fbpx

Optimizing Your RRIF

Registered Retirement Income Funds (RRIFs) are one method of drawing an income from Registered Retirement Savings Plans (RRSPs) in retirement. There are a few things to consider to get the best value from your retirement savings with RRIFs.

 

For many Canadians, RRSP savings will be the major source of their retirement income. The main concern for most is the risk of outliving their money. Another priority for many retirees is minimizing income taxes.

 

The minimum income that needs to be drawn from a RRIF increases each year. Any funds left in the account will continue to grow tax-postponed. Don’t forget that eventually all funds will have to be withdrawn. If a huge withdrawal is made due to death or medical emergency, the income tax implications can be staggering.

 

Colin has other savings he can use for retirement income and only wants to draw the minimum from his RRIF. He learned that the annual amount can be lower than he expected by electing to use his younger wife’s age instead of his own for the income calculation.

 

He also realized that, while his RRSP investments in GICs weathered the market turbulence over the last few years, a current 2% or so return would mean his funds will deplete more quickly than he really wants. Colin decided that he needs to add some risk to his retirement income savings in order to keep ahead of inflation as well. He may want to consider a plan that offers a low to medium risk in well managed investment funds in an account that also offers some solid income as well as the possibility of death guarantees for some of his money.

 

Colin should avoid falling into the trap of delaying an income too long from his RRIF. With tax law allowing him to split qualifying retirement income with his wife, he may actually be able to draw much more from his RRIF each year and actually pay less income tax. If this creates more income than they need, they can deposit the excess into Tax Free Savings Accounts (TFSAs) – if they have deposit room.

 

Even though Colin elects to take income by way of a RRIF, he isn’t stuck with that decision for life. It may be to his advantage at a later age to convert some of his RRIF account to an annuity that could pay a much higher income than the RRIF would. While this may mean less left for their children, the income may be more important.

 

Contact our office today to get the conversation started.

 


 

Copyright © 2021 AdvisorNet Communications Inc. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of the AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.

 

HOW WE HELP

Without barely a moment’s thought, you would…

Do you ever feel like life is too automated?  Maybe…

You have worked all your life and saved for…

After years of living the “rat race”, you are looking…

First you were putting on their diapers. Then you…

LIFE STAGES

If you are just starting out, it’s easy to…

You get home from work, your spouse is…

You are more experienced now, your bank account is…

During the last market downturn, retirees who…

Running a single-person household has a unique set of..

SERVICES

Many people will offer you advice on which investments…

For most Canadians, retirement is a major financial goal that…

Many people assume that estate planning is only for the…

Investment tax planning is not just about writing the…

Careful portfolio analysis is necessary to ensure that…

Proper analysis is vital to ensure that you aren’t paying too…