Age 71: A turning point for your RRSP – What you need to know
You might know about the deadline for closing your RRSP. But do you know what to do with the money? Here are your options.
Turning 71 marks an important milestone in your retirement journey. It’s the point when your Registered Retirement Savings Plan (RRSP) must transition from a savings vehicle into an income source.
While that may sound procedural, the decisions you make now can shape your financial security for decades to come.
Whether your goal is steady income, tax efficiency, or flexibility, understanding your options—and how they fit your broader retirement plan—is key to building lasting peace of mind.
What happens to your RRSP at age 71?
By December 31 of the year you turn 71, the Canada Revenue Agency (CRA) requires you to close or convert your RRSP. Once closed, you can no longer contribute to it, and you must choose one or more of the following options:
- Withdraw the funds in cash.
- Transfer it to a Registered Retirement Income Fund (RRIF).
- Use it to buy a payout annuity.
Before you decide which route to take, it’s important to get all the facts plus getting professional advice from an advisor. Why? Because once you’ve committed to an option, you may not be able to change your mind.
Let’s explore each option, its pros & cons, and how you might blend them.
| Cash withdrawal | You can take your RRSP savings as a lump-sum withdrawal, but the amount is fully taxable in the year you receive it.
This option may suit you if you have smaller RRSP balances or specific short-term needs, but it can significantly increase your tax bill and reduce long-term income potential. |
|---|---|
| Convert to a RRIF | RRIFs let your investments continue to grow tax-deferred while providing a steady income stream. You must withdraw at least a minimum amount each year based on your age.
You can decide how your funds are invested and make additional withdrawals—but they may carry market risk (e.g. potential investment loss) and longevity risk. |
| Purchase a payout annuity | A payout annuity converts your RRSP savings into guaranteed income for a fixed period or for life. Once established, you’ll receive predictable payments at your desired intervals that can help cover essential expenses.
A payout annuity can provide peace of mind by reducing impact of market volatility—but with limited liquidity and no potential for market-based estate growth. |
| Combine for balance | Depending on your other sources of savings and income, you may consider a combination of these options. For example, allocating part of your RRSP to a RRIF for flexibility and part to a payout annuity for guaranteed income.
This hybrid strategy may help balance growth potential and stability and can complement other income sources, such as your Canada/Quebec pension plan (CPP/QPP) and Old Age Security (OAS). |
Why could a payout annuity deserve a spot in your retirement income strategy?
Including a payout annuity in your broader income strategy may bring several compelling advantages:
- Guaranteed income: Provides predictable, stable income for a fixed term or for life.
- Term certain annuities provide income for a fixed term, with beneficiaries receiving any remaining payments if you pass away during the term.
- Life annuities ensure you don't outlive your income, with guaranteed period options ensuring beneficiaries receive remaining payments if you pass away during the set period.
- Simplicity & peace of mind: No need to manage, rebalance or worry about the impact of a market downturn on the assets.
- Longevity risk protection: Life annuities pool risk across many people, which allows those who live the longest in the pool to benefit from lifetime guaranteed income.
And it doesn’t have to absorb all your capital. Using a portion of your capital to purchase an annuity as “guaranteed income floor” can significantly reduce future stress.
With the help of an advisor, you can benefit from a combined income strategy that’s tailored to your goals and lifestyle.
Goals and lifestyles |
Potential income strategies |
|---|---|
Couples with low risk tolerance, that value stable income and minimal volatility |
Allocate a portion of your RRSP to a joint payout annuity for a guaranteed income floor. Put the remainder into a RRIF for flexibility.
This combination ensures you always have a specific level of income while leaving some opportunity for market growth. |
Couples who have higher spends, desire steady income but also seek growth and legacy planning |
Use a smaller “floor” joint payout annuity to cover essential expenses. Keep a larger portion in RRIFs for market exposure and investment growth potential.
Consider a Segregated Fund Contract for your RRIF so you can benefit from the growth potential of a market-based investment, and many other added benefits like maturity and death benefit guarantees. |
Independent retirees that need guaranteed income for longevity risk but also want control over money for emergencies |
Allocate an adequate amount of money to single payout annuity for basic expenses. Put more savings into the RRIF for additional withdrawals and emergency access. |
Hands-on investor who prefers flexibility and market exposure. |
A RRIF-only approach may appeal, but adding even a minimal amount to a payout annuity can safeguard the assets in the investment against market downturns and longevity risk. |
Beyond income – other steps to consider at age 71
Plan with your spouse2
If you haven't done so already, turning 71 is also a good time to consider an income splitting strategy such as a spousal RRIF or a joint payout annuity to maximize tax efficiency and ensure income continues for both partners. Review beneficiary designations to ensure your loved ones receive the remaining values, where applicable.
Review your overall plan
Turning 71 is also a good time to revisit your broader financial picture: asset allocation, estate planning, insurance coverage, and long-term health care considerations. These steps can help ensure your income and investments stay aligned with your goals.
Explore the strategy that fits your unique needs
Age 71 brings important choices—but also opportunities. Whether you’re looking for growth, guarantees, or a balance of both, Sun Life Global Investments offers a broad range of solutions to help you build the plan that fits your retirement vision.
Beyond payout annuities, we also offer segregated fund contracts, mutual funds, insurance GICs (accumulations annuities) and trust GICs (guaranteed investment certificates) for your RRIF for continued growth and flexibility.
Explore more options
Visit our Retirement Hub to learn more about how these products can work together or speak with your advisor about which approach suits your needs.
1 For term certain annuities funded by a RRIF or RRSP, the term must end by age 90 of the annuitant or younger spouse.
2 A spouse is a person to whom one is married, a partner in a civil union or under certain conditions, a common-law relationship.
Information contained in this article is provided for information purposes only. It is not intended to provide or be a substitute for professional, financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard. It also does not constitute a specific offer to buy and/or sell securities or other products. You should always consult your advisor or tax specialist before undertaking any of the strategies discussed in this article to ensure that all elements and your personal circumstances are taken into consideration in developing your individual financial plan. Information contained in this article has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy and Sun Life Assurance Company of Canada disclaims any responsibility for any loss that may arise as a result of the use of the strategies discussed.