Out-of-the-box RRSP ideas for retirement

Much RRSP advice follows a similar script. Contribute as you go, convert to a RRIF at 71, withdraw the minimum and hope for the best.

But retirement planning is where the interesting things actually happen. With a little flexibility and good timing, RRSPs can be used in ways that soften taxes, improve cash flow, and reduce future problems.

Here are a few out-of-the-box RRSP and RRIF ideas I’ve come across lately. All completely acceptable, rarely discussed and aimed at making better decisions about a full retirement.

Contribute to a spousal RRSP after 71

One of these concerns an older spouse who turned 71 in 2025. Even though they were forced to close their own RRSP, they still had unused contribution space. Even though their personal RRSP was gone, that contribution room didn’t disappear.

They continued to contribute to an RRSP for their younger spouse, tapping into that valuable contribution room and extending tax deferral beyond what most people think is possible.

Use early withdrawals from RRSP to smooth out income between spouses

Another example looks at income smoothing when one spouse retires earlier than the other. Instead of living entirely on the working spouse’s salary, the retired spouse begins making modest RRSP withdrawals, often up to the personal base amount or the top of his lowest tax bracket.

That reduces future RRIF balances, flattens lifetime taxes and paves the way for retirement income splitting once both spouses retire.

Convert a spousal RRSP to a spousal RRIF to avoid attribution

There’s also a couple who forgot to stop their spouses’ RRSP contributions and worried they had locked themselves in.

But by converting the spousal RRSP to a spousal RRIF, the minimum required withdrawals are not subject to income attribution, allowing the required RRIF withdrawals to be taxed in the hands of the receiving spouse in the future. Crisis avoided.

Partial RRIF at age 65 to release the retirement income tax credit

Some retirees deliberately open a small RRIF even if they aren’t ready to convert everything.

If they move about $14,000 from an RRSP to a RRIF at age 65, they can take out about $2,000 per year (from age 65-71) in qualifying retirement income, which is enough to claim the full retirement tax credit.

The rest of the RRSP remains untouched and flexible, avoiding larger mandatory withdrawals later.

Wise if you think you might be able to earn a part-time income and don’t necessarily want to be subject to the minimum required RRIF withdrawal on the entire balance of your retirement account.

Optimize RRSP withholding for better cash flow

Retirees who use RRSP withdrawals for income quickly discover that mandatory withholding taxes impact how much actually ends up in their bank accounts.

• Up to $5,000 withdrawn: 10% withholding tax
• $5,001 to $15,000 withdrawn: 20% withholding tax
• More than $15,000 withdrawn: 30% withholding tax

At an institution like Wealth simpleRRSP withdrawals made at least 60 days apart are not considered cumulative for withholding purposes.

For example, a retiree who withdraws $48,000 annually could make four $5,000 withdrawals (60 days apart) at a 10 percent withholding, and then two $14,000 withdrawals (60 days apart) at a 20 percent withholding. The total withholding tax would be $7,600, or about 15.8 percent.

For a bank that calculates the withholding cumulatively, that same $48,000 withdrawn gradually over the year could yield an effective withholding of closer to 26 percent. The tax due at filing is obviously the same, but the cash flow experience is very different throughout the year.

Using RRSP space to offset capital gains in retirement

Finally, there is coordinating RRSP withdrawals with capital gains. Think of a retiree who owns a rental property or a handful of wildly appreciated stocks in a taxable account.

Rather than immediately switching to a RRIF, they modestly tap their RRSP for a year or two and then sell the real estate or concentrated equity position before starting government distributions, avoiding potential OAS clawbacks in a peak revenue year.

The added value is activated deliberately. If RRSP space is available, they contribute to help offset the gain. If not, they can simply skip RRSP withdrawals that year to keep taxable income in check. The proceeds are reinvested in a more diversified, riskier portfolio, and the RRIF conversion takes place the following year with a cleaner balance sheet.

Final thoughts

I cringe when I hear people write off RRSPs as a tax trap waiting to happen at age 71. Timing is important. Nuance is important. Your personal situation is important. The age difference between spouses matters.

Understand that most RRSP problems are not caused by the account itself. They are caused by default decisions or misunderstandings about available planning strategies before it is too late to do anything about them.