RRIF, Annuity, or Both at 71

There is one date in Canadian retirement planning that cannot be negotiated, deferred or worked around, and it arrives in the calendar year the holder turns 71. Under paragraph 146(2)(b.4) of the Income Tax Act, a registered retirement savings plan does not provide for maturity after the end of that year. The plan does not simply carry on. By the end of December it has to have become something else, and there are exactly three things it may become: cash in the holder’s hands, a registered retirement income fund, or an annuity that meets the definition of retirement income in the Act. It may also become a combination of them, which is the outcome most households ought to be considering and the one presented least often. This article sets out the deadline, the three permitted outcomes, the minimum withdrawal and why it is a floor rather than a target, the election that uses a younger spouse’s age, what an annuity settles and what it gives up, the withholding rule above the minimum, and what happens if the year ends with nothing done.

The deadline, and it is a year rather than a birthday

Paragraph 146(2)(b.4) of the Income Tax Act sets the condition in plain words: the plan does not provide for maturity after the end of the year in which the annuitant attains 71 years of age. Maturity is defined in subsection 146(1) as the date fixed under a retirement savings plan for the commencement of any retirement income the payment of which is provided for by the plan. Read together, the plan has to mature by the end of that calendar year. Source: Income Tax Act, Justice Laws Website, read 7 September 2026.

Notice that the trigger is the year, not the birthday. A person born in December has exactly the same deadline as a person born in January, and it is the last day of December either way. The Canada Revenue Agency puts the companion rule the same way: December 31 of the year you turn 71 years old is the last day that you can contribute to your RRSPs. Source: Canada Revenue Agency, RRSP options when you turn 71, read 7 September 2026.

The three outcomes the Act permits

The first is to take the value in cash. The entire amount is included in income in the year it is received. For any balance of consequence this is the most expensive of the three by a wide margin, because it collapses what might have been twenty five years of taxable income into a single taxation year. It is chosen far more often than it should be, and almost always by inaction rather than by intention.

The second is to transfer the property to a registered retirement income fund. The shelter continues, the investments can usually be carried across intact rather than sold, and the only structural change is that a minimum amount has to be paid out each year afterwards. This is what most holders do, and for most holders it is a reasonable default rather than a considered decision.

The third is to acquire an annuity that meets the definition of retirement income in subsection 146(1) of the Income Tax Act: an annuity commencing at maturity, payable to the annuitant for the annuitant’s life, with or without a fixed term commencing at maturity. The capital passes to the insurer and an income begins in exchange. Source: Income Tax Act, Justice Laws Website, read 7 September 2026. See how annuities work.

The minimum amount is a floor, not a target

Under the definition in subsection 146.3(1) of the Income Tax Act the minimum amount is determined by a formula whose first element is the fair market value of the property held at the beginning of the year multiplied by a prescribed factor. The factors are set by regulation and rise with age. This article does not print them, because the reader should be taking them from the Canada Revenue Agency and the regulation rather than from an article that may be a year old by the time it is read. See how the minimum works.

There is no minimum for the year the fund is established. The Canada Revenue Agency states it directly: the minimum amount must be paid to you in the year following the year the RRIF is entered into. Source: Canada Revenue Agency, Registered Retirement Income Fund, read 7 September 2026. A holder who converts in the year they turn 71 therefore has no required payment until the following year.

The word minimum is doing work that most holders ignore. It is the least that may be taken, not the amount that should be taken. A household whose plan calls for levelling taxable income will frequently take more than the minimum in the early years, while a household whose income is already high will take exactly the minimum and not a dollar more. Taking the minimum because it is the number printed on the statement is not a decision; it is the absence of one.

Using a younger spouse’s age for the minimum

The definition of minimum amount permits the first annuitant to elect, before any payment has been made under the fund, to have the prescribed factor determined by reference to the age of the person who was their spouse or common law partner at the time of the election. A younger spouse means a smaller factor, and a smaller factor means a smaller required payment in every year that follows. Source: Income Tax Act, subsection 146.3(1), Justice Laws Website, read 7 September 2026.

Two conditions attach and both matter. The election has to be made before the first payment is made under the fund, which in practice means at the moment the fund is opened. And the Canada Revenue Agency states that once the election is made it cannot be changed, even if the spouse or common law partner dies. The annuitant may, however, establish a separate fund and make a different election for that one. Source: Canada Revenue Agency, Information Circular IC78-18R7, read 7 September 2026.

It is not free of consequence, though, and the consequence belongs in the same conversation. A smaller forced withdrawal leaves a larger balance compounding inside the fund, and under subsection 146.3(6) that larger balance is what is included in income on the death of the last annuitant. The election defers; it does not forgive. See registered plans at death.

What buying an annuity settles

It settles the payment. The amount is fixed by the contract at the moment of purchase and does not move with markets afterwards. Whatever else happens, that income arrives. For a household that has never been comfortable watching a balance move, the value of that is not primarily financial.

It settles longevity. A life annuity pays for as long as the annuitant lives, which is something no schedule of withdrawals from a fund can promise, because a fund is a pot of money and a pot of money can be exhausted. The insurer, not the household, carries the risk of a very long life.

And it settles the administration. There is nothing to rebalance, nothing to review, and nothing to decide again, which is a real advantage late in life and for a surviving spouse who never handled the investments. On protection: a policy is not a deposit account and CDIC does not apply to it. Assuris provides protection for policyholders within limits, and those limits are worth asking about before a large amount goes into one contract.

What buying an annuity gives up

Liquidity, first and most. Once the contract is issued the capital is gone as capital. There is no lump sum available for a roof, a vehicle, a move into assisted living, or a family emergency, and no amount of regret changes that. This is the reason an annuity should almost never take the whole balance.

Flexibility on the income comes next. A fund can be drawn at the minimum in one year and heavily in the next, which is exactly what a household needs when it is managing income around the recovery tax. An annuity pays what it pays, every year, whatever the tax position happens to be. See the recovery tax.

Then the estate. A straight life annuity ends at death, and the remaining capital does not pass to anybody. Contracts can be written with a term certain or on two lives so that something continues, and every one of those features reduces the income the same capital purchases. Nothing is added for free.

And inflation. A level payment for life buys less every year it continues, and over a thirty year retirement that erosion is substantial. Indexed contracts exist and they cost income at the outset in exchange. The final point is simply that the purchase is generally irreversible, so it belongs at the end of a process rather than at the start of one. See inflation and purchasing power.

Splitting the balance between the two

There is a workable way to divide it. Establish what the household needs every month whatever happens, the floor below which life becomes difficult rather than merely uncomfortable. Subtract from that floor whatever the public pensions and any employer pension already provide, since those payments already have the characteristics an annuity is bought for. The gap that remains is the part an annuity is well suited to fill. Everything above the floor stays in the fund.

What the split buys is more than the sum of the pieces. Once the base is contracted, the fund no longer has to fund next year’s groceries, which means it can be invested for the horizon it actually has rather than for the worst twelve months in it. The household keeps liquidity for the unexpected and keeps the remaining capital for the estate. See the pension decision, which is the same trade in different clothes.

Timing is a separate question from the split, and it is worth separating. Nothing requires the annuity to be purchased at 71. The whole balance can go into a fund at the deadline and part of it can be converted to an annuity years later, and money may be moved from a fund to acquire a qualifying annuity without withholding. Doing it later means the decision is made with better information about health, spending and the household’s real tolerance for watching a balance move.

Withholding applies above the minimum only

Payments up to the minimum amount are made without tax withheld at source. Amounts above the minimum are subject to withholding at the lump sum rates, which rise in steps with the size of the excess. Quebec residents face a federal component and a provincial component and the combination differs from the rest of the country. This article prints no rates; the Canada Revenue Agency and Revenu Québec publish the ones in force and those are the ones that apply.

The point most people miss is that withholding is not the tax. It is an instalment against a bill computed on the return the following spring. Withholding too little on a large extra withdrawal produces a balance owing that catches households by surprise, and withholding more than the final tax produces a refund rather than a loss. Neither outcome changes the actual tax payable by a cent.

Withholding is not required where an amount above the minimum is transferred directly to another registered fund or plan, or used to acquire a qualifying annuity. A direct transfer is not a withdrawal, and the distinction is worth stating clearly to the institution handling the paperwork before the transaction is done rather than afterwards. Source: Canada Revenue Agency, Information Circular IC78-18R7, read 7 September 2026.

What happens if the year ends and nothing was done

The maturity requirement is a condition of registration. Paragraph 146(2)(b.4) is one of the conditions the Minister requires for acceptance, and subsection 146(12) provides that where a plan is revised or amended and the amended plan does not comply with the requirements of the section, the amended plan is deemed not to be a registered retirement savings plan. A plan that stops qualifying stops being sheltered, and the consequence of losing registration is an income inclusion measured on the value of the plan. Source: Income Tax Act, Justice Laws Website, read 7 September 2026.

In practice that outcome is rare, because specimen plans are drafted so that the carrier converts the plan at the deadline under a default option. The rarity is not a reason to relax. A default conversion produces a fund the holder did not design, with a minimum calculated on the holder’s own age because nobody made the spousal election, and sometimes with investments that were liquidated into a default holding to make the conversion administratively simple.

The remedy is administrative and unglamorous, which is exactly why it gets left. Start in the summer of the year the holder turns 71, not in December. Paperwork takes weeks, transfers between institutions take longer than anyone expects, and the deadline does not move for either.

How the decision is actually made

The order of questions matters more than any single answer. How much income does this household need every month no matter what happens, and how much of that floor is already covered by the public pensions and any employer pension. How much capital has to stay accessible for the things that are not monthly. Whose age should govern the minimum. What does taxable income look like in each year afterwards, and where does it sit relative to the recovery tax. And what happens on the second death.

This is work to do with a qualified tax professional against the household’s own figures, and where a contract is being considered, with a Financial Security Advisor who can set out what a specific contract does and does not do. Nothing in this article is a recommendation about any particular product or any particular household.

Frequently Asked Questions

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Read how the minimum withdrawal is calculated before deciding anything, then the order of drawdown, which is the wider question this deadline sits inside. Annuities covers the contract itself and the recovery tax covers the constraint that most often shapes how much is taken above the minimum. Holders with money in a locked in account should read locked in accounts, because the provincial rules there are different again.