Sophia, 62, plans to retire next year. She has $150,000 in her RRSP. Her husband, Mark, 65, has a large RRIF from which he's already making withdrawals. Sophia's financial planner suggests converting her RRSP to a RRIF upon retirement but delaying withdrawals. What is the primary benefit of this strategy compared to withdrawing directly from her RRSP before conversion, assuming she does not need the funds immediately?

Question: Sophia, 62, plans to retire next year. She has $150,000 in her RRSP. Her husband, Mark, 65, has a large RRIF from which he's already making withdrawals. Sophia's financial planner suggests converting her RRSP to a RRIF upon retirement but delaying withdrawals. What is the primary benefit of this strategy compared to withdrawing directly from her RRSP before conversion, assuming she does not need the funds immediately?

Answer options:

• It allows her to continue deducting contributions to the RRIF.
• It defers the mandatory minimum annual withdrawal until the RRIF is established. ✅ It allows the funds to continue growing tax-deferred within the RRIF, potentially for decades, before mandatory withdrawals begin.
• It provides greater flexibility for spousal rollovers upon death than a standalone RRSP.

Correct answer: It allows the funds to continue growing tax-deferred within the RRIF, potentially for decades, before mandatory withdrawals begin.

Explanation: Converting an RRSP to a RRIF by the end of the year in which the annuitant turns 71 is mandatory, but withdrawals do not need to start immediately upon conversion if done earlier. This strategy allows for continued tax-deferred growth within the RRIF until mandatory withdrawals commence at age 72, or later if the RRIF is based on the younger spouse's age.