Finance Minister Francois-Phillipe Champagne tabled the federal budget in Parliament on Thursday, proposing a major change to how your Registered Retirement Savings Plan, or RRSP, is managed in the years after you stop working.
Budget 2026 proposes an “RRSP-for-life,” which could even carry over until after a person’s death.
Here’s how it differs from the way your RRSP currently works.
Currently, retirement planning in Canada is split into two stages – the accumulation stage and the decumulation stage.
“You have the accumulation stage, which is the RRSP, where we contribute and we get a tax deduction against our income for the amount we contribute,” said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth.
At age 71, Canadians with an RRSP face a choice.
They can either cash out of their RRSP before they turn 71, buy an annuity that guarantees them a fixed income or convert their RRSP into a Registered Retirement Income Fund, or RRIF.
They are then required to make minimum withdrawals from their RRIF.
What did Budget 2026 propose?
In Budget 2026, the federal government proposed merging the core features of the RRSP and RRIF into one single “RRSP-for-life.”
“This would eliminate the need for individuals to convert their RRSP to a RRIF at age 71,” budget document said.
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The proposal is “more of an administrative issue” than a tax change, Golombek said.
“The concept is basically you could just have one retirement vehicle that you have until the day you die or you’ll also may be allowed to name a successor,” he said.
Currently, Canadians cannot name a successor for an RRSP like they can for a TFSA. The budget proposes allowing Canadians to include a “successor holder” who can be a spouse or a common law partner.
“This could permit a RRSP to remain open until the death of the successor holder (i.e., the original holder’s surviving spouse or partner) and avoid the value of RRSP property being included in the income of the deceased,” the budget said.
Changing the system would save retirees a lot of paperwork and save banks the time the spend reaching out to their clients with RRSPs who are about to turn 71, Golombek said.
“Under the new system called ‘RRSP-for-life’, they’ll actually get rid of the entire RRIF concept,” he said.
He said, however, it is unclear whether existing RRIFs would be converted back to RRSP or if the change would apply to people turning 71 after the changes go into effect.
The group Conference for Advanced Life Underwriting (CALU), which has been calling on the federal government to make this change, said it was “pleased to see” the changes to the RRSP system, which they say will begin “modernizing the retirement income system.”
“However, this does not change the current requirement to make minimum withdrawals once the holder attains the age of 71,” the group, which represents professionals in the life insurance and financial advisory industries, said in a statement.
This would mean that while the RRIF wouldn’t exist, anyone over the age of 71 would have to make mandatory minimum withdrawals from their accounts.
The proposal also makes no changes to the age of contribution.
“(There are) no changes for how long you can contribute. You can only contribute to the end of the year you turn 71,” Golombek said.
For now, however, nothing changes since the budget only announces the government’s “intention” to bring in this change — the budget implementation bill will still need to be passed in the House of Commons then in the Senate, and specific regulations and technical details could change pending consultations that are taking place on the proposed changes.
If the changes go through as proposed, Canadians will still have three options on how to decumulate their savings.
“You could cash in your RRSP at 71 and pay tax, which almost nobody does,” Golombek said.
For most people, the choice will come down to choosing the RRSP-for-life or buying a registered annuity.
“If you want a regular, predictable, guaranteed amount of income every single year, you could choose the registered annuity route,” he said.
However, having the RRSP-for-life would mean your money stays invested, often in a combination of ETFs, mutual funds, stocks or bonds.
It would also give you more flexibility on how and when to withdraw your money.
“Most people want the flexibility to be able to (withdraw), if they need a large sum of money for healthcare or medical or travel or whatever,” he said.
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