Income Fund)?
In your working career, you earned the income and saved taxes by purchasing a RRSP (Registered Retirement Savings Plan) to offset the yearly personal taxes. Based on your income per year, Revenue Canada had given an allowance (available room) for contributing to your Registered savings plan. As your income changes from employment to possible pensions, Government pensions (Canada Pension, Old Age Security) and your RRSP will become an income product as well.
Did you know you MUST convert your RRSP to an RRIF (Registered Retirement Income Fund) in the year you turn 71? True, you can make the final payment to your RRSP, but, that same year, you must convert all your RRSP holdings into an RRIF, and start to take income from them on a monthly basis. This income is taxable.
Seniors fall into the “far too much income” bracket at this stage in their life. If they haven’t planned ahead this could be very costly. They could lose those Government pensions (clawbacks) due to the amount of taxable income coming into the household.
As always, it is beneficial to talk to someone who can assist you to plan your retirement well before you reach 55 or 60 years of age. Taking action at this age will enable the correct sequence of events leading up to a full and comfortable income in retirement.
For more information, here is a link to set up an appointment firstname.lastname@example.org