Q&A: RRIF conversion

Question: My wife turns 71 in October this year and has an RRSP account. When should she convert it into a RRIF and when will it be necessary to make a minimum RRIF withdrawal? How does one determine the minimum percentage applied and who is responsible for calculating this obligatory amount if the account is self directed? – Bryan N., B.C.

Gordon Pape answers: She can convert to a RRIF any time up to Dec. 31 of this year. Her first minimum withdrawal will be required next year, in 2011. The minimum is based a percentage of the market value of the plan on Jan. 1 of each year. For someone who is age 71 on Jan. 1, the minimum is 7.38% of the plan’s value on that date. The percentage increases each year. The financial institution that holds the plan will advise your wife of the minimum withdrawal requirement each year. She can decide if she wants to take the payment in one lump sum or periodically. Withholding taxes will apply.

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