Families, RRSP

RRSP Choices When You Turn 71

Make sure you circle Dec. 31 on the calendar in the year when you turn 71. This marks the final day when you can contribute to your registered retirement savings plan. Age 71 represents an important year in your retirement planning. You have to decide what to do with your RRSP: cash it out in full, convert it to a registered retirement income fund or buy an annuity. If you have a younger spouse, you can continue to make RRSP contributions, but you have to put them into a spousal RRSP.

Spousal RRSP

If you’re still working at age 71 or would like to reduce your taxable income, a spousal RRSP might be your best option. If you have a younger spouse, you can continue to contribute to your spouse’s RRSP. You are allowed to contribute up to your RRSP deduction limit until Dec. 31 in the year when your spouse turns 71. This can be advantageous for income splitting purposes if you are in a higher marginal tax bracket than your spouse or common-law partner.

For example, if you turned 71 on March 6, 2016, the last day when you could contribute to your RRSP was Dec. 31, 2016. However, if you still have RRSP contribution room left, you can continue to make contributions to your spouse’s RRSP until Dec. 31 of the year when your spouse turns 71.

Home Buyers’ Plan

If you participated in the Home Buyers’ Plan, be careful in the year when you turn 71. After December 31 in the year when you turn 71, you are no longer allowed to repay any withdrawals you made from your RRSP under the HBP. (Normally, you have 15 years to repay the amount you withdraw.)

When you turn 71, you have three options: you can repay the remainder of your RRSP, make a partial repayment to your RRSP or make no repayment to your RRSP. Any withdrawal amounts not repaid to the HBP are added to your tax return in the year you turn 71 as taxable income. For example, if you turned 71 on Sept. 6, 2016 and failed to repay $3,000 to your RRSP under the HBP by Dec. 31, 2016, $3,000 is added to your 2016 tax return as taxable income.

Lifelong Learning Plan

Similar to the HBP, you have until Dec. 31 in the year when you turn 71 to repay any withdrawals from your RRSP under the Lifelong Learning Plan. You can no longer repay after Dec. 31 in the year when you turn 71, because this is the final year when you can make contributions to your RRSP. By Dec. 31, you can repay the full amount, a partial amount or make no repayment at all. If you have any amount left to repay, it is added back to your tax return as taxable income.

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