What is an RRSP and how does it work?

Yes. But to get all the tax benefits associated with having an RRSP, you must be a resident of Canada.

To open an RRSP you:

• must have earned income and filed at least one tax return in Canada
• be age 71 or under on December 31 of the current year

Note: Depending on which province or territory you live in and which institution you want to open an RRSP with, there may be minimum age restrictions on when you can open and contribute to an RRSP. Connect with your financial institution for more detail.

Foreign workers and international students can contribute to an RRSP before obtaining their permanent resident status. It’s a good idea for them to consult with a tax advisor if they are also a resident of another country for tax purposes, as the other country may not recognize an RRSP’s tax benefits.

There’s no minimum age required to open an RRSP. You can open an RRSP if you have RRSP contribution room.

Even though there's no legal minimum age for owning an RRSP under federal law, provincial law may set age requirements to owning an RRSP.

Connect with an advisor for more detailed information

After December 31 of the year you turn age 71, you can no longer own an RRSP. Before this happens, you can:

• Convert RRSP funds to a Registered Retirement Income Fund (RRIF). You don’t pay tax when you make a direct transfer from an RRSP to a RRIF.
• Purchase a payout annuity. You don’t pay tax when you purchase a payout annuity with RRSP funds.
• Withdraw RRSP funds. If you withdraw funds from an RRSP, the withdrawn amount will be subject to withholding tax and will be included in your taxable income for the year of the withdrawal.

Learn more about what to do with your RRSP when you turn 71

You can withdraw your money anytime from your RRSP. You’ll pay withholding taxes on the withdrawal amount. You will also have to include the withdrawn amount as taxable income for the year of the withdrawal.

Remember, you must close your RRSP by December 31 of the year you turn age 71.

Before this happens, you can:

• Convert your RRSP to a RRIF
• Purchase a payout annuity or
• Withdraw all your RRSP funds

Learn more about RRSP withdrawals

It depends on your financial goals and needs. You can own a variety of investments within an RRSP like segregated fund contracts, mutual funds, GICs, stocks, bonds and more.

Connect with a Sun Life advisor to find out which investments can help you meet your financial goals.

When you retire, you can use funds from your RRSP for any purpose, including:

• general living expenses,
• paying medical or health-related costs (e.g. prescription drugs, health insurance, etc.),
• travel and vacation, and
• any hobbies you may take up.

A locked-in RRSP is an older term for a type of RRSP that holds money from your former employer’s pension plan. Today, these RRSPs can be commonly referred to as LIRAs (locked-in retirement accounts), RLSPs (restricted locked-in savings) or LRSPs (locked-in retirement savings plan).

Unlike a regular RRSP, you generally can’t withdraw money from a “locked-in” account until you reach a specific age (usually age 55). However, there are exceptions.

Speak with your advisor to learn more.

No. During your lifetime you can’t transfer your RRSP tax-free to someone else.  You can withdraw money from your RRSP and give it to your spouse, common-law partner or adult child. You’ll have to pay tax on that withdrawal, plus any income that the money earns after the transfer will be taxable, and may be attributed to you for tax purposes.

Talk to a Sun Life advisor to learn more

If you have named your spouse or common-law partner in your will or as a beneficiary of your RRSP, it can roll over to the surviving spouse or common-law partner on a tax-deferred basis. Your spouse doesn’t require additional RRSP contribution room when the rollover happens.

Otherwise, subject to a few exceptions, the value of your RRSP is included as income in your final tax return, regardless of who receives the funds. However, special rules apply if you’re a Quebec resident.

Talk to a Sun Life advisor for more detailed information

No, you can name only beneficiaries to your RRSP.

However, in Quebec, you can name a beneficiary to a RRSP only for insurance contracts like insurance GICs and segregated fund contracts. Quebec doesn’t allow beneficiary designations on mutual funds, stocks, bonds and trust GICs held in an RRSP.

Connect with an advisor for more detailed information

If you’ve named a personal beneficiary, it’s likely not subject to probate.  

However, if you don’t name a personal beneficiary, many RRSPs will deem your estate as the recipient of the RRSP money when you die. As such, the RRSP money may be subject to probate.

Please note that probate tax varies across provinces and territories. Probate applies to most provinces and territories, except Quebec.

Learn more about how probate works

Yes. You can leave your RRSP funds to your child at your death by naming them as the beneficiary of your RRSP.  

Remember, the value of your RRSP is included as income in your final tax return, regardless of who receives the funds, subject to a few exceptions.

If your beneficiary is a minor at the time of your death or has a mental or physical infirming, speak to your tax and legal advisor.

It depends. The entire value of your RRSP is included in your income on your final return.

However, you may be able to transfer the tax liability and even defer immediate taxes depending on the beneficiary named:

• Your spouse or common-law partner: They can transfer the money into their own RRSP or RRIF tax-deferred.
• A minor child who is financially dependent: They can use the money to purchase an annuity, potentially deferring taxes.
• A child with a disability: There are multiple options they can do to potentially defer taxes. Here are 2 common options:
  • They can transfer the money to a Registered Disability Savings Plan (RDSP)
  • They can use the money to purchase an annuity

The CRA may also collect taxes associated with the RRSP from a beneficiary recipient if the deceased’s estate doesn’t have sufficient funds to meet the tax liability itself.

Speak to a tax and legal advisor to review your and your beneficiary’s unique situations.