Many milestones can mark aging, but one of the more important ones from a financial perspective is age 71. That is the birthday year you must unbundle your RRSP.
If you turn 71 this year, you have until December 31 to plan the best way to exit your plan. This is not an isolated financial decision, however. Winding down your RRSP should be just one element in meeting your total financial and estate planning needs. Asking for the assistance of a trusted or long-time financial advisor might be one of the best decisions you can make.
First of all, you need to look at the monthly and annual cash needs required to maintain the lifestyle you wish to have for you and your spouse. Don't forget to factor in inflation, because this one item alone can seriously erode your comfort level in years to come.
You also need to look at your other assets and income sources to help you decide just how and when your RRSP funds should be integrated with your cash flow. Taking your RRSP funds directly into high-income years can significantly increase your tax liability. So, even if you have to wind up your RRSP this year, there are ways to delay the tax impact.
Here are the options available to you:
- Collapse the RRSP and take the funds into income now.
- Transfer the funds to a Registered Retirement Income Fund (RRIF).
- Purchase an annuity with your RRSP funds.
- If your RRSP contains funds transferred from a registered pension plan, purchase a Life Income Fund (LIF).
We would like to help you with this very important decision. We urge you to meet with one of the estate/retirement planning experts in our Harvest Estate Planning division at your earliest convenience. Since estate planning is included in the FBC membership, there is no extra cost to FBC Members.
As an FBC Member you receive exclusive access to FBC Financial & Estate Planning to help you with your retirement planning.