Are you close to retirement? Ways to get income from your RRSP.

There are a number of factors that need to be considered in deciding when you start drawing income from your RRSP.  Whether you delay as long as you can or start withdrawing funds from your RRSP as soon as you stop working, the rules determining when and how you can take income from your RRSP are decided by the Income Tax Act. 

By the end of the year you turn 71 you must close all your RRSP accounts.  In the year after you turn 71 you are required to take your first income payment from your RRSP.  There are three basic ways you can turn your savings into income:

1. Purchase an annuity – When you close your RRSP you purchase an annuity that will allow you to set up regular, set-amount payments for the rest of your life. 
2. Purchase a Registered Retirement Income Fund (RRIF) – By moving your money into a RRIF you continue to invest your savings for growth.  At the same time you take a portion of your savings each year as income.  The Income Tax Act determines the minimum amount that must be withdrawn each year.
3. Lump sum payment – This one is usually not the best decision as you have to pay tax on the full amount of your savings. 

There are a number of factors which need to be considered in deciding when you start drawing income from your RRSP.  Prior to deciding to take income from your RRSP or before you turn 71 it is important you discuss your situation with your financial advocate.  WE CU so you can get the most out of your RRSP.