Financial Planning Q 'n A

You must wind up your RRSP by December 31st in the year you turn 71. You have several options available to you. The simplest option is to withdraw the funds in their entirety. The result would be the reporting of all funds on your income tax return for the year withdrawn. Your second option is to purchase an annuity from a life insurance company. Annuities come in a variety of forms which can be chosen to suit your needs. A third option is to convert your RRSP to a RRIF. The makeup of the RRIF is similar to the RRSP with the difference being that a certain percentage of the RRIF assets must be withdrawn and taxed each year. Those with locked in RRSP’s have different options using a LIF or a LRIF. The best option is dependent on your cash flow needs and the amount of time and effort you wish to spend on monitoring your investments. Note that if you do not purchase an annuity or RRIF, by December 31st, your entire RRSP will be taxable.