Q. I am approaching the age limit for retirement. If I convert all my RRSPs to RRIFs, how much capital gains tax will I pay? Secondly, what happens to my investments?


A. Many seniors have difficult decisions to make, particularly with losses in their pension plans savings and withdrawals. New rules have increased the age from 69-to-71-years-old for collapsing your RRSPs. This effectively gives individuals two more years to contribute and delay withdrawals.


Generally, individuals at age 71 with RRSPs have three options:

1. Withdraw entire amount and pay the tax.

2. Buy an annuity.

3. Convert to Registered Retirement Income Fund (RRIFs).

According to Jose Lomonaco, a financial advisor with Edward Jones at their Toronto office, “RRIFs are the most popular choice.” You will have no income taxes to pay at 71 if you choose to buy RRIFs or annuity.

With an RRIF, your investments can remain intact. The annual minimum requirement must be withdrawn and reported as income on your tax return.

However, Lomonaco advises that you maintain your portfolio — individuals must de-register and transfer “in kind” the shares to a non-registered investment account.

Therefore, your stock holdings are unchanged but split between a registered and non-registered account.

These may help with your decision:

• No taxes to pay at the time RRSPs are converted to RRIFs.
• All investments remain intact. Individual continue to control assets.
• May qualify for income split up to 50 per cent of RRIF income with spouse and lower tax bill.
• Continue to defer tax on investment income.
• Income taxes due on minimum annual withdrawal requirement.

– Reach Henry Choo Chong, CGA, at choochonghcga@yahoo.ca.

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