RRIF Explained: What Happens to Your RRSP When You Retire

Most Canadians spend decades building their RRSP. But once you retire, the question changes from how to save and grow your assets to how to take them out while managing tax and cash flow.

RRSP vs RRIF: The Simple Version

During your earning years, the government makes you a deal: you get to save money in your RRSP and let it grow tax-deferred, and in exchange, you agree to pay tax on it later in retirement.

When you convert to a RRIF (either at age 71, or before), it becomes a spending account. In retirement, you'll withdraw money from your RRIF and pay income tax on what you take out.

When you convert from RRSP to RRIF, the investments inside the account can stay the same, whether they are GICs, index funds, or individual stocks. But the account type changes: you can no longer make contributions, and mandatory annual withdrawals begin.

When Do You Have to Convert?

You have to close your RRSP by December 31 of the year you turn 71. At that point, you have three options:

1. Convert to a RRIF. Your investments stay in place, and you choose how much to withdraw above the minimum.
2. Buy an annuity. You exchange the balance for a guaranteed income.
3. Withdraw the full balance. The whole amount is taxed as income in a single year.

Most Canadians choose a RRIF. It's important to note that investments within your RRIF can continue growing tax-deferred. You'll just have to start making a percentage withdrawal each year.

How RRIF Withdrawals Work

Once your RRSP becomes a RRIF, you must withdraw at least the minimum set by the federal government each year. Every dollar you withdraw is added to your taxable income for that year.

The minimum is a percentage of your RRIF balance on January 1, and the percentage rises with age.

RRIF Minimum Withdrawal Rates by Age

Different rules apply to RRIFs set up before the end of 1992.

Curious to find your RRIF rate? You can find out more on our RRIF minimum withdrawal page.

A Simple Example

You have a $500,000 RRIF and are 72 years old at the start of the year. The minimum rate at 72 is 5.40%.

That means you must withdraw at least $27,000, which is added to your taxable income alongside CPP, OAS, and any pension income you receive.

Next year the rate rises to 5.53%, and it applies to whatever the account is worth on January 1.

How the Minimum Plays Out in a Full Plan

How much the switch matters depends on the size of your RRIF next to what you spend. We've created two case studies to illustrate the difference.

Susan retires at 65 with $1 million. She was already withdrawing close to the minimum, so at 71 her withdrawals rise only from $29,017 to $29,778 a year. The difference to her plan and lifestyle is minimal.

Daniel retires at 65 with $2 million, and the minimum on a balance that size is more than he had planned to spend. At 71 his RRIF withdrawals jump from $43,775 to $60,211 a year, and his tax rate rises from about 14% to about 17%. The money he doesn't spend goes back into his TFSA and non-registered account.

Daniel's jump could have been much bigger. His plan draws from all of his accounts every year, so his RRSP was already paying out before 71. We reran it with the Sequential strategy in Scenario Lab+, which spends his non-registered savings first and leaves the RRSP alone. By 71 the untouched RRSP has grown to about $1.43 million, and the minimum forces out $75,333 in the first year. His tax rate jumps from about 6% to about 22%, he starts repaying OAS, and over his retirement he pays about $55,000 more in tax than in his original plan.

How RRIF Income Is Taxed

RRIF withdrawals are fully taxable as income in the year you take them, on top of your CPP and OAS. They also count toward the OAS clawback. If your own net income exceeds $95,323 in 2026, your OAS will begin to be clawed back.

So with improper planning, a large RRIF combined with CPP, OAS, and a workplace pension can easily push a retiree into a higher tax bracket and into the clawback. Our OAS clawback explainer shows how that calculation works, and what you can do to make the most of your OAS.

Why Timing Matters Before 71

You don't have to wait until 71 to convert to a RRIF. Some retirees choose to convert earlier, and start withdrawals in their 60s. Here are a few reasons why:

Income smoothing. If you retire at 60 with little other income, modest RRIF withdrawals before CPP and OAS begin are taxed at lower marginal rates, and the tax is spread across more years.

Reducing your future RRIF balance. Every dollar you withdraw before 71 is a dollar that does not compound inside the account. That means smaller mandatory minimums later, when CPP and OAS are already adding to your income.

Daniel shows how much this can matter. Drawing his RRSP first from 65, which Scenario Lab+ runs as its RRSP Meltdown strategy, left him with RRIF withdrawals of $44,873 at 71, compared with $75,333 when he left the RRSP for last. Over his retirement he paid about $30,000 less in tax. He did finish with about $43,000 less in savings, because leaving the RRSP for last keeps more money in his RRIF, where the tax on it is still to come.

It can be overdone, though. The meltdown packed $88,176 a year of RRSP income into ages 65 to 70, which pushed him over the OAS clawback threshold in those years. Drawing a little from every account each year, as his original plan does, paid the least tax of the three: about $25,000 less than the meltdown.

Pension income credit. From age 65, RRIF withdrawals qualify for the pension income amount, a federal tax credit on the first $2,000 of eligible pension income. If your spouse has no pension income of their own, the RRIF income you split with them can qualify for the credit on their return as well, depending on their age.

RRIFs for Couples

If one spouse has a much larger RRIF than the other, the minimum withdrawals will concentrate taxable income onto one return. Pension income splitting can let RRIF income (from age 65) be allocated to the lower-income spouse's return to help even out your household taxes.

The size of the gap decides how much any of this is worth. In our case study of a couple with $1 million, Tom has the larger RRSP, and at 71 the couple's RRIF withdrawals rise from $22,800 to $34,946 a year. Both partners still sit in the lowest federal and BC tax brackets, so Scenario Lab+ moves only $1,700 to $2,400 a year of Tom's RRIF income onto Lisa's return.

Our guide to pension income splitting covers the rules, and retirement tax planning for couples shows where RRIFs fit in a household's taxes.

Common Mistakes

Retirement might feel like the time to relax, but a few planning decisions are worth getting right first. If you're still unsure how to handle your RRSP, make sure to avoid these common mistakes:

Waiting until 71 to plan. By the conversion deadline, most of the choices that shape your RRIF balance have already been made. The withdrawals you take or skip in your 60s set your minimums for decades.

Large withdrawals in a single year. Taking a big RRSP or RRIF withdrawal in one year puts that income in a higher tax bracket and can push you into the OAS clawback.

Treating the RRIF in isolation. Every withdrawal lands on the same tax return as your CPP, OAS, pension, and investment income.

Bottom Line

Converting to a RRIF is the second half of the deal you made when you opened your RRSP: the tax you deferred while saving comes due as you withdraw. The rules are the same for everyone. What they cost you depends on the choices you make before 71.

The key takeaway: your RRIF minimums are set by the balance you carry into your 70s. Daniel's plan shows both sides. Left alone until 71, his RRSP forced out $75,333 in the first year and cost him some of his OAS. Drawn on steadily from 65, the same account produced a much smaller step.

The best time to plan your RRIF is in your 60s, while you still have room to choose. The Drawdown tab in Scenario Lab+ runs your plan through each withdrawal strategy and compares the lifetime tax. If you'd like to see one first, Daniel's full plan is open to explore.