Time to RRIF soon? The RRIF, an RRSP Maturity option!
There are 4 RRSP Maturity Options, one of those options is the RRIF.
The RRIF is a very popularRetirement Income Optionthat the government legislation provides. Although you can make the same types of investments in your RRIF that you can in your RRSP the RRIF is legislation, not an investment (But you are able to invest within it). Types of investments include Mutual Funds, Segregated Funds, Individual Stocks, GICs, Bonds, etc. At Bowie Financial Inc. we prefer segregated funds and GICs because they mitigate some risk.
Circling back to the RRSP for a moment. The RRSP account is a great way to grow your money; so investing is smart. While your money is growing your taxes are deferred, but when you take out your money or start to generate an income from your RRSP that’s when you get taxed. This is why Income Planning and Tax-Planning should go hand-in-hand…and that’s why we have a full-time Tax Advisor available to our clients.
So, what’s the “RRIF” legislation? By the end of the year in which you turn 71, you must make arrangements for your RRSP to be converted into income and to commence in your 72nd year.
You don’t have to wait till you are 71 to convert your RRSP to a RRIF!
That’s right, if you need income before age 71, perhaps you are 55 or 60, 65, you can make your income arrangements at that time instead! Pretty cool!
So what’s a RRIF?
A RRIF is a Registered Retirement Income Fund. The RRIF is essentially an extension of the RRSP which can keep your investments intact. When you break it down a RRIF is really just a fund of money… RRSP money that was in accumulation and now you are converting it to a RRIF… (or the other 3 RRSP Maturity Options: annuity, cash-out, or in the near future “spring 2022″ using the newly introduced ALDA). But this blog is about RRIFs.
The RRIF was introduced in 1978
Since that timethere have been a number of changes. In 1986 a new change came about making it so people could have as many RRIFs as they’d like. Also, for people to be able to take whatever income over the minimum that was wished to take as well. Of course, you have to take at least the government legislated minimum.
Important Facts to remember for once you enter into a RRIF Contract
You must determine what you’re going to do with your RRSPs during the year you turn 71.
Income payments must commence no later than the year you turn 72.
A legislated minimum must be withdrawn each year.
Younger spouse’s date of birth may be used to determine minimum income payments, potentially lowering your tax burden.
All payments from your RRIF account will be taxed as income (although there is a $2000 deduction if you don’t have a pension)
RRIF Income minimum amount percentages are based on your age. So your income year to year can fluctuate because of this. Income is also always based on the market value of the RRIF on January 1st of any given year. Check out this RRIF minimum withdrawal amounts PDF
Bowie Financial Advisors are here to help you make the decisions about how you’d like to invest your RRIF, either with a combination of solutions or just one solution that best suits your needs. Remember what you always want to establish in retirement is protected lifetime income.
