By Brenda Bouw
Financial Post
January 26, 2002

Question: I know you must do something with your RRSP by age 69, but my question is how early can you use your RRSP funds for retirement purposes? Could I retire at 55 by rolling my RRSP funds into an RRIF or purchase an annuity? Are there rules about earning income if this is possible or making further RRSP contributions?

Answer: Adrian Mastracci, president of KCM Wealth Management, a fee-only planner in Vancouver, says the reader should convert their normal RRSP to a RRIF by the end of the year in which they turn age 69. (This is assuming you have a regular RRSP, as opposed to a locked-in RRSP that arises from a pension plan transfer.)

Before then, Mr. Mastracci says any current RRSP funds can be used for retirement purposes at any time before age 69. His advice is to wait as long as possible before using the RRSP and to not convert to a RRIF until required by law. It is in a person's best long-term interest to accumulate as much as possible in the RRSP. If you have a locked-in RRSP, you may be limited to withdrawing the money, starting at age 55, by way of an annuity.

You can retire at age 55; however, there is no requirement to convert your RRSP to a RRIF or to an annuity. Therefore, if you need funds, you may redeem amounts from the RRSP at any time up until the end of the year in which you turn 69. All RRSP withdrawals are taxable as income.

If you were 69 today, your RRSP options would be to cash out the RRSP, convert to a RRIF, purchase an annuity, or a combination of these three. Hence, you will retain more financial flexibility by not converting your current RRSP to a RRIF.

You can earn as much income as you desire after you retire. When you choose to convert your RRSP to a RRIF, all minimum RRIF withdrawals are governed by a formula and are fully taxable as income. The first withdrawal generally commences the year after you convert. All RRSP deposits must be made before you convert to a RRIF and no further contributions can be made to an RRIF.

So, keep your current RRSP and earn as much post retirement income as you like.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.