Retirement income choices for you
When you retire, there are a number of things to which you’ve been looking forward. So now it’s time to start decide how your income is going to be constructed.
Your Registered Retirement Savings Plans (RRSPs) must be converted to either of these options by the end of the calendar year in which you turn 71.
• A Life Annuity
• A Registered Retirement Income Fund (RRIF)
1. Convert funds into an Annuity
If you’re looking for a fixed payment, you should consider a single premium immediate annuity. You can use your RRSP to purchase an annuity to provide regular income for a guaranteed period or only for life. Your retirement income is determined at the time you purchase your annuity using your age, or ages in the case of a joint annuity.
2. Convert your funds into a RRIF
RRIFs are a popular way to convert RRSPs into an ongoing monthly income. You are required to withdraw an annual minimum amount, according to a formula set by the Canada Revenue Agency. You can increase this amount or take lump-sum withdrawals any time you choose.
3. Use your savings
You can have a non registered annuity with funds from your savings.
Life Annuities offer:
Security
• monthly payments continue for life or to age 90 or later.
• will provide guaranteed income for the lives of you and your spouse.
RRIF or Life Annuity?
What should you choose to provide your retirement income,an immediate Annuity or a RRIF? There is no simple answer – it depends on your risk tolerance, investment knowledge and personal circumstances. Risks that should be considered include:
1. the risk that equity markets will decline or under-perform,
2. the risk that interest rates will change
3. the risk that inflation will be higher than expected.
So you can mix a RRIF with an annuity or use annuities with different guarantee periods.