The old Revenue Canada rule was that you had up to age 71 to convert but the 1996 budget reduced the maximum age for holding a RRSP from 71 to 69. So, if you are in this age group you must wind up your RRSP by December 31st. 

RRSP MATURITY OPTIONS

• Cash in your RRSP.

The proceeds are fully taxable and unless your RRSP is very small this is the least tax efficient option. However, be aware that if you do not elect another option mentioned below, the financial institution holding your RRSP will cash in your RRSP and send you the proceeds (less any withholding tax.) 
• Convert to an Annuity.

The three most common types of annuities are Single Life Annuities with no guarantee term or with a guaranteed term usually 5, 10 or 15 years. The second is Joint and Last Survivor Annuities with the same guaranteed terms. Life means that this annuity would pay for life and if you had a Guaranteed Term the annuity would pay for that term in any event. The third option is a Term Certain Annuity that pays back your principal plus interest over a certain period of time. In the first two types of annuities after the guaranteed term expires there is no money left for the estate. In addition annuities pay you a fixed amount, and over the years inflation erodes your purchasing power. For these reasons annuities usually are not the right choice. Only in a very high interest rate environment should they be considered. 

If you are convinced annuities are the only way to go and wish to preserve the capital for your estate, an insured annuity which matches a Term Insurance Policy to a Single Life Annuity would be your choice. This strategy however is for those who usually do not need income from their RRSPs as the payment from the annuity goes to pay for the term policy. You also have to pass a medical to qualify for the Term Insurance. 

• Convert to a RRIF

The Registered Retirement Income Fund (RRIF) is the most popular option. The proceeds belong to your estate and if your investments generate more than you withdraw, your RRIF will grow. RRIFs could hold Mutual Funds and give you income similar to Systematic Withdrawal Plans discussed in our September,1996 newsletter. 

You MUST take out a minimum amount each year but there is no maximum. The following shows the 2000 Minimal Annual Withdrawal 

RRIF Value 1st Jan. 2000=$10,000

Age 69	$4761	4.761%
Age 70	$5000	5.00%
Age 71	$7380	7.38%

RRIFS ARE THE BEST CHOICE

In our opinion, RRIFs continue to provide the best alternative for your RRSP assets because they: 
• let you make the investment decisions, giving you the flexibility to change your investment strategy to improve your rate of return; 
• let you keep ownership of your assets, building an estate. If you were to buy an annuity you would no longer control your assets Although new annuity rules allow you to redeem or transfer your annuity to a RRIF, you would get less back than what you invested. Careful planning with your financial planner is advisable if you were to make this move; 
• let you determine what income you wish to receive(subject to the minimum, see table.) No annuity gives you this option. 

OTHER RRIF OPTIONS

1. you can own more than one RRIF 
2. you can start at any age(but by age 69) 
3. there is no maximum limit(subject to the minimums) you can draw lump sums or switch from minimums to higher amounts and back to minimums. 
4. This is subject to the rules of the plan you choose. Usually not available in guaranteed RRIF plans 

CHOOSE YOUR OPTIONS WISELY

Note: "Rules for locked in RRSPs" are slightly different. Proceeds in these plans came from pension plans. Your options are to buy an annuity or a LIF. A LIF is like a RRIF where the restrictions are on the maximum amount that can be withdrawn in a year. At age 80 a LIF must be converted to an annuity. However the same deadline applies for people turning 69 in 2000. Locked in RRSPs must be converted by Dec.31st, 1999.