On December 31 of the year in which an individual turns 71 years of age, he must terminate his Registered Retirement Savings Plan, according to RBC Financial Planning. These individuals have three choices of what to do with retirement savings: They can take the money saved in lump sums, convert the RRSPs into registered retirement income funds, or RIFs, or use the RRSP funds to buy annuities.
If an individual opts to take the RRSP funds as one lump sum payment, he is responsible for paying taxes on that lump sum, explains RBC Financial Planning. This is typically not a good option unless a person's RRSP is very small.
If an individual opts to transfer his RRSP funds into a RIF, the assets continue growing while deferring taxes, notes RBC Financial Planning. Individuals can choose a self-directed RIF, allowing flexibility in managing assets. Individuals may have more than one RIF, but Canadian law requires a person to withdraw a minimum amount from a RIF annually. When an individual withdraws money or assets from a RIF, he is responsible for paying taxes on them at the current rate. A RIF can only contain assets that an individual has transferred from current registered savings or pension plans.
If an individual wants to receive a steady income from his assets but not be responsible for managing these assets, using his RRSP funds to purchase an annuity is a good option, reports RBC Financial Planning. With an annuity, an individual enters into a contract with an insurance company. The individual gives a lump sum to the insurance company, and the company issues this money back to the individual in small amounts over a predetermined length of time. Those annuities with higher interest rates offer more to retirees.