Converting your RRSPs into income
It can be confusing to know what to do when you are ready to take that important step of converting your registered retirement savings (RRSP, pensions, etc) into a retirement income.
All RRSPs must be cashed-in or converted to income by December 31 of the year when you turn 71. You can choose to do this earlier, if you want.
You have 3 choices:
- Cash it in
- Transfer the money to a registered retirement income fund (RRIF)
- Use the money to buy an annuity
Most people prefer not to cash in because all the money is taxed in one year. So, cashing it in can be a costly mistake.
The options you choose depend on your investment style and what your needs are. You may find it is best to have more than one solution to meet your needs.