Upon reaching age 71, a client must convert their RRSP into a RRIF or an annuity. What is the primary purpose of this mandatory conversion from an income tax perspective?

Question: Upon reaching age 71, a client must convert their RRSP into a RRIF or an annuity. What is the primary purpose of this mandatory conversion from an income tax perspective?

Answer options:

• To allow for continued tax-deferred growth of remaining funds.
• To ensure a steady stream of income for the retiree. ✅ To legally enforce the end of tax-sheltered growth and begin income taxation of the funds.
• To facilitate estate planning and beneficiary designations.

Correct answer: To legally enforce the end of tax-sheltered growth and begin income taxation of the funds.

Explanation: The mandatory conversion at age 71 ensures that the tax-sheltered growth within the RRSP ends, and withdrawals from the RRIF begin, making the funds taxable as income. This prevents indefinite tax deferral on these registered savings.