According to the Canadian Investment Funds Course, an RRSP is a retirement savings plan that allows individuals to defer taxes on their contributions and investment income until they withdraw the funds.
However, an RRSP cannot be held indefinitely and must be terminated by the end of the year the annuitant turns 71. At that point, the annuitant has three options to withdraw the funds from the RRSP:
* Make a lump-sum withdrawal, which is subject to withholding tax and income tax.
* Convert the RRSP to a registered retirement income fund (RRIF), which provides a steady stream of income with a minimum amount that must be withdrawn each year.
* Purchase an annuity, which offers a guaranteed income for life or for a specified period.
References: 1: Canadian Investment Funds Course - IFSE Institute 2 (Unit 9: Retirement)