Pension Entitlement at Age 71

By the end of the year you turn 71, you must transfer your RRSP to RRIF (Registered Retirement Income Fund) or purchase an annuity. If you fail to do so, your RRSP will be deregistered and you will have to pay the tax on the full amount of the withdrawal.

When you withdraw funds from your RRSPs, your RRSP issuer will withhold some tax. But, your RRSP issuer will not withhold tax on amounts that are transferred directly to a RRIF or that are used to purchase an annuity. While both the annuity and the RRIF options provide tax deferral, the more popular choice is RRIFs.

RRIF Minimum Withdrawal

Every year, you must withdraw a percentage of your RRIF. There is no maximum limit to the amount you can withdraw. You can withdraw any amount as long as a minimum withdrawal is made annually. The withdrawals are taxed as regular income each year.

The minimum withdrawal in the first year that your RRIF is set up is zero. The minimum withdrawal in the following years depends upon your age and a percentage of the total value of the plan on January 1st each year.

Prior to age 71, the minimum withdrawal is a percentage of your RRIF balance, being 1/(90 - your age). For example, if you are 65 at the beginning of the year following the year in which you start the RRIF, you must withdraw at least 1/25th of your RRIF (or 4%). If you are 70, your minimum withdrawal will be 1/20th of the fund (or 5%).

Starting at age 71, minimum withdrawal requirements are made according to a schedule created by Canada Revenue Agency. as shown in the following table.

RRIF minimum annual withdrawal