Since the individual does not have to start receiving income from an RRSP until age 72, the funds can stay in the RRSP longer. This means there will be additional growth in the RRSP and the tax on the required payments can be deferred. This coupled with possible additional contributions will result in higher retirement income in the future.

For those individuals who are 70 or 71, the rules before March 19, 2007 required that RRSP contributions to their plan had to cease at 69. Further RRSP contributions could not be made and a transfer to a Registered Retirement Income Fund (RRIF) or certain annuities was required with scheduled mandatory payouts.

If you are now 69, or younger, and have not yet converted your RRSP, you will be able to maintain your existing RRSP and continue to make contributions until the year in which you turn 71. If you are 70 or 71, you will still be able to make RRSP contributions in 2007. Although the proposals contemplate the possibility of converting an existing RRIF back to an RRSP, it is likely administratively easier to open a new RRSP for the additional contributions.

If you are 70 or 71 in 2007, the proposals also provide that the mandatory withdrawal requirements will not apply for 2007. Therefore, you can stop the amounts scheduled to be paid to you without the requirement to convert back to an RRSP. Similar rules will apply to those individuals who are 71 in 2008. Taxpayers, who are 70 or 71 or who are contemplating converting their RRSP to a RRIF, should address the tax issues with their chartered accountant as soon as possible to determine if there are investment and tax advantages that may accrue to them and their spouses for 2007.