Chapter 3: RRIF or annuity?
Chapter 3: Table of Contents
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: the risk that equity markets will decline or underperform, the risk that interest rates will change and the risk that inflation will be higher than expected. To mitigate these risks a combination of Immediate Annuity/RRIF may be used.
Your Registered Retirement Savings Plans (RRSPs) must be converted to one or more of the following retirement income options by the end of the calendar year in which you turn 71.
- An Annuity
- A Registered Retirement Income Fund (RRIF)
- A lump-sum cash withdrawal
A registered retirement income fund (RRIF) is like an extension of your RRSP. Your investments continue to grow tax-free but you must stop contributions and withdraw a certain amount of income from your RRIF each year.
- You retain personal control over your investments
- Flexibility to change your income and make lump sum withdrawals
- You could outlive your RRIF income
- Requires ongoing management
- Depletes your capital if the amount you have to withdraw, exceeds the amount you are earning on the deposit
- If funds are were registered (eg. RRSPs)
- Income is 100% taxable
- If funds are non-registered
- Only the interest portion of income payments is taxable
If your life insurance company fails, your Payout Annuity policy will be transferred to a solvent company.
On transfer, Assuris guarantees that you will retain up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher.