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April 2006
Vol. 7, no. 4

Perspectives on Labour and Income

Cracking the RRSP nest egg
Ted Wannell

  • Mandatory conversion of RRSPs substantially boosts the income of 70 year—olds-an average of about $1,600 or 6.6% of taxable income in 2002. At the same time, some other forms of income are declining, so the net increase in taxable income is much less—$800 in 2002.
  • The income effect of mandatory conversion is increasing over time, indicating that younger cohorts have greater RRSP assets when they reach age 69 than those who preceded them. More of the converted assets are now being managed in RRIFs as opposed to annuities.
  • High-income earners are much more likely to have a substantial RRSP-related boost in income than those earning less. More than half of the top income quintile had an increase of over $2,400 compared with 1 in 20 of the bottom quintile. Hence, much of the income generated by mandatory conversion will be taxed at relatively high marginal rates.
  • Very few seniors rely on RRSPs for a significant proportion of their income prior to age 70. Just 2.4% made annual RRSP withdrawals that accounted for over one-quarter of their income. For this group, taxable income actually declined at age 70.
  • Seniors who continue to earn most of their income from employment at age 69 tend to be high-income professionals. For them, mandatory conversion results in an average RRSP-generated boost in income of more than $7,000, softening to $5,100 after netting out declines from other sources.

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Ted Wannell is with the Labour and Household Surveys Analysis Division. He can be reached at (613) 951-3546 or

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