Registered Retirement Income Funds:

Selecting the Right Retirement Income Option

You can choose a combination of the following options to best meet your retirement income needs:

• RRIF
• Cashing in your RRSPs
• Annuities
• Any Combination of These Options
• Other Investments to Consider

RRIFs:

• RRIFs are the most flexible option for retirement income. RRIFs allow you to choose when and how much to withdraw (above the minimum required amount), what investments to make and if you wish to leave an estate. Income earned inside the RRIF is not taxed until withdrawal, and funds can easily be transferred into a RRIF from your RRSP. It is also possible to have more than one RRIF.

Cashing in your RRSPs:

• RRSPs can be cashed at any time once the investments have matured. It is important to note that you will be taxed on the amount you withdraw from your RRSP (tax is withheld at the time of withdrawal). In addition, if you withdraw a large amount, you may possibly move yourself into a higher income bracket.

Annuities:

• An annuity is a fixed term investment that will pay you a fixed amount on a regular basis for the duration of the term. Funds from an RRSP can be used to purchase either a life annuity (funds expire at the time of your death or your spouse’s death) or a term-certain annuity (funds expire at the end of a fixed term).
  
  • Benefits: Annuities allow for great peace of mind, as the purchaser knows the same amount will be received at each payment interval.
    
    
  • Drawbacks: Annuities do not allow for any flexibility. Once the contract is signed, changes to the payment amount or term of the annuity are not permitted. Therefore, if the purchaser does not live for as long as life expectancy tables predict, the return on the investment could be very low.

  Annuities are ideal if you want to know exactly how much you will be receiving each payment period or if you need to ensure you will not outlive your capital. This option is ideal if you do not want to worry about continuing to invest your savings into a RRIF, or if you are not concerned about leaving an estate.

Any Combination of These Options:

• You may want to consider investing a portion of your retirement savings into a combination of options to maximize the benefit of your retirement income. For example you can ensure that you have a steady income stream throughout your lifetime with an annuity, while maintaining the flexibility and growth opportunities available through the RRIF.

  Your ATB Investment Specialist will be able to help you determine what mix of options is best for you.

Other Investments to Consider:

• With a Locked-in Retirement Account (LIRA) your options for retirement income include:
  
  
  1. Locked-in Retirement Income Fund (LRIF)
     Designed for individuals with either Locked-in Retirement Accounts, Locked-in RRSPs or pension plans. LRIFs are similar to RRIFs in terms of their flexibility in payments and investments. To ensure you receive long term benefits, LRIFs have a maximum amount that can be withdrawn each year. LRIF payments are taxable in the year you receive them. If you select more than the annual minimum payment, tax is withheld on the excess.
     
     
  2. Life Income Fund (LIF)
     LIFs are similar to LRIFs. Upon reaching the age of 80, a LIF holder must purchase a Life Annuity. Unlike LRIFs, LIFs are available throughout Canada.
     
     
  3. Life Annuity
     Life Annuities can be purchased with Locked-In Retirement funds. They offer the same features as an annuity, which is described on the preceding page.