Ottawa’s RRSP for life plan and Canadian seniors, Digi Mart USA News (Canada): Canada’s new federal budget proposes a change to Registered Retirement Savings Plans (RRSPs) intended to simplify financial planning for thousands of seniors each year. Tax and personal finance experts say the “RRSP for life” measure would be more convenient, but it does not address seniors who are struggling with rising living costs.
An RRSP is a Canadian savings account that reduces your tax exposure today and allows savings and investments to grow without being taxed until retirement. RRSPs can hold a wide range of financial assets, including cash, stocks, guaranteed investment certificates (GICs) and exchange-traded funds (ETFs).
For the 2026 tax year, individuals can contribute up to 18 per cent of their earned income in 2025, to a maximum of $33,810. If you have a workplace pension, the value of those pension contributions is deducted from that 18 per cent limit.
Currently, RRSPs must be withdrawn or converted into a Registered Retirement Income Fund (RRIF) when the account holder turns 71. In the new federal budget, Ottawa proposes allowing Canadians to keep their RRSPs after reaching that age.
Under current rules, if someone dies after age 71 holding a RRIF, the account can be transferred to a spouse without being closed or triggering tax paperwork. That is not the case today with RRSPs.
Ottawa’s budget proposal would “allow a surviving spouse or partner to become a successor holder of an RRSP, and simplify tax-free transfers to qualified survivors after the death of the account holder.”
A public consultation on the plan began Thursday and will run until Jan. 8, 2027.
Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, says most 71-year-olds today convert their RRSPs to RRIFs to avoid the tax applied if they cash out. “It’s a complex administrative thing for hundreds of thousands at least every year,” he told CBC News.
“What the government is saying is, ‘Why not have an RRSP for life?’ In other words, an RRSP that you basically have until the day you die.”
Under the proposed change, RRSP holders would be required to withdraw a minimum percentage of their savings each year, starting at age 72. These percentages would be based on average life expectancy so that retirement savings are paid out and taxed gradually over the owner’s lifetime.
John Fragos, press secretary to Finance Minister François-Philippe Champagne, confirmed to CBC News that under the government’s proposal, RRSP account holders could not contribute after age 71.
Aaron Hector, senior wealth advisor at Calgary-based Tier Wealth, says simplifying the financial landscape for seniors is a smart move by the government. He also praises the proposal to allow RRSPs to be transferred easily after death.
“Not needing someone to go through the paperwork process of converting an RRSP into a RRIF just makes a lot of common sense for me,” he said. “Heaven forbid it slips through the cracks.
It could create some issues for people.”
Li Zhang, director of social impact at Chartered Professional Accountants of Canada, views the “RRSP for life” proposal as “more of a nomenclature change” that ignores bigger issues for seniors. She estimates that only 33 to 37 per cent of Canadians actually have access to a pension.
“You’re not actually talking about a lot of people who have a lot of retirement savings assets,” she said. “If you’ve walked by food banks, and you look at the line, it’s the really young or the really old.”
Zhang also said mandatory withdrawals can make it difficult for RRSP holders to balance their income. “That then triggers higher levels of taxation,” she said.
While the consultation runs until Jan. 8, Golombek expects it could take much longer to enact the changes if Ottawa chooses to proceed. “I think it’s going to be a few years before we see the ultimate merger of these, or at least the elimination of the RRIF.”
