Receiving Income from an RRSP Part 1

by in Tax Advice Information and Updates
Receiving Income from an RRSP Part 1
Are you nearing retirement? If you are, you might want to think about getting regular income from your RRSP.

Generally, you may have a certain amount of flexibility on the types of income you can receive. You will have to contact your RRSP issuer and ask about the options available to you.

Here are your options for your RRSP at any age up to the end of the year that you turn 71.

Transfer your RRSP funds to a Registered Retirement Income Fund (RRIF): A year after you establish a RRIF, you can receive a minimum amount each year using a predetermined formula based on the value of the RRIF and your age. You will have to pay tax on the income when you start receiving payments from your RRIF as your RRSP issuer will not be withholding tax on the amount transferred directly to your RRIF. The payments you receive will be included in your tax return as income for the year you receive them.

Use your RRSP funds to purchase an annuity: Annuities provide guaranteed income for life or for a specified period. As with the RRIF, your RRSP issuer will not withhold tax on amounts that are used to purchase an annuity so you may have to pay tax on the income when you start receiving payments. Included these payments on your tax return for the year you receive them.

You may have received commutation payments from an RRSP: A commutation payment is a fixed or single lump sum payment from your RRSP annuity that is equal to the current value of all or part of your future annuity payments from the plan.

There are 3 more options for your RRSP that we will look at. Please check back for part 2!

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/registered-retirement-savings-plan-rrsp.html
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