A few things I’ve learned as I undertake the preparation to retirement that may be helpful in the future. For those of you who don’t know, a DPSP (Deferred profit-sharing plan) is a CRA-approved vehicle to invest monies donated by corporations in the context of RRSP contributions (matching contributions). A brief reference can be found here. A DPSP is best thought of as an RRSP that is tied to your employer. Until and unless you leave the payroll of the employer, the DPSP is effectively untouchable by you, the beneficiary.

My employer included a DPSP as part of their compensation package; once I retired, that DPSP became portable and so I initiated the process to move it to my RRIF accounts.

A question you may have is “Why convert to a RRIF at all? Why not just withdraw money directly from the RRSP? “ You can, but it becomes likely that deregistration fees will be owed to your financial services provider. Not only that, but you will also be subject to withholding tax in this scenario. When RRIF minimums are withdrawn, there is no withholding tax, and there is no deregistration fee. Just 100% of the money you expect.

So my plan was to retire on December 31, 2024, and start collecting from my RRIF as a source of income in 2025. My plan had a small flaw, however. With a RRIF, you are required to withdraw a minimum amount from it based on your age and the value of your RRIF in the year after your RRIF is created.

You can access RRIF money as soon as the RRIF exists, but the annual minimums stated above are only calculated for the first time the year AFTER it’s opened. Practically, what this means is that if you try to withdraw money from a RRIF in the year it’s created, your withdrawals will be subject to withholding tax (boo).

So my little plan has a problem. My DPSP is only available to me as of Jan 1, 2025. Which means this account will only be converted to a RRIF in 2025. Which means I can only withdraw tax-free from the RRIF starting January 1st, 2026.

So that’s my tiny cautionary tale for y’all. If you’re planning on retiring, and you’re planning on getting near-immediate access to your DPSP funds via RRIF, I would NOT recommend a Dec 31st retirement date. A month earlier would be better, so you have time to set up the RRIF and access the RRIF funds in January.