The deadline for rolling your RRSP into a RRIF or annuity is Dec. 31 of the year in which you turn 71. If you're in this group for this year or will be in the next few years and you plan to use the RRIF option, you should make sure all your paperwork is in order and ask yourself if your portfolio objectives reflect the realities of compulsory annual withdrawals of fully taxable income that are part and parcel with a RRIF.
Canadians are living longer, and even on retirement day you may consider yourself a long-term investor because you expect to live to 120. But because you have to withdraw specific percentages from your plan each year, you are in fact a short-term investor for part of your funds. Also, if you are planning to live to a really ripe old age, remember that when you reach 95 you'll be required to withdraw 20% of what remains in your RRIF each year.
If you turn 71 this year you must take out during 2016 a minimum of 5.40% of the value of your RRIF as of the beginning of 2016. If your portfolio generates enough income to meet the minimum withdrawal, you don't have any problems in the near term. But the percentage rises each year, so you may want to consider putting a portion of your portfolio each year into something low risk in anticipation of withdrawing funds and not worrying about short-term market fluctuations.
You should also, of course, look at the assets in your plan to make sure all are suitable for retirement. You should consider getting rid of any assets that might have liquidity problems at some point in the future such as issues whose offering memorandums list potential redemption restrictions. You can redeem these in your plan and reinvest the proceeds in something more suitable.
A key planning issue is to confirm that you completed the beneficiary section of all RRSP and RRIF account application forms. If you don't, your RRSP or RRIF assets may become part of your estate and subject to probate fees, so from a financial planning point of view, name your beneficiary or beneficiaries and save your estate some money. (Quebec residents must use a will to distribute RRIF assets.)
Your advisor has a duty of care to inform you of the consequences of not naming a beneficiary, but not all of them do, so confirm that the form includes a filled-in beneficiary section and keep a copy with your will, powers of attorney and insurance policies.
Also, keep in mind that beneficiary designations don't automatically move when you change plans or switch accounts. It's up to you to confirm that your documents include RRSP and RRIF beneficiary designations.
If you have a spouse, you would generally designate him or her as beneficiary so he or she will get the assets rolled over into his or her RRIF or RRSP on a tax free basis.
However, if this is your second or third marriage and you want to leave your RRIF or RRSP assets to your children from a previous marriage, you should opt for legal and tax advice to avoid unintended consequences. For example, at death under this scenario your children from that first marriage will get the cheque for the value of the plan, but it would not be taxable in their hands. Rather, the fair market value of the property will be included in your income for the year of death. In other words, whatever you left to your other survivors will be reduced by taxes that your estate will pay. This is where your professional advisors will try to balance your bequests so that taxes won't put some parties at a disadvantage relative to others.
You should also be aware that special rules apply if you name as beneficiary a financially dependent child or grandchild. These can be very complicated depending on the specific circumstances of the beneficiary. You should review this option with your professional advisor before making any decisions.
