In the year you turn 71, you must close down your RRSP and choose from several investment options.  Like an RRSP, any interest, capital gains or dividends will compound on a tax-deferred basis. It is not possible, however, to make any new tax-deductible contributions to a RRIF. In addition, you must make minimum annual withdrawals. Payments received from a RRIF are included in the income of the year they’re withdrawn.

Key benefits

• Investments compound tax-free as long as they remain in the plan
• Choose your holdings from a wide range of options
• You decide how much to withdraw each year (above a set annual minimum after you reach 71)
• You can leave remaining RRIF assets to your heirs
• You can income-split your RRIF income with your spouse if you are at least 65 years of age. This will allow you to allocate up to 50% of your RRIF income to your spouse and save your family tax if your spouse is in a lower tax bracket than you

If you choose a RRIF, be careful to note that it does not guarantee a set income for life. As with an RRSP, if your investment decreases in value, you'll have less to draw from.

The fine print...

• You must withdraw a minimum amount from your RRIF each year based on your age or the age of your spouse.
• You decide how much to withdraw yearly (above a set minimum once you turn 71);
• There is no maximum withdrawal amount.