When must RSP funds be transferred to a RRIF?

Individuals must transfer their RSP (Registered Retirement Savings Plan) funds into a RRIF (Registered Retirement Income Fund) by the end of the year in which they turn 71. This regulation is in place to ensure that retirement savings begin to be used for income as individuals reach a certain age.

The reasoning behind this age limit is tied to the government's desire to encourage the disbursement of retirement funds, ensuring that individuals have access to their savings to support themselves during retirement. By age 71, individuals are typically expected to be in retirement or close to it, and the funds should start being drawn down as income rather than remaining in tax-deferred accounts.

This information is particularly relevant because failing to convert a RSP to a RRIF by this age could result in tax penalties, as the funds would then be subject to taxation as income. Therefore, knowing that this transfer must happen by age 71 is crucial for effective retirement planning.