When it’s time to retire and convert your savings (RRSPs, locked-in RSPs, LIRAs and non-RRSP savings) into retirement income you need to know your options.
You are allowed to contribute to and keep your RRSP, Locked-In RSP or LIRA until the end of the year in which you turn 71. After this point, they must be converted into income.
Guaranteed Minimum Withdrawal Benefit (GMWB)
A type of option that you can purchase for your retirement annuities. This specific option gives you the ability to protect your retirement investments against downside market risk. You also have the ability to access capital should you need it. A GMWB gives balance to your current portfolio.
Annuities (Life, Term or Prescribed)
An annuity provides guaranteed income to when you need it most. You make a lump sum payment, and then it is distributed back to you either for a specified period of time, or the rest of your life. You can use registered or non registered funds.
Life Annuity – This will provide income to an individual for as long as they are living. It will ensure that your retirement money will not run out while you are still alive.
Term Annuity – This will provide income for a specific amount of time. It replaces a gap in your income so that you can still cover all of your obligations.
Prescribed Annuity – This type of annuity can defer tax as it will report a level amount of interest over the length of the annuity. It must be purchased with non registered funds.
Registered Retirement Income Fund (RRIF)
A RRIF is an investment plan in which registered funds can be transferred into to provide a steady stream of income for your retirement years. The plan is tax sheltered until you take your first payment, and then tax is calculated according to CRA guidelines. You are required to take a minimum annual payment, based on your age, starting one year after the plan has been set up. However, there is no maximum that could be withdrawn at one time. Should you die, it would be passed on to your spouse or beneficiaries.
Call us today to discuss which option would suit you the best.