At age 71, you must convert your RRSP to a Registered Retirement Income Fund (RRIF) and begin taking minimum annual withdrawals. The minimum is a percentage of your year-end balance, and that percentage rises as you age.
The minimum factors
The factors start at 5.28% at age 71 and climb to about 7.38% by age 80, 10.21% by 88, and 20% at 95+. Because the minimum is a percentage of a growing balance, a large RRSP compounding at a healthy return can produce minimums that exceed your actual spending — especially after spending typically declines in later retirement.
The surplus problem
When your RRIF minimum is bigger than what you need to spend:
- You must withdraw it (there's no flexibility on the minimum).
- You pay tax on the full withdrawal at your marginal rate.
- The surplus cash has to go somewhere — often a TFSA or non-registered account.
This is the "over-accumulated RRSP" trap: under-drawing in your 60s lets the balance grow, then the minimums force large taxable withdrawals later. The tool flags this in its compliance warnings ("RRIF minimum exceeds spending — surplus reinvested to TFSA").
The fix: draw earlier
The whole point of tax-smoothing is to draw the RRSP more evenly across retirement — filling your low tax brackets in your 60s so the balance is smaller (and the minimums gentler) by the time you hit 71. The tool's tax-smoothing target lets you set the taxable income level to fill; the "Optimize income target" mode finds the maximum level spending your plan can sustain.
Try it: set a low tax target and watch the RRSP balance grow into the 70s; then raise the target and watch the minimums (and the surplus-to-TFSA) shrink.