# Minimum age for RRIF conversion



## SixesAndSevens (Dec 4, 2009)

What is the minimum age for converting a RRSP to a RRIF? the earliest I have seen in a chart is 55, but most charts start from 65.
http://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm

can it be done at 50? what about 40?
what would be the minimum withdrawal rate before 55 if that is even possible.


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## My Own Advisor (Sep 24, 2012)

My understanding is you can start a RRIF at any age. Even in your 20s or 30s if you really wanted to.

Check out this table courtesy of LB bank:
https://www.laurentianbank.ca/en/pe..._futur/registered_retirement_income_fund.html

If you have good income sources, I think it's a smart idea to wind down the RRSP (convert to RRIF) in your 50s or 60s.

Hope that helps.


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## OptsyEagle (Nov 29, 2009)

There is no age minimum to starting a RRIF. For ages below age 71 the formula for the minimum payment is 1 divided by (90 minus your age). After age 71 the government puts out a set schedule for the minimum amount.

Now with that said, there is no benefit to starting a RRIF before age 65 since you are taxed the same for withdrawals from a RRIF as you are for withdrawals from an RRSP (although withholding taxes can vary but that is a pretty short lived benefit if a benefit at all). So you might as well just withdraw the money from your RRSP and enjoy the benefit of stopping or suspending those taxable withdrawals at any time. With a RRIF you have to take the minimum, whether you want it or not.

Lastly, the only benefit of a withdraw from a RRIF as compared to a withdraw from an RRSP, between age 65 and 71, is that RRIF withdrawals at age 65 are eligible for the pension income tax credit and income splitting with your spouse (if the spouse is age 65 or older). Withdrawals from an RRSP are not eligible for those benefits.


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## My Own Advisor (Sep 24, 2012)

@Optsy,

I think a consideration here is, there are tax considerations with RRSP withdrawals vs. RRIF minimum withdrawals.

For RRSP, there is withholding taxes for withdrawals. That's not good. Even a $5,000 RRSP withdrawal, you lose 10% to withholding taxes (except in Quebec, 5%).

Only if you take out more than the minimum RRIF amount, will you pay withholding tax on the excess amount.


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## AltaRed (Jun 8, 2009)

I don't understand the pre-occupation with withholding taxes. The only downside is taxes withheld before they might otherwise be due... or recovered (Apr 30 for the preceding tax year). The penalty is only the PV of the time value of money for a portion of the year.


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## Four Pillars (Apr 5, 2009)

One advantage to the RRIF is that most financial institutions support regular withdrawals, whereas they don't for RRSPs.

The withholding is a bit of a non-issue. You have to pay the minimum withholding amount (as low as zero for the RRIF mandatory withdrawals) for withdrawals from an RRSP or RRIF, but most people are probably better off asking for more. You can specify the withholding amount for any withdrawal (in excess of the minimum).


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## steve41 (Apr 18, 2009)

AltaRed said:


> I don't understand the pre-occupation with withholding taxes. The only downside is taxes withheld before they might otherwise be due... or recovered (Apr 30 for the preceding tax year). The penalty is only the PV of the time value of money for a portion of the year.


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## kcowan (Jul 1, 2010)

There are also minimum charges. e.g. TDDI charges $25 a year if the balance is below $25k in an RRSP/RRIF.


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## SixesAndSevens (Dec 4, 2009)

I did not know RRSP can be converted to RRIF at any age, so thanks everyone for that.
the reason I will want to convert instead of withdreawing from RRSP is to avoid the withholding taxes. Withholding taxes are up to 30% for higher amounts.
secondly my plan is to unregister the securities not sell and withdraw cash.
so if I withdraw from RRSP i will have to sell some to pay the cash for withholding taxes.
but if it's already converted to RRIF then i can just unregister an amount equivalent to the minimum withdrawal requirements.
does that seem reasonable and feasible?


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## MoneyGal (Apr 24, 2009)

Oooohkay, but you will have to abide by the minimum distribution rules once you convert your RRSP to a RRIF - you can't not withdraw in any given year.


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## SixesAndSevens (Dec 4, 2009)

MoneyGal said:


> Oooohkay, but you will have to abide by the minimum distribution rules once you convert your RRSP to a RRIF - you can't not withdraw in any given year.


yes of course that is the whole idea....to gradually unregister (unwind) the RRSP into non reg. by withdrawing in kind.
between the age of 40 and 65 mandatory withdrawals should be quite low it seems.


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## heyjude (May 16, 2009)

Hmmm, food for thought. Can you put a portion of your RRSP into a RRIF? If so, that could be a great way for an early retiree like me to set up an income stream that remained in a low tax bracket.


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## HaroldCrump (Jun 10, 2009)

heyjude said:


> Hmmm, food for thought. Can you put a portion of your RRSP into a RRIF? If so, that could be a great way for an early retiree like me to set up an income stream that remained in a low tax bracket.


If you have multiple RRSP accounts, you can convert one or more to RRIFs and leave the others as RRSP.
There is nothing that says you cannot have multiple RRSP and RRIF accounts at the same time.

Even if you have a single RRSP account, you can open up a new one, do an RRSP to RRSP transfer, then convert one of them to a RRIF.
Perhaps we can call this the _heyjude maneuver_.
And the OP's idea of converting RRSP to RRIF at the age of 40 for super-early retirement can be called the _SixesAndSevens maneuver_.


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## heyjude (May 16, 2009)

haroldcrump said:


> if you have multiple rrsp accounts, you can convert one or more to rrifs and leave the others as rrsp.
> There is nothing that says you cannot have multiple rrsp and rrif accounts at the same time.
> 
> *even if you have a single rrsp account, you can open up a new one, do an rrsp to rrsp transfer, then convert one of them to a rrif.
> ...


lol!

😃


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## OptsyEagle (Nov 29, 2009)

The most tax deferred you will get is for about one year. By the time you are moving assets out of the RRIF in-kind, in the 2nd year, you will be obligated to pay the tax on the money you moved out of the RRIF the year before, at your marginal tax rate. Since nothing was withheld, it will be all payable when you do your taxes for that year.

Not a lot of benefit for all the paperwork and hassle, if you ask me. 

But anyway, that is how it all works. Good luck.


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## 6811 (Jan 1, 2013)

heyjude said:


> Hmmm, food for thought. Can you put a portion of your RRSP into a RRIF? If so, that could be a great way for an early retiree like me to set up an income stream that remained in a low tax bracket.


This is exactly what I did. I opened a new RRIF account and transferred an estimated five year income amount from my RRSP account. I plan on topping my RRIF up annually from my RRSP to maintain the five year income stream until I turn 71 and have to convert it all.


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## cheech10 (Dec 31, 2010)

How does it differ whether the income comes from a RRIF or RRSP? Withholding tax is just a pre-payment of your estimated tax liability, and you get it back at year end if you paid too much (or owe more if you paid too little); your tax bracket is based on your income, not the source (RRSP vs RRIF). Seems like moving RRSP funds to a RRIF prematurely locks funds into the withdrawal schedule (decreasing the benefit of tax deferral) without any benefit, or am I missing something here?


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## Retired Peasant (Apr 22, 2013)

You can open a RRIF with a portion of your RRSP (no need to open a separate RRSP first).

If you want to draw down your RRSP, another reason to convert to a RRIF is that some institutions charge a fee to withdraw from a RRSP ($45), but no fee to withdraw from a RRIF.


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## 6811 (Jan 1, 2013)

cheech10 said:


> How does it differ whether the income comes from a RRIF or RRSP? Withholding tax is just a pre-payment of your estimated tax liability, and you get it back at year end if you paid too much (or owe more if you paid too little); your tax bracket is based on your income, not the source (RRSP vs RRIF). Seems like moving RRSP funds to a RRIF prematurely locks funds into the withdrawal schedule (decreasing the benefit of tax deferral) without any benefit, or am I missing something here?


It may not work for everyone, but I'm a 64 year old retiree and need the monthly income stream that I set up with this RRIF. There are no fees (though income tax is withheld) and the monthly income goes directly into my bank account on the date I chose, automatically. I'm drawing down more than I need from my RRSP (being careful not to exceed the lower tax bracket I'm now in) and topping up our TFSA's, with any leftover going into our non-registered accounts.


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## cheech10 (Dec 31, 2010)

Oh I totally see the convenience aspect, especially if there are fewer fees and you want to withdraw funds while you are in a low tax bracket. It just seemed like some of the discussion above suggested conversion to a RRIF to minimize taxes (which has no tax benefit compared to withdrawing directly from an RRSP, as far as I know). If you have a steady income need, it might make sense, but you lose flexibility in timing your withdrawals, which can reduce the tax deferral benefit.


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## kcowan (Jul 1, 2010)

If you have no Pension Income, remember to create a RRIF that will give you at least $2k per year for the Pension credit. Same for a spouse. Age 65.


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## SixesAndSevens (Dec 4, 2009)

OptsyEagle said:


> The most tax deferred you will get is for about one year. By the time you are moving assets out of the RRIF in-kind, in the 2nd year, you will be obligated to pay the tax on the money you moved out of the RRIF the year before, at your marginal tax rate. Since nothing was withheld, it will be all payable when you do your taxes for that year.
> 
> Not a lot of benefit for all the paperwork and hassle, if you ask me.





cheech10 said:


> How does it differ whether the income comes from a RRIF or RRSP? Withholding tax is just a pre-payment of your estimated tax liability, and you get it back at year end if you paid too much (or owe more if you paid too little); your tax bracket is based on your income, not the source (RRSP vs RRIF). Seems like moving RRSP funds to a RRIF prematurely locks funds into the withdrawal schedule (decreasing the benefit of tax deferral) without any benefit, or am I missing something here?


there is a difference because in RRSP withdrawal I need to come up with the cash for the withholding.
for larger amounts, the withholding is up to 30% isn't it?

but i am not planning to sell my investments and withdraw cash.
i want to withdraw by unregistering the securities.
if i have to pay withholding tax i will have to sell part of the holdings to pay in cash.

if it is a RRIF i will just keep unregistering the minimum required withdrawals.

i hope i am understanding this correctly.


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