Are you turning 69 this year?
By Eunice Luis
Published in Port Credit Harbour Lights
If so, you must collapse your RRSP by the end of the year and face some important decisions.
Here are the options:
- Convert your RRSP to a RRIF. A RRIF offers the flexibility to choose your own investments, while continuing to enjoy tax-sheltered growth. You will also receive an income stream that's based on a pre-determined percentage of your plan's assets each year, plus you can withdraw extra cash when needed (subject to withholding tax).
- Purchase an Annuity. Roll your RRSP into an annuity and receive a fixed or indexed to inflation income stream. Keep in mind that the money will be locked in at current interest rates and you will have no control over how it's invested.
- Cash in your RRSP. With this option the total amount of your RRIF will be subject to taxation in the year of withdrawal.
What is a Registered Retirement Income Fund (RRIF)?
It is a plan designed to provide you with a steady stream of income during retirement. Similar to an RRSP, your RRIF can hold a variety of investments. They will continue to grow tax-free. However, a specific percentage of your plan's assets must be withdrawn each year and reported as income.
This income will be taxed at your individual tax rate.ludes your age or the age of your spouse and the value of your RRSP at the end of the year in which you turn 69. You must receive your first payment no later than the end of the year in which you turn 70.
At Portlington Financial Group, we can work with you in determining your annual minimum payment and tailoring the timing of the withdrawls to meet your individual cash flow needs. If your RRIF is not your primary source of income, we recommend a schedule that provides the minimum income payment. This will allow for maximum tax deferral. However if your RRIF payments are your primary source of income, you can request monthly deposits to your bank account to cover your monthly expenses.
If you withdraw more than the minimum, your payment will automatically be reduced by the appropriate amount of withholding tax.
To learn more about your options, call our office at 905-274-7820 or email eunice@portlingtonfinancial.com.
You can also attend our up coming seminar on this topic. The agenda will cover: Steps in converting RRSP to RRIF; Purchasing an Annuity; General RRIF rules; Minimum withdraws; Taxes on RRIF withdraws; Pension credits.
