How to Transfer RRSPs, RRIFs and TFSAs in Retirement

Ask MoneySense

My husband and I are retired. Together we hold about $200,000 in Tax-Free Savings Accounts (TFSAs), and roughly $230,000 in Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). We also have an emergency fund and a household income of about $85,000 per year.

Because my husband may require nursing-home care at some point, I’ve been shifting some assets from RRSPs into our TFSAs to keep funds more flexible and tax-free on withdrawal. My spouse is over 71 and reportedly has about $50,000 of unused RRSP contribution room.

We would like to leave an inheritance for our only child and are considering opening a non-registered investment account soon.

Should I transfer TFSA and other assets into a spousal RRSP before I turn 71, and continue moving funds from RRSPs/RRIFs into TFSAs? Or is it better to leave our accounts as they are?

— Irene

Moving money from RRSPs and RRIFs to TFSAs

Your approach is sensible: you’re thinking ahead to reduce taxes and maintain flexibility. Withdrawals from RRSPs and RRIFs are taxable, whereas TFSA withdrawals are tax-free and TFSA growth is sheltered. Shifting some money into a TFSA can therefore preserve after-tax wealth and provide tax-free income or legacy assets for your child.

You’re also asking whether you can use your husband’s unused RRSP contribution room. That can sometimes be useful, but there are age restrictions and rules to consider. As we move through the options, the goal is to balance tax efficiency, liquidity for health or care costs, and planning for an estate.

Withdrawing from RRIFs and RRSPs in retirement

It helps to look at your overall income and cashflow before deciding on account conversions. With an annual household income of about $85,000 (assumed pre-tax), a typical combination of Canada Pension Plan (CPP) and Old Age Security (OAS) of around $40,000 would mean you need approximately $45,000 from investments to reach your target income level.

Taking $45,000 annually from your RRSPs and RRIFs would exhaust roughly $230,000 in about seven years. If your long-range projections already show the RRIF being gradually depleted in line with your retirement plan, accelerating withdrawals — paying tax and moving the proceeds into a TFSA — might not provide a net benefit.

From a tax perspective, withdrawing that level of income can be reasonable. For example, if you live in Ontario and skillfully split pension income and share CPP, you might each face a modest marginal tax rate, keeping overall taxes moderate. That said, the precise impact depends on your exact sources of income, province of residence and whether you use pension income splitting.

Withdrawing from registered accounts

If you withdraw from an RRSP or RRIF to contribute to a TFSA, consider immediate taxation. RRSP/RRIF withdrawals reduce taxable balances but produce taxable income in the year of withdrawal. If the returns in the registered account and the TFSA are similar and your marginal tax rate stays roughly the same, moving funds may not change long-term after-tax results.

Shifting money from a registered account to a TFSA can make sense when your priority is to create a source of tax-free income or to shelter funds you expect to pass on to heirs. But if you plan to spend most RRIF money during your lifetime for regular income, the tax shelter provided by the RRIF may already be serving that purpose, and converting too aggressively might be unnecessary.

Withdrawing money from a TFSA in retirement

One important advantage of the TFSA is its re-contribution flexibility: amounts withdrawn can be re-contributed the following calendar year without losing contribution room, which is helpful when you need temporary liquidity. RRIF withdrawals don’t offer that same flexibility — once you withdraw, you can’t put that exact money back into the RRSP/RRIF vehicle.

If you expect a large tax-sheltered inflow soon — from a house sale, an inheritance, or a lump-sum payment — you might prefer to preserve RRIF assets rather than deplete them to create TFSA room. Keeping TFSA contribution room available for those events can be a useful strategy.

Example TFSA savings account offering tax‑free interest on cash savings.

An example TFSA GIC that guarantees a fixed return for a set term.

A reminder that many online brokers provide TFSA investing platforms suited to long‑term portfolios.

Converting an RRSP to a RRIF at age 71

If you haven’t yet converted your RRSP to a RRIF and you’re at or approaching age 71, you should consider doing so. Converting can make you eligible for the pension tax credit, and it gives you greater control over withholding tax on withdrawals. RRSP withdrawals are subject to mandatory withholding tax at source (rates vary by amount), which can reduce your immediate cash flow and sometimes force you to withdraw more than you need.

After the first calendar year, RRIF minimum withdrawals typically aren’t subject to withholding tax unless you request it. Excessive withholding on RRSP withdrawals can leave you with less money to keep invested and may raise your average tax rate for the year. Managing withholding allows you to better align withdrawals with actual tax liabilities.

You also mentioned the idea of withdrawing from a TFSA to contribute to an RRSP. Be cautious: taking money out of a TFSA and then adding it to an RRSP can leave you worse off unless you plan carefully. If you withdraw $10,000 from a TFSA and contribute it to an RRSP, you’ll get a tax deduction that produces a refund based on your marginal tax rate — but that refund will not always fully offset the lost value caused by how the original TFSA funds were earned. In many cases you would need to borrow or arrange interim funds to keep the contribution-neutral.

Finally, you asked about contributing to a spousal RRSP on your husband’s behalf. If your spouse is already over age 71, he is not permitted to receive new contributions into an RRSP or spousal RRSP. That unused RRSP contribution room cannot be used once the spouse has passed the RRSP/RRIF age limit.

Making retirement income tax-efficient and liquid

You’ve already set up a helpful mix: RRIFs for consistent taxable income, and TFSAs for flexible, tax-free funds to cover health expenses or to leave as a legacy. That balance is a practical approach for retirees who want steady income but also need liquidity and tax-free assets in case of unexpected costs.

If your goal is to preserve options for paying care costs or to leave a clean, tax-efficient inheritance, keep prioritizing TFSA space where practical, and use RRIF withdrawals to supply regular income in years when your taxable income remains modest. Also consider professional advice for modelling long-term withdrawal sequences, OAS and CPP projections, and the impact of provincial rules on health and long-term care costs.