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Canada’s new federal budget proposes a tweak to Registered Retirement Savings Plans (RRSPs) aimed at simplifying financial planning for thousands of seniors every year.
Tax and personal finance experts say while the new “RRSP for life” measure would be more convenient, it does not address seniors who are struggling under rising living costs.
An RRSP is a Canadian savings account that lowers your tax exposure today, and lets your savings and investments grow without being taxed until you retire. They can hold a wide variety of financial assets, including cash, stocks, guaranteed investment certificates (GICs), and exchange-traded funds (ETFs).
For the 2026 tax year, individuals can contribute up to 18 per cent of their earned income in 2025, up to a maximum of $33,810. If you have a workplace pension, the value of those pension contributions is deducted from that 18 per cent limit.
Thursday’s federal budget includes a number of measures aimed at making life more affordable for Canadians. More low-income workers will get benefit payments to help them make ends meet. Those who make a minimum of $3,000 annually get a refundable tax credit under the Canada Workers Benefit, but that threshold is being lowered to $500 for all workers.
What are the proposed changes?
Currently, RRSPs must be withdrawn or converted into a Registered Retirement Income Fund (RRIF) when the account holder turns 71. In the new federal budget, Ottawa proposes to allow Canadians to keep their RRSPs after they reach that age.
Currently, if someone dies after age 71 with a RRIF, the account can be transferred to a spouse without closing it or triggering tax paperwork. That’s not the case today with RRSPs.
Ottawa’s budget proposal would “allow a surviving spouse or partner to become a successor holder of an RRSP, and simplify tax-free transfers to qualified survivors after the death of the account holder.”
A public consultation on the plan started on Thursday, and will run until Jan. 8, 2027.
Jamie Golombek, managing director, tax and estate planning at CIBC Private Wealth Management, says today most 71-year-olds choose to convert their RRSPs to RRIFs to avoid the tax applied if they choose to cash out.
“It’s a complex administrative thing for hundreds of thousands at least every year,” he told CBC News.
“What the government is saying is, ‘Why not have an RRSP for life?’ In other words, an RRSP that you basically have until the day you die.”
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Read More: What Ottawa’s ‘RRSP for life’ plan means for Canadian seniors
