As you save for retirement through your working years, you’ll likely make tax-deductible contributions to an RRSP. When you stop working and earning income, however, you can no longer make RRSP contributions. Further, by the end of the year that you turn 71, you’ll need to close out your RRSP and decide what to do with the funds. If you withdraw all your RRSP savings at once, you’ll face a heavy tax burden.
This is where the Registered Retirement Income Fund (RRIF) comes in. A RRIF is a tax-sheltered account that pays you a steady stream of income in retirement. It’s like an RRSP, but instead of putting money into it, you take money out of it. You can convert your RRSP savings to a RRIF whenever you choose, provided it’s no later than the end of the year that you turn 71.