OTTAWA
The federal government has proposed merging Registered Retirement Savings Plans and Registered Retirement Income Funds into a single "RRSP for life" account to simplify financial planning for seniors.
The change, outlined in the 2026 federal budget released Thursday, would allow Canadians to keep their RRSPs after they turn 71, eliminating the current requirement to convert them into a RRIF by the end of that year.
Account holders would still be required to start minimum annual withdrawals at age 72, and they would not be allowed to contribute after age 71, according to John Fragos, press secretary to Finance Minister François-Philippe Champagne.
"It's a complex administrative thing for hundreds of thousands at least every year," said Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management.
"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."
The proposal also aims to streamline how retirement savings are transferred to spouses and other eligible survivors after death.
Currently, a surviving spouse can inherit a RRIF without immediately paying tax, but similar rules do not exist for RRSPs.
The budget proposes allowing a surviving spouse or partner to become a "successor holder" of an RRSP, and to simplify tax-free transfers to qualified survivors.
"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," said Aaron Hector, a senior wealth advisor at Tier Wealth in Calgary.
"Heaven forbid it slips through the cracks. It could create some issues for people."
Financial planners say the changes are largely administrative, but several key questions remain unanswered.
Simon Wong, a certified financial planner and head of financial planning at Blueprint Financial, said it is unclear whether existing tax benefits for retirees would apply.
Currently, RRIF withdrawals can be split with a spouse for tax purposes and qualify for the federal pension income tax credit, but regular RRSP withdrawals do not.
Jason Heath, managing director at Objective Financial Partners, expects both benefits would be extended to RRSP withdrawals under the new system.
The changes could also prompt financial institutions to eliminate administrative fees for RRSP withdrawals, which can range from $25 to $100, he said.
Adam Chapman, a certified financial planner in London, Ont., said the changes are a significant improvement but will likely benefit younger generations.
"This isn't something that's probably going to benefit the boomers," said Chapman. "This is really a Gen X and millennial improvement."
Li Zhang, director of social impact at Chartered Professional Accountants of Canada, said the proposal ignores bigger issues for seniors, like affordability.
She estimates only 33 to 37 percent of Canadians 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."
She also noted that mandatory RRIF withdrawals can push seniors into higher tax brackets.
The government has launched a public consultation on the plan, which will run until Jan. 8, 2027.
However, experts warn implementing the changes could take years, as they may require amendments to federal and provincial legislation and updates to financial institutions' systems.
"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," Golombek said.
Chapman suspects existing RRIF accounts would remain in place rather than requiring retirees to switch to the new system.
The budget proposal comes as the government tables a $142.1 billion spending plan focused on investment and affordability.
This story was written by the e2gold.ca newsroom from reporting by CBC News and The Globe and Mail. Quotes are checked word for word against that reporting.