Watch out for RRSP and RRIF taxation

Watch out for RRSP and RRIF taxation

I get lots of reader emails and questions, and the volume of emails and questions that top the list are generally about RRSP and RRIF taxation.

Savvy DIY investors already know this but it’s worth reminding everyone:

RRSP withdrawals and RRIF withdrawals are both subject to taxation.


This is because an RRSP works best with long-term, steady contributions such that savings or investments inside this account grow – until you take money out of the account. Your taxable income will include any RRSP withdrawals for the year.

Withdrawals from a RRIF are fully taxable as income in the year withdrawn. When you withdraw more than the minimum withdrawal amount from your RRIF, you will also pay a withholding tax (which will be withheld by the financial institution and submitted to the government(s) on your behalf).

Needless to say, I think we all want to pay less tax while keeping more money/income for ourselves.

This makes it essential to know the ins-and-outs of RRSP and RRIF taxation.

Watch out for RRSP and RRIF taxation

In previous posts on my site, I’ve provided some general guidance on RRSPs, RRIFs, and much more including beneficiary considerations. I’ll link to that content at the end.

I’ve also shared what I intend to do when it comes to withdrawals from my/our RRSPs/RRIFs as well.

How and when to withdraw from RRSP and TFSA

But personal finance is personal is a constant refrain on this site for a reason – since your individual circumstances might dictate tax “hits” sooner or later related to your RRSP or RRIF account.

To share some objective takes on the RRSP and RRIF taxation subject, I’ve once again engaged respected CFP® Mark McGrath.

Mark McGrath holds Chartered Investment Manager (CIM®), CERTIFIED FINANCIAL PLANNER®, and Chartered Life Underwriter (CLU®) designations. Knowing my personal circumstances are likely different than yours, I figured Mark would be a fine person to expand on my DIY insights.

Mark McGrath, welcome back!

Mark, always a pleasure.

Mark, let’s remind folks about the tax implications of RRSP withdrawals, at any age. Meaning, for the most part, RRSP withdrawals will have withholding taxes applied. Can you explain how that happens in real life – how taxation is reconciled at income tax filing?

That’s correct Mark, and I know you’re planning ahead for semi-retirement!

RRSP withdrawals are taxable income, and tax will be withheld at the time of the withdrawal. The *withholding tax rate is based on the amount of the withdrawal. The amounts are:

  • Up to $5,000: 10%
  • $5,001 – $15,000: 20%
  • Over $15,000: 30%

*Note, different rates for Quebec. Source:

This isn’t a penalty, it’s a pre-payment of your taxes for the year, similar to tax withheld on employment income.

Say you withdraw $6,000 from your RRSP. You pay a 20% withholding tax, or $1,200, and receive $4,800 to your bank account.

When you file your taxes for that year, you’ll report $6,000 of income from the RRSP withdrawal, and $1,200 in taxes paid. If you’re in the 29.65% tax bracket, your total taxes owing on that withdrawal would be ($6,000 x 29.65%) = $1,779 – of which you’ve only paid $1,200. That means you’ll owe another $579 in taxes for the year.

That’s not necessarily true about Registered Retirement Income Funds, or RRIFs.

With a RRIF, you have a minimum withdrawal you must make each year based on either your age or your younger spouse’s age. That minimum payment does not require a withholding tax. It’s still taxable, but you have the choice not to have taxes withheld at source. If you take an amount above this minimum, then withholding tax will be applied to the excess, using the same thresholds we talked about above.

Perfect. A great primer. Let’s talk about the benefits of turning your RRSP into a RRIF, at age 65. Why is that age/date an important consideration? I get a few reader questions on that age-point.

Mark, I know you are aware, but all your readers should know while you can convert your RRSP to a RRIF at any age, 65 is important because from that point on, RRIF income is considered eligible pension income. And that gives you two opportunities:

  • pension income splitting, and
  • the pension income tax credit.

Pension income splitting allows you to split up to 50% of your RRIF income with your spouse, regardless of their age. That helps lower the overall family tax bill since you can both use up your lower tax brackets.

The pension income tax credit is a non-refundable credit on up to $2,000 of eligible pension income. This tax credit is based on the lowest tax bracket, which is 15% for the federal portion and 5.05% for the provincial portion in Ontario. That translates into a reduction in taxes owing of $401. Note the provincial amount varies by province.

Indeed. Let’s dive deeper, why your 60s or age 65 could be a good trigger for RRSP withdrawals or turning RRSP assets into a RRIF. I view RRSP assets as an estate planning liability. Let’s unpack that.

Mark, I hear you. It is a liability, since RRSPs are taxed – eventually.

Generally, the fair market value (FMV) of your RRSP/RRIF at your death becomes taxable income on your final tax return – with some exceptions which we will talk about a little later. That can be a significant amount and might even be taxed at the top tax bracket.

Having said that, you must factor in the tax refund you received when you made the contributions, as well as the tax-free compounding of your investments along the way.

Investors should think of their RRSPs as pre-tax money, unlike a TFSA.

Assume you pay tax at 50% for a simple example. If you earn $10,000, you have two options:

  1. put $10,000 into an RRSP and pay no tax
  2. put $5,000 into a TFSA after paying the tax bill.

Assuming you earn the same rate of return in both cases and assuming your tax rate at retirement is also 50%, then the after-tax outcome of both choices is identical.

We don’t usually think of it that way because we see the RRSP assets but haven’t accounted for the tax refund we received when we made the contribution.

Personally, I think RRSPs get a bad reputation because of this, and I think it’s undeserved. When you factor in income splitting and the tax deductions received, an RRSP can often come out ahead of a TFSA after tax.

But there’s no denying it – RRSPs and RRIFs can eventually come with a hefty tax bill.

Yup. Let’s talk about the future – death and taxes. What happens to the money in my RRSP/RRIF, if I pass away, generally speaking?

With some important exceptions, the fair market value of the RRSP/RRIF is taxed as income on your final tax return in the year of death. For example, if the balance of your RRSP or RRIF is $500,000 when you die, that’s $500,000 of income that is added to your tax return and taxed at your marginal rate.

Any income earned in the plan after your death will be taxable to your RRSP’s beneficiaries. If there are no beneficiaries, then that income is taxable to your estate.

Going further, what happens if I name my spouse/partner as my RRSP beneficiary?

In that case, the RRSP can be rolled over to your spouse or common-law partner on a tax-deferred basis. The amount can be transferred to their RRSP without tax and will be taxed in their hands on withdrawal.

The surviving spouse claims the fair market value of the RRSP on the date of death as income, but then receives an offsetting deduction for rolling it into their RRSP.

To qualify, the surviving spouse must make the transfer by December 31st of the year following the year of death.

You are not required to do this, and there can be circumstances where rolling only part of the RRSP makes sense. For example, if the spouse has little income that year, then part of the RRSP can be included in their income, taking advantage of their lower tax brackets. They also have the option instead to purchase an annuity. In that case, taxes are paid on the annuity income received each year.

Ya, I recall the annuity part which is essentially a pension. Folks really don’t like annuities but I don’t know why?! I provided a great, detailed post below with Alexandra Macqueen: a fee-for-service financial planner, author and faculty member at the Schulich School of Business. (She has been a big advocate of pensionizing your nest egg at some point).

Here are ten questions and answers on annuities below.

Ten Questions on Annuities – Answered Here!

Mark, what happens to the money in my RRSP, if I pass away, and there is no last surviving spouse/partner or named beneficiary?

On the death of the last spouse, the RRSP is taxed as income, as above. The exception to this rule is if the beneficiary is a financially dependent child or grandchild. If they qualify because of mental or physical infirmity, they can roll the RRSP over to their own RRSP, or to an RDSP where they are the beneficiary. Note they would still have to abide by the $200,000 lifetime limit on RDSP plans.

If they are financially dependent but not due to a mental or physical infirmity, and they are younger than 18, then the RRSP assets can be transferred to a term-certain annuity. The annuity must pay out in full before they turn 18.

If none of the above applies, then the RRSPs will be taxed on your final tax return.

RRSP beneficiaries seem crucial to me, when it comes to estate planning. Any other considerations for RRSP beneficiaries or withdrawal strategies we should know about?

I’ve seen cases where RRSPs were left to non-qualifying beneficiaries, like independent, adult children. That might be okay, but can create a tax problem. Since they receive the full amount of the RRSP on death, with no taxes withheld, the estate needs cash to pay that tax bill. If there’s insufficient cash in the estate, CRA can go after the executor, or the beneficiaries, for the tax bill. In some cases, it might be better to name the estate as beneficiary to avoid this problem and ensure the estate has money to pay the tax bill.

Good guidance.

Mark, you might have gleaned from my questions that I also view RRIF assets as an estate liability. Meaning, depending on your income needs throughout retirement, it might not be wise to keep that account afloat with lots of assets “until the end”. Let’s unpack that too.

Possibly. It’s one of those questions that you’ll rarely know the answer to in advance. Because the returns on your investment portfolio are sheltered from tax in your RRSP and RRIF, they are quite tax-efficient. In fact, over a long enough time frame, an RRSP/RRIF can be more tax-efficient than a non-registered account – even if you’re in a higher tax bracket when you withdraw the money than you were in when you made the contribution! That breakeven point vs. the non-registered account is going to depend on the time horizon, type of investment income, and return on the investments. So like many answers in personal finance – it depends.

What happens to the money in my RRIF, if I pass away, generally speaking?

It’s generally the same as the RRSP. When you die, you are considered to have received an amount equal to the fair market value of the RRIF – unless your spouse is named as successor annuitant, which I’ll discuss below.

What happens if I name my spouse/partner as my RRIF beneficiary? i.e., is there a way to reduce the tax implications when transferring the RRIF assets to a surviving spouse/beneficiary? 

You can name your spouse as either a successor annuitant or a beneficiary. There’s an important difference – with a successor annuitant, the RRIF continues on in your spouse’s name. Any income from the date of death remains in the RRIF, and any payments out of the RRIF are taxable to the successor. But when named as the beneficiary, it’s like the RRSP. The amount is considered income to them, and they can receive an offsetting deduction for transferring it to their own RRSP or RRIF. But any increase in value between the date of death and the date of the transfer is taxable to them. For that reason, naming your spouse as the successor annuitant of your RRIF is often preferred.

Makes sense to me and we’re planning to do that years down the road assuming RRIF rules don’t change. What happens to the money in my RRIF, if I pass away, and there is no last surviving spouse/partner or named beneficiary? 

Then it’s treated much like the RRSP. If there is a qualifying survivor, namely a financially dependent child or grandchild, it may be possible to roll over the RRIF assets to their RRSP or RDSP. If there are no qualifying survivors, for example only independent, adult children – then the total amount will be taxed on your final tax return.

As a follow-up, does it make sense to keep lots of RRIF assets “until the end”? I’m not planning to since we don’t have kids.

Maybe, Mark!

But you won’t know the optimal outcome until it’s too late. While you benefit from the tax deferral on keeping the RRIF intact, you likely face a higher terminal tax bill. That can still be a better outcome than using a non-registered account since the aforementioned tax drag can create a worse outcome than leaving the money in the RRIF.

With that, you must also consider whether additional RRIF withdrawals will subject you to Old Age Security (OAS) claw back or other income tested benefits.

For my clients, we can test multiple scenarios including leaving the RRIF intact or making additional withdrawals up to certain limits. It’s not always apparent at first glance which path is best.

I think a lot of this decision comes down to what you might do with the additional money. If you just invest it in a non-registered account, it might make sense to leave it in the RRIF. But if you have other plans – like spending the money on experiences or gifting the money to your family – then that’s a noble use of the money, and the optimal tax scenario might be a secondary consideration.

Ya, I see taxation as a consideration but not the primary driver of our financial decisions. We plan to spend our RRSP/RRIF money over a few decades and leave any remaining TFSA money intact “until the end”. OK, any other considerations for RRIF beneficiaries or withdrawal strategies we should know about?

Similar to the RRSP, be careful naming beneficiaries without a thorough estate plan.

Agreed. As we wrap this post, Mark, what other worthy takeaways are worth demystifying when it comes to RRSP/RRIF taxation? Do you agree or disagree with the general notion that RRSPs/RRIFs are an estate liability?

I agree that it’s a liability, but it needs to be quantified.

First, you have to consider the tax refunds you received along the way, as well as the benefit of tax-free compounding of your RRSP/RRIF portfolio over potentially many years. Most Canadians will likely take advantage of income splitting on the RRIF withdrawals (i.e., starting at age 65), hopefully over many years. If you contributed at a high tax bracket and withdrew the majority of the RRIF at lower brackets over time, then even with a sizeable balance at death, you might have benefitted from significant tax reduction over your lifetime.

We tend to focus on that final tax bill, but when you consider these other facets, it still might be the optimal scenario.

But no one likes cutting a big cheque to CRA. I don’t think you will!

Ha, not in my plan for sure, Mark. Thanks for doing this.

Folks, first, a big thanks to Mark McGrath.

Second, a lot to digest here but I’ll offer a few simple takeaways for your further reading and potential RRSP and RRIF taxation planning, some thoughts from yours truly:

  1. Whether you decide to make RRSP withdrawals or turn your own RRSP into a RRIF, know that RRSP and RRIF withdrawals will trigger taxation impacts. So, you can consider being “strategic” with your RRSP withdrawals (i.e., take out as much or as little as you wish) before age 65 to help mitigate taxation. See point #2.
  2. Determining the timing and amount of your RRIF withdrawals is likely going to depend on your other income sources in retirement, your age, and your marital status as key drivers.

Consider the following:

2a. If/when you establish your RRIF, you can have your RRIF withdrawal based on the age of your spouse. So, if your spouse is younger than you by a few years, you can lock-in lower, minimum withdrawal payments that could reduce your taxable income.

2b. Like we highlighted above, RRIF income qualifies as eligible pension income for pension splitting. So, if you are age 65 or over, you can split 50% of your RRIF income with your lower-income spouse to reduce your combined, overall, tax bill. Smart!

2c. If you do decide to start splitting RRIF income, at age 65, or least taking your own RRIF income at age 65, then $2,000 withdrawn from your RRIF each year between the ages 65 to 71 will qualify for the pension income tax credit, and that triggers an annual 15% Federal tax credit on $2k (or $300) on your tax return. Small potatoes overall but take any meaningful tax credits when you can!

  1. Smart RRSP and RRIF tax planning is important because if you withdraw funds from a spousal RRSP or spousal RRIF – any withdrawals in excess of the minimums could be attributed back to the contributing spouse. This applies up to amounts contributed in the current year and previous two calendar years.


  1. Finally, if you don’t need all the RRIF income, or even some RRIF income every year, then consider contributing the cash withdrawn from your RRIF to your TFSA every year, up to your TFSA contribution limits. This way, you’ve moved tax inefficient money (tax-deferred money) from your RRIF to your TFSA to compound tax-free moving forward. The TFSA is an outstanding retirement account for longevity risk, tax-free income spending and/or estate planning “until the end”.

Let me know if you have additional questions for me, or the other Mark, happy to answer!

Thanks for your readership.

Mark S.

Related Reading:

I provided some beneficiary considerations for TFSAs, RRSPs, RRIFs and more accounts here. 

Beneficiaries for TFSAs, RRSPs, RRIFs and other key accounts

Mark McGrath and I collaborated on this post – essential reading if you have a corporation:

Taxation of investment income in a corporation

Along with my own preferred drawdown order, I highlighted a number of overlooked retirement income planning considerations here:

Overlooked retirement income and planning considerations

There are also dozens of Retirement stories and essays you can learn from there. You can also hire me on that page for my time and DIY services. 

Finally, why living off dividends in perpetuity is usually a mistake.

Disclosure and notes at the time of this post:

Mark McGrath is a Wealth Advisor with Wellington-Altus Private Wealth (WAPW).  The information contained herein is provided for informational purposes and should not be construed as financial, legal, tax or investment advice. Please consult a financial advisor and tax professional with respect to your personal financial situation and objectives. Please note that while current at the time of publication, tax rates are subject to change. WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. 

Mark Seed is a DIY investor and advocate for DIY investing in Canada. I share content on my site for general education and information purposes only – to help Canadians learn more, save more and grow more. Please review more disclaimers and related clauses here.

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

24 Responses to "Watch out for RRSP and RRIF taxation"

  1. Awesome info… wish I have found this sooner… I have a somewhat related question regarding US dividends and where to hold them.

    I am Canadian and prepping for retirement. I have an annual US financial obligation and have invested in US dividend funds to cover it. Consensus seems to be to hold these investments in an RRSP account to avoid US withholding tax which makes sense when compounding the dividend growth. However, I will be removing the dividend growth each year and want to prep for the most efficient taxation.

    From my chair, holding them in
    ==> RRSP (RRIF) obligates me to full CDN taxation but no US withholding tax.
    ==> TFSA obligates me to 15% US withholding tax on the US dollar, but that is it.
    ==> non-registered accounts. I believe the 15% US withholding tax is still in play, there is something about a foreign tax credit and the Cdn dividend tax calculation is based on the remainder or the full amount?

    It seems that the TFSA is still the best vehicle as long as your income tax liability is not quite low, not to mention makes tax time a lot simpler. Any insights you have would be great.

    1. Jayne, happy to chat. 🙂

      I wish you would have found my site sooner as well!


      1. RRSP/RRIF, LIRA/LIF = U.S. stocks or ETFs since no withholding taxes but that doesn’t mean those are the best long-term returns. You never know….historically, great spot for U.S. stocks and ETFs.

      2. “TFSA obligates me to 15% US withholding tax on the US dollar, but that is it.”


      3. Non-Reg. “I believe the 15% US withholding tax is still in play, there is something about a foreign tax credit and the Cdn dividend tax calculation is based on the remainder or the full amount?”

      Yup, witholding is recoverable.

      If you have investments outside of your registered accounts, your first choices should be

      A. Canadian dividend-paying stocks OR
      B. ETFs holding Canadian dividend-paying stocks OR
      C. Stocks or ETFs where the majority of the return is in capital gains.

      I love the TFSA. Own income and growth there as you wish :))

  2. Thank you for the very in depth coverage of this topic. Regarding withholding tax from a RRIF withdrawal, I just want to close the loop on the following statement (stated about RRSP but applies to RRIFs as well)

    …. If you’re in the 29.65% tax bracket, your total taxes owing on that withdrawal would be ($6,000 x 29.65%) = $1,779 – of which you’ve only paid $1,200. That means you’ll owe another $579 in taxes for the year.

    I expect that if the opposite was true, meaning your withholding tax for the RRIF withdrawal was over your overall tax burden, that the overpayment would be refunded. I can find no information to verify this statement.

    thanks, Jayne

    1. Hey Jayne,

      Recall RRSP withholding tax differs from RRIF.

      RRSP – Withholding Rates
      Use the following withholding rates for lump-sum payments:

      10% (5% for Quebec) on amounts up to $5,000
      20% (10% for Quebec) on amounts over $10,000
      30% (15% for Quebec) on amounts over $15,000

      Source: CRA.

      There are no RRIF withholding taxes applied to RRIF mins. Income is reported for the year come tax time.

      So, if any withholding tax for the RRSP OR RRIF withdrawal was over your overall tax burden, then that will be reconciled.
      I haven’t done any RRSP or RRIF withdrawals personally, but I would anticipate you cannot pay more taxes than what is actually calculated and owed – otherwise a refund applies.


  3. Excellent article – as usual. My interest was especially piqued when I read, “While you benefit from the tax deferral on keeping the RRIF intact, you likely face a higher terminal tax bill. That can still be a better outcome than using a non-registered account since the aforementioned tax drag can create a worse outcome than leaving the money in the RRIF.” Oh!!! So, I’m in a position where my RRIF $ are gravy – I don’t need them to cover living expenses – and, alas, I don’t have a spouse with whom to do the “splitting.” My intention was to gradually withdraw funds from my RRIF to even out the taxes payable and give some to my daughter (giving with a warm hand), but also put the money in TFSAs but also non-registered accounts. It sounds like the latter is not advisable. If I leave the funds in the RRIF, then my overall tax bill will go up. I guess I don’t understand the downside of transferring RRIF funds into a non-registered account.

    1. Absolutely Marie – taxable money is a tax drag so you have to weigh these options IMO since there are more financial decisions that just tax ones:

      1. Move/kill off the RRIF sooner than later in your 70s or 80s = move tax-deferred money from RRIF to taxable or to your TFSA (the latter is ideal).
      2. Keep RRIF intact and let the estate worry about it.

      More and more as I age, I believe the ability to smooth out taxes and to gift money to children or other causes during your life, seems like a great plan.

      Stay well 🙂

      1. I get that tax-deferred money in RRIF could end up with high taxes to CRA later, but non-registered account is not a tax drag and rather more tax efficient? Am I missing something? So with smoothing out taxes in mind, wouldn’t it be better to pay taxes now in non-registered instead of growing RRSP/RRIF to avoid having to take it all out ASAP in retirement along with higher tax?

        1. It all depends, Sharon.

          I’ve been on record here for over 10-years to say that maxing out your TFSA is best, for most, but that’s just me.

          Then, it becomes a question related to tax-deferred investing vs. taxable.

          I like maxing out our RRSPs, after TFSAs, in that priority. Then, if money leftover (not usually?!!) then taxable investing.

          When possible, I don’t think it makes too much sense to pay taxes from non-reg. when you have don’t have TFSA or RRSP filled up yet.

          Having a large RRSP/RRIF balance to withdraw from is a great problem to have.


  4. Hello Mark:

    For your RIFF cannot you not transfer out stocks of your RIFF rather than cash to cover what has to be withdrawn except with holding tax?

  5. Fantastic post Mark and Mark! A few questions after reading carefully and trying to absorb all the valuable information.

    Can you name your spouse as a successor annuitant for your RRSP? If so, how does it differ from naming your spouse as beneficiary for your RRSP? Does it work the same way as for RRIF?

    Can you name beneficiaries to a RRSP/RRIF that are siblings/nieces/nephews? What happens if the nieces/nephews are under 18 at time of death of RRSP/RRIF holders?

    Thank you in advance!

    1. Thanks, Sabrina.

      As I understand it:

      -You can have RRSP beneficiaries (one or more) but the annuitant designation does not apply to RRSPs because there is no forced withdrawal/schedule.
      -You can have RRIF beneficiaries (one or more) OR the successor annuitant designation. (The latter is best for us, eventually.)
      -You can have TFSA beneficiaries (one or more) OR you can have the successor holder designation.

      Sadly, to make things confusing from our government, if you’re wondering as to why RRIFs have a “successor annuitant” and TFSAs a “successor holder”, it’s simply a naming convention to differentiate between the two but keep in mind annuitant implies income vs. holder, whereby you’re not forced to make withdrawals. 🙂

      Fun stuff eh?

      To your other question, you could name adult children as beneficiaries but…with complications I believe. Here is one of many references via RBC but others I could point to:

      Check out page 4. It’s complicated and with complications come consequences.

      I hope that helps and thanks for your readership! 🙂

  6. When I add up for our net worth tally, I have 4 amounts.
    House value–I never want to sell so that is kinda unimportant to me.
    Items which are 100% taxable like: RRSPs, RRIFs, LIF etc.
    Items which are 50% taxable: capital gains on non-registered investments
    Items which incur 0 tax: book value of non-registerd investments, any cash in accounts and TFSA

    Comparing from year to year this is very helpful, as it gives a truer picture of what is available to spend.
    I like to see the 0 tax category increase the most, don’t we all?
    It is more difficult to know future taxation costs.

    1. I recall you have a paid off home, Barbara? If so, awesome.

      Definitely challenging to get closer to $0 tax when you have RRSP, RRIF withdrawals but certainly, as you know, the ability to “smooth out taxation” via slow RRSP, RRIF withdrawals over many years is very helpful to move tax-deferred money to taxable or ideally, tax-free (TFSA).


  7. I agree with the last poster’s comments that it is not a liability. It is a before tax asset. I will always prefer to pay more tax than less since it usually means I have assets. I have an rrsp worth about 1mm. I have NOT contributed to it in over 30 years but was fortunate with a few investments. My wife has a spousal rrsp worth about $700k and we have withdrawn about $300k over the past 5 years to take advantage of her lower tax bracket. (Ages 67 and 61). Who would have thought!!
    If I had known in advance that the rrsp’s would do this well, I might have changed strategy (especially with respect of the capital gains portion) but the reality is nobody knows and I certainly did not expect this result. Bottom line is keep saving on a regular basis and “worry” about the taxes issues as they arise. We tend to overthink the issue.
    The biggest negative to the rrsp question, in my mind, is that in many cases you are converting capital gains (and dividends) into fully taxed regular income. I have not figure out any way to get around this.

    I know not many readers may want to go down this route, but our tax “problem” has been “managed’ by choosing to give more to charity and our overall tax rate has been in the 10% or less area for several years as a result.

    Neither of us have employer pensions but we live a relatively simple lifestyle.

    Another strategy
    I have a friend who has a big “problem” in that his RRIF is over $5mm! He is obviously a wealth person and I suggested to him that he treat the RRIF similar to a charitable foundation. He can give all the income from his withdrawals to charity and ends up with no tax on the withdrawal. What a wonderful way to give back to your community and make a difference in an area of interest to you. Just another way to look at this. Paying it forward at its finest.

    1. A fat RRSP is an outstanding problem to have. $1M or more is extremely well done by anyone in their 50s and 60s without a workplace pension plan.

      If you have been blessed to have such a great asset value, I totally see tons of merit/value in charitable giving. Correct on the RRSP to a point…

      Each dollar withdrawn from an RRSP or RRIF is taxable in the year of withdrawal at your marginal tax rate. Therefore, donating your RRSP/RRIF withdrawal to charity can often result in a donation receipt worth more in tax credits than the tax you will face on that RRSP/RRIF withdrawal, which may reduce tax on other income….so, it depends.

      Here is a decent source:

      Excellent comment and what a nice way to give back based on your wealth, Dale. Impressive.

  8. Great article While everyone’s situation is different, I am fortunate to have an excellent defined benefit pension plan ( I consider it my annuity). I made a long range plan knowing what my annual taxable income would be. So, I turned my RRSP into a RRIF at 65 (now 69) with a plan to empty it by age 70 in a tax wise way and taking advantage of income splitting and deferring CPP and OAS. I will make the last withdrawal next year by my 70th birthday and will then start CPP and OAS. My wife is three years younger and we will turn her RRSP into a RRIF and follow the same plan with taking CPP and OAS at 70. TSFAs and RESPs for 5 grandkids maxed yearly. Also blessed to make charitable donations knowing they are benefitting those in need and providing a tax deduction. Thanks for your website and how in tune you are with providing relevant information and insight, Mark. I both learn new things and have my personal planning confirmed.

    1. Awesome, Bruce!

      This point of yours made me smile: “…I turned my RRSP into a RRIF at 65 (now 69) with a plan to empty it by age 70 in a tax wise way and taking advantage of income splitting and deferring CPP and OAS.”

      Super smart with CPP and OAS coming online at age 70.

      Sounds like with those TFSAs and RESPs, those grandkids will be in outstanding financial shape. Well done.

  9. Lloyd (63, retired) · Edit

    I’ll never regret having the RRSPs/RRIFs. I have a bit of regret the plan didn’t work out the way I intended.

    I will not complain about paying the taxes upon withdrawal (and certainly not after death) ;-). I knew about that issue when I invested. I would hope everyone who uses this tool was aware of that fact when they elected to partake in it.

    1. Same. I don’t regret using RRSPs to date. They have been wonderful to me as a retirement planning tool. I simply wanted to point out, with Mark’s insights, that taxation is an issue for assets in RRSPs/RRIFs and needs to be navigated. That’s all. 🙂

      You’ve done very well from what I know about, Lloyd! Kudos.

  10. This one one of the best articles that I have encountered about RRSP/RRIF withdrawals. It mentions aspects that many others leave out.

    I understand the convenience and accuracy of labelling RRIF assets as tax liabilities, but I think that label might send some people down the wrong path. I could see people taking away that they don’t want to have RRSP/RRIF assets because they are tax liabilities. I prefer to spin RRIF/RRSP assets as the ultimate tax deferral. Shelter your assets from tax for your whole life and pay the tax after you are dead. That doesn’t seem like a liability to me. We’re saying the same thing, just spinning it differently.

    1. Great stuff Neil. The way I see it though, all RRSP contributors (and contributions) have been deferring tax – you are using a government loan to build wealth with. Not a bad thing, but folks need to be mindful the taxman cometh.

      Most folks I know want to spend RRSP and RRIF assets before they die too but everyone has a different plan for their money of course!

      Thanks for the comment 🙂


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