RRIF vs Annuity at 71 for a $1M Portfolio in Ontario: How to Think It Through

At 71 the choice is rarely all-or-nothing: a RRIF keeps your $1,000,000 invested, flexible, and inheritable while forcing a rising minimum withdrawal each year, whereas a life annuity converts the same money into a guaranteed cheque you cannot outlive but also cannot change or leave behind. On a $1,000,000 registered portfolio in Ontario today, an annuity would produce more guaranteed income in year one — roughly $81,000 versus a $54,000 RRIF minimum — but it gives up control, growth, and estate value to do it. Most retirees who look carefully end up somewhere in the middle, annuitizing the portion of the portfolio that covers essential spending and leaving the rest in a RRIF.

That middle path is the part the search results usually skip, so it is worth walking through the whole decision slowly.

What actually happens to your RRSP at 71

An RRSP cannot simply continue past the end of the year you turn 71. By December 31 of that year it has to be wound up, and there are three acceptable destinations: cash it all out (almost never sensible on $1,000,000), transfer it to a Registered Retirement Income Fund, or use it to buy a registered annuity. The CRA's guide RRSPs and Other Registered Plans for Retirement (T4040) sets out the mechanics.

Nothing says you must pick one. You can move $600,000 to a RRIF and use $400,000 to buy an annuity, and both will count as a proper wind-up. People often arrive at this decision believing it is binary, and simply learning that it is not changes the conversation.

What a RRIF gives you, and what it asks of you

A RRIF is the familiar account with a withdrawal schedule attached. Your investments carry over unchanged; the difference is that each year you must take out at least a prescribed percentage of the December 31 value from the year before.

The CRA's prescribed factor is 5.28% at age 71 and 5.40% at age 72, climbing each year to 20% at age 95 and older. One wrinkle matters for planning: if you convert during the year you turn 71, no minimum is required until the following calendar year — so the first mandatory withdrawal on a December conversion is usually the 5.40% figure, not 5.28%.

What you keep is control. You choose how much above the minimum to take, where the money comes from inside the account, and how the portfolio is invested. What you take on is sequence-of-returns risk and longevity risk: if markets are unkind early and you are still drawing a rising percentage, the account can shrink faster than you planned. The mechanics of managing that are covered in more depth in the RRIF withdrawal strategy guide.

What an annuity gives you, and what it asks of you

A life annuity is a trade with an insurance company: you hand over capital, and they pay you a fixed amount every month for as long as you live. The payment does not move with markets, does not run out, and does not require a single decision from you ever again.

Annuity rate surveys published by Canadian annuity brokers in late 2026 showed a 71-year-old man receiving approximately $677 per month per $100,000 of registered money on a single-life, non-indexed contract with no guarantee period. An inflation-indexed version of the same contract paid closer to $570 per month — the cost of protecting future purchasing power is visible and immediate.

Rates are tied to long-term bond yields, so the Government of Canada yield curve published by the Bank of Canada is the single biggest driver of what you will be quoted in any given month. Insurance companies offering annuities in Ontario are regulated provincially through the Financial Services Regulatory Authority of Ontario, and payout annuities carry industry protection from Assuris of up to $5,000 per month or 90% of the promised monthly benefit, whichever is higher.

What you give up is everything flexible: you cannot increase the payment in a year with a large expense, you cannot stop it, and on a single-life contract with no guarantee the capital is gone when you are.

A worked example on a $1,000,000 portfolio

Assume a single Ontario retiree who turns 71 this year, holds $1,000,000 in an RRSP, has CPP of about $14,000 a year and close to the maximum OAS. For scale: the maximum CPP retirement pension at 65 in 2026 is $1,507.65 per month according to Service Canada, though the average new beneficiary at 65 receives closer to $900, and the maximum OAS for those aged 65 to 74 was $743.05 per month for the April-to-June 2026 quarter.

Option A — everything to a RRIF. At age 72 the minimum is 5.40% of $1,000,000, or $54,000. Add $14,000 of CPP and roughly $8,900 of OAS and net income lands near $76,900. That sits below the OAS recovery tax threshold of $95,323 for the 2026 tax year, so no OAS is clawed back. At the margin, roughly 30 cents of each additional dollar goes to combined federal and Ontario tax in that band.

Option B — everything to an annuity. At approximately $677 per $100,000, $1,000,000 buys about $6,770 per month, or $81,240 a year. Add the same CPP and OAS and net income is about $104,140. That is roughly $8,800 above the threshold, and the OAS recovery tax claws back 15 cents per excess dollar — close to $1,320 of OAS lost that year, every year, with no lever to pull. The OAS clawback strategy guide goes through why that fixed-income floor can be awkward.

Option C — a partial annuity. Annuitize $400,000, producing roughly $2,708 per month or $32,500 a year. Leave $600,000 in the RRIF, where the 5.40% minimum is $32,400. Total portfolio income is about $64,900; with CPP and OAS, net income is near $87,800 — still below the clawback line, with $600,000 still invested, still flexible, and still part of your estate.

Those numbers are illustrative only, and they shift with your sex, your spouse's age, the guarantee period you choose, and the month you buy. Running your own version through free retirement planning calculators is a reasonable first pass before any conversation with anyone.

The questions that usually settle it

How much guaranteed income do you already have? Someone with a defined benefit pension, CPP and OAS may already have their essential spending covered, which weakens the case for buying more guaranteed income. Someone with only CPP and OAS is in a very different position.

What does your own situation suggest about longevity? Statistics Canada's life tables put average remaining life expectancy for a 71-year-old Canadian at roughly 15 years for men and approximately 17 for women, but an annuity is a bet on being above average, and family history and current health are the honest inputs.

What do you want to leave behind? A RRIF balance can roll to a spouse tax-deferred, but whatever remains eventually lands in a terminal tax return as fully taxable income, potentially near Ontario's top combined rate. A single-life annuity with no guarantee leaves nothing — though joint-life contracts and 10- or 15-year guarantee periods exist precisely to soften that, at the cost of a lower monthly payment.

How does this interact with your other decisions? CPP start dates and any pre-71 RRSP drawdown change the whole picture, which is why the CPP timing guide and the RRSP meltdown guide tend to come up in the same discussion. Decisions made at 60 are often what determine how comfortable 71 feels.

"I ask people one question first: if markets dropped 30% next spring, would you change how you spend?" says Marc Pineault, retirement planner in London, Ontario. "If the answer is no, a RRIF is probably fine. If the answer is that you'd lie awake, some guaranteed income is worth paying for."

The Ontario tax details worth knowing

Both RRIF withdrawals and registered annuity payments are fully taxable as ordinary income, and both generally qualify for pension income splitting with a spouse and for the federal pension income amount once you are 65. That matters: the tax difference between the two options is usually smaller than people assume, and the real differences are flexibility, guarantees, and estate value.

One exception is worth flagging. An annuity bought with non-registered money can receive prescribed tax treatment, where only the interest portion of each payment is taxable — a materially different outcome from annuitizing registered funds. If part of your $1,000,000 sits outside an RRSP, that distinction is worth examining on its own.

How this decision usually gets made well

Marc Pineault works with retirees across London, Ontario and southwestern Ontario, and the pattern he sees is that the conversion deadline arrives before the thinking does. The years between 65 and 71 are when the useful choices are available — partial drawdowns, CPP timing, how much to shelter in a TFSA, whether to pre-commit to any guaranteed income at all. By December of your 71st year, the options have narrowed to the three the CRA allows.

There is no deadline pressure in saying that. It simply means the question "RRIF or annuity?" is better asked at 68 than at 71, and better asked as "how much of each?" than as "which one?"

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This article is for educational purposes only and does not constitute personalized financial advice. Please consult a qualified professional before making any financial decisions.