If you have been accumulating wealth in a Registered Savings Plan and are turning 71 this year or next, you should be aware of the decisions you have to make. The Income Tax Act says that you have to terminate your RSP’s by December 31st in the year you turn age 71. In doing so, you basically have three options:
- You can withdraw all the funds in your RSP in one lump sum. Unless you have a negligible amount in your registered plan this is not a good option.
- You can transfer the balance of your Registered Savings Plan into a Retirement Income Fund (RIF). This is a simple process involving the transfer of the assets. You can keep the same investments you had before the transfer and nothing really changes except for the fact you will now be drawing income from the RIF, but the remaining funds will continue to accumulate tax-deferred.