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If you have an RRSP and you’re nearing your 72nd birthday, it may be time to switch to a registered retirement income fund. Find out how it works.
A registered retirement income fund (RRIF) is an account designed to hold investments transferred from registered retirement savings plans (RRSPs) and certain other registered accounts. Canadians must close their RRSPs by the end of the year in which they turn 71.
Moving investments from an RRSP to a RRIF avoids the need to sell off the investments in the registered account and pay tax on any capital gains. After you open a RRIF, you will be required to withdraw a certain percentage of the balance each year according to your age.
Instead of converting an RRSP to a RRIF, you also have the option to cash out your RRSP or buy an annuity.
Example: “Like RRSPs, RRIFs allow your investments to grow tax-free; you only pay tax on money withdrawn from these accounts.”
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