This year’s federal budget tacked another couple of years onto the maturity date of RRSPs. For 2007 and subsequent calendar years, the conversion age for RRSPs will be moved to the end of the year in which the holder turns 71. It was 69 previously.

The budget changes recognize the fact that people are living longer and working longer, and that they don’t want to be forced to tap into their retirement funds too early. The Investment Funds Institute of Canada, among others, recommended shifting the RRSP maturity age to 73.

Under the new rules, clients who turn 70 or 71 in 2007 will be able to continue making RRSP contributions if they have the room available. Unused RRSP contribution room being carried forward, for example, can be used up in this way.

As well, a client aged 70 or 71 at the end of 2007 who has already converted RRSP funds to a RRIF, will be able to transfer funds from the RRIF to an RRSP, as long as the re-established RRSP is converted to a RRIF before the end of the taxation year in which the individual turns 71.

The government also announced minimum RRIF withdrawal amounts will be waived for 2007 for RRIF annuitants who turn 70 or 71 in 2007, and for 2008 for those turning 71 in 2008. There are no changes to the RRIF withdrawal rules. But withdrawals up to the minimum amount that would otherwise be determined under the normal rules will continue to be exempt from tax withholding.

— MONICA TOWNSON