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Retirement Income Options (RIOs)
You've planned ahead by
saving for your retirement; you've taken responsibility for your own
financial future and you're ready to enjoy all the leisure and
opportunity available to you. But now there's a major decision to be
made: What do you do with your retirement savings? It's an important
question for several reasons:
First, a decision made today could "lock you in" to a fixed income for
the rest of your retirement years.
Next, the choice of retirement income made by your friend or neighbour
may be ideal for them but less than perfect for you. Choosing the best
option for you means examining the lifestyle you plan to enjoy during
your retirement, along with other factors.
Finally, there is a surprisingly wide choice of retirement income
options available today - much wider than the choices facing your
parents when they retired. While having so many options is good in
some ways, it can also be confusing unless you understand the
differences and are able to choose the ones best suited to your needs.
Your credit union wants you to reap maximum enjoyment from the
retirement savings you've accumulated over the years. This Web Site
provides you with basic information on the retirement income options
currently available. While it won't answer every conceivable question,
it will give you enough background to begin choosing the options best
suited to your needs.
A Few Things to Remember Before We Get Started
Some of the terms used in discussing retirement income options could
be a bit confusing at first, especially terms such is LIRA, LIF,
Annuitant, Joint and Last Survivor, and so forth. We'll describe them
as we go, but to help avoid Confusion we've included a short Glossary
on the left-hand column.
Remember that you can convert your RRSP to one or several of the
Retirement Income Options described in this booklet at any age. But
you must terminate it no later than December 31st of the year in which
you turn 69. While you could withdraw all the money from your RRSP as
a lump sum before then, the best choice by far is to transfer the
funds to all options which will make payments to you and earn income
over the long term.
Also, some rules about retirement income vary from province to
province. We'll identify these as they occur.
While we've tried to make this information as complete as possible, it
is not meant to provide the final decision on its own; this should
only be made after a good deal of thought by you, by discussion with
your spouse or children and by consultation with a knowledgeable
credit union staff member.
A R.I.O. and Rio Are Both Destinations
- But the Similarity Ends There.
When you're ready to convert your savings to income, you're dealing
with a Retirement Income Option (RIO). A RIO is a financial product
which becomes your own personal pension plan. It may be purchased from
a credit union, bank, trust company, insurance company, investment
brokerage or Mutual Fund dealer.
The money to purchase your RIO comes from the funds accumulated in
your Registered Retirement Savings Plan (RRSP); your Registered
Pension Plan (RPP); your Deferred Profit Sharing Plan (DPSP); or a
combination of any of these.
Think of a RIO this way:
For much of our working life, you've been paying your RRSP, RPP or
DPSP. Over all those years, you've had a goal or destination in mind.
Now that you've reached it, it's time for those plans to start paying
you.
Three RIO Choices
Available to Everybody.
And Two More Choices Available to Some.
All Canadians may choose from three different ways of generating
retirement income from their RRSPs. These are:
A Registered Retirement Income Fund (RRIF) which puts you in control
of your investment and the amount of income it pays you.
A Life Annuity which guarantees a fixed income.
A Term Certain Annuity to age 90 (TCA 90) which gives you some control
over the investment and earnings.
In most provinces you have the additional option of a Life Income Fund
(LIF) which combines the benefits of both a RRIF and a Life Annuity.
Alberta and Saskatchewan permit a fifth choice, a Locked-In Registered
Retirement Income Fund (LRIF).
We'll deal with all five. First, take a moment to think about the
following questions and indicate your response in the appropriate
area. Here's where you may want to discuss your reply with your
spouse.
Take a Few Minutes to Consider
Questions that Will Help to Focus on
Your Retirement Needs and Assets.
We said it before but it bears repeating. A decision on your RIO
should not be made on the spur of the moment. You've worked many years
to reach this point, so it deserves a good deal of careful thought
before making a choice.
Consider your lifestyle.
When you retire, do you plan to:
Remain in your home?
Buy another home?
Live part-time at a second location?
How much traveling will you do?
Consider your expenses.
What will you need for:
Household
Personal
Travel/Entertainment
Hobbies
Consider your Retirement Assets
RRSP, RPP & DPSP
Employer pension, OAS & CPP
How financially independent do you want to be?
Will your RIO cover inflation shrinkage?
As you consider your investment options,
consider the answers to these questions.
A Brief Word About (Shudder!) Taxes
All the money you've been putting away over the years in your RRSP,
RPP and DPSP was not taxed. In addition, the interest or other
earnings accumulated over the years has also been free of taxation as
long as it remained in the registered plan.
When you terminate ("collapse", "roll over" or "transfer") your
registered plans, all the money remains sheltered from tax if you move
it to a RIO. Only when the money is withdrawn from your RIO as income
does it become taxable.
If you terminate your registered funds by withdrawing them as a lump
sum, the total amount becomes immediately subject to income tax. This
is the best reason for not making lump-sum withdrawals.
Payments received from any RIO qualify for the pension income tax
credit if you are age 65 or older or regardless of age if received as
a result of the death of your spouse.
Registered Retirement Income Funds (RRIFs)
DESCRIPTION: Plans or accounts registered with Revenue Canada designed
to provide payments to you, subject to an annual minimum amount.
MOST IMPORTANT QUALITIES: The most flexile RIO; you control both the
amount of monthly/annual payments to you and the types of investment;
at death, the balance is available for survivors.
BEST SUITED FOR: People who want to make their own decisions (subject
to government limitations) regarding retirement income; people for
whom estate preservation is important.
Two things happen during the life of a RRIF:
The RRIF earns money from investment, just as your RRSP did while you
were contributing to it; and the RRIF makes payments to you according
to a formula selected by you in accordance with Revenue Canada’s
requirements.
The investments in your RRIF are the same as those which qualify for
RRSP investments, including savings accounts, term deposits, mutual
funds*, stocks, bonds or mortgages. The selection is determined by you.
RRIF investments should be chosen for both income and security; you
don’t want to choose investments that may decline in value and
interfere with your planned retirement income.
Before you open any RRIF, ask about Deposit Insurance protection. RRIF
investments are insured in the same fashion as RRSPs. There is no
insurance against loss on mutual funds*, stock, bonds or mortgages held
in your RRIF.
A Few Rules Regarding Withdrawals
You must withdraw at least the "minimum payment" from your RRIF each
year. Originally, RRIFs were to be depleted by the time you reach age
90. Recent tax law has changed that formula. For details on the
minimum payment you must withdraw from your RRIF, check the chart
below or talk to your credit union staff.
You withdraw money from the RRIF according to one of three options
chosen by you. Those are:
The Minimum Payment Option, which guarantees you will receive payments
from your RRIF for life.
The Specified Amount Payment Option, which permits you to change the
amount of payments from your RRIF from time to time.
The Specified Term Payment Option, which enables you to choose
payments over a fixed number of years.
Each option has certain advantages, as well as choices to be made, if
you select that option. Fortunately, you're not locked into one
payment option or another for life; each year you can change the
payment plan to accommodate your changing needs, depending on the
types of investments you've chosen for your RRIF, and the amount of
funds remaining in it.
Let's look at these options in detail:
The Minimum Payment Option: The Simplest Formula
to Meet Revenue Canada's Requirements.
You don't have to take any payment from a RRIF in the first calendar
year it is first funded. In subsequent years, there is a mandatory
minimum payment which changes annually based on your age (or your
spouse's age if you elected) and the total value of the RRIF at the
beginning of the year.
Minimum Payment, Age Less than 71
If your age (or your spouse's age if you elected) is less than 71 at
the beginning of the year, the minimum payment you must receive is
calculated by subtracting the age at January 1 from 90, and dividing
the result into the value of the RRIF at the beginning of the year.
This formula produces an increased payment each year
Minimum Payment, Age 71 to 77
If the age at the beginning of the year is from 71 to 77, the minimum
payment depends on whether the RRIF was first funded before or after
January 1,1993.
Age Pre-1993
%
Post-1992
%
69 4.76 4.76
70 5.00 5.00
71 5.26 7.38
72 5.56 7.48
73 5.88 7.59
74 6.25 7.71
75 6.67 7.85
76 7.14 7.99
77 7.69 8.15
Minimum Payment, Age More than 77
From age 78 on, the following percentages are applied to the value of
all RRIFs at the beginning of the year, based on the age at that time.
Age %
78 8.33
79 8.53
80 8.75
81 8.99
82 9.27
83 9.58
84 9.93
85 10.33
86 10.79
87 11.33
88 11.96
89 12.71
90 13.62
91 14.73
92 16.12
93 17.92
94 & up 20.00
The Specified Payment Option:
Changing Amounts to Meet Changing Needs.
By the time you reach retirement age, nobody has to tell you life
rarely goes according to plan. That's a reason to consider this
choice.
With the Specified Payment Option, each year you can determine how
much money you wish to take from the plan and how often. For example,
one year you may need $500 a month from the plan; the next year you
may want only a single payment of $ 1, 000. As long as the amount
meets the Minimum Payment for your age and subject to your investment
selection, it's your choice to make.
The Specified Term Option:
A Good Way to 'Bridge' Your Income.
Instead of specifying the amount of income you want from your RRIF,
you may want to specify the term of the income - that is, how many
years the RRIF will pay you before it is depleted.
For example, you might choose this option if you retire at age 55 with
an RRSP but are not eligible immediately for other retirement incomes
such as a company pension plan, CPP or OAS. If that's the case, you
could convert your RRSP to a RRIF that would pay an income until the
other sources begin.
AN IMPORTANT NOTE: Specified Income and Specified Term options do not
necessarily ensure an income for life.
Cash Withdrawals:
Always an Option for Special Occasions.
You're enjoying your retirement, with sufficient income for your needs
- and you want to "kick up your heels" a little. Perhaps by taking
that ocean cruise you always dreamed about, or adding a new sundeck to
your house.
With a RRIF, you have the option of making cash withdrawals. (But only
if the nature of your RRIF investments permits them; talk to a
qualified credit union staff member for details.)
And Now a Short Message from Revenue Canada.
All payments from your RRIF must be declared as income for the year in
which you receive them. At the end of the year you receive a T4RIF
slip showing the full amount of RRIF payments received; the amount in
excess of your minimum for that year; and the withholding tax deducted
on the excess.
Withholding tax, which is a prepayment of your annual income tax
liability, may be deducted from your RRIF payment.
If you receive only the Minimum Payment for a year, no withholding tax
is deducted.
If you receive more than the Minimum Payment for a year, the amount in
excess of the Minimum Payment is subject to withholding tax, which
will be deducted from the payment. The amount deducted depends on the
amount withdrawn from your RRIF that year in excess of the Minimum
Payment.
AMOUNT % WITHHOLDING
WITHDRAWN TAX DEDUCTED
IN EXCESS OF AT SOURCE
MINIMUM PAYMENT
FOR THAT YEAR
Up to $5,000 10%
$5,001 to $15,000 20%
$15,001 and over 30%
If you withdraw $6,000 per year from your RRIF, and the minimum
payment required for that year is $3,600, a 10% withholding tax would
be deducted from the $2,400 excess, reducing your annual RRIF payment
by $240. The $240 tax is remitted on your behalf to Revenue Canada by
your financial institution.
NOTE: If the personal tax credits on your tax return will result in no
tax liability arising from your RRIF income, you may eliminate the
withholding tax by completing Form TD1 and providing it to your
financial institution. Or, if withholding tax would be unreasonable in
light of your other income and deductions, you may be able to obtain a
Letter of Authority from Revenue Canada's local tax services office
authorizing your financial institution to withhold less tax.
Special Tax Rules Applied to RRIFs
Purchased with Spousal RRSPs.
RRIFs purchased with Funds from a spousal RRSP may be subject to
"attribution rules".
If a contribution has been made to a spousal RRSP in the year the
payment is received or the two preceding years, payments in excess of
the minimum payment amount are taxed as income of the contributor.
Although the payment is made to the RRIF plan-holder (the spouse), he
or she must claim only the minimum payment as income. Normal
withholding tax rules apply.
What Happens to Your RRIF in the Event of Your Death?
If any funds remain in your RRIF, your surviving spouse may assume
ownership of the plan or transfer the funds to his or her own RRIF or
annuity. If he or she is not older than 69, the funds may be
transferred to an RRSP.
If you have no spouse, there are provisions for the transfer of RRIF
funds, without immediate taxation, to a dependent child or grandchild.
Restrictions apply.
If you have not specified your spouse as beneficiary (or your spouse
predeceases you), funds in your RRIF will be paid in a lump sum to
your estate or named beneficiary. The estate is responsible for any
tax owing.
In some provinces, you are permitted to name a beneficiary directly on
the RRIF itself rather than by will. Check with your estate planner
for more details.
Life Annuities
DESCRIPTION: Contracts between you (the Annuitant) and a Life
Insurance Company that will provide you with payments for life,
regardless of the number of years you live.
MOST IMPORTANT QUALITY: Fixed payments for life, guaranteed for a
minimum term you decide on.
BEST SUITED FOR: People who prefer security above all other aspects of
retirement income.
The majority of Canadians with savings to invest for their retirement
once chose a Life Annuity. In recent years, the flexibility offered by
RRIFs has made them more attractive to most people. But new features
available in Life Annuities have generated new interest in them.
One way to understand a Life Annuity is to compare it with a life
insurance policy. Both are available only through insurance companies
and a Life Annuity is like a life insurance policy in reverse. With a
life insurance policy, you make regular payments to the insurance
company; with a Life Annuity, the insurance company pays you as long
as you're alive, and may pay a beneficiary depending on the type of
annuity you purchase.
Most life insurance companies are members of a consumer protection
plan that is intended to safeguard your life annuity income if the
company fails to meet its obligations.
When discussing Life Annuities, you will usually hear the term "buy".
And that's exactly what you do: You buy the annuity with the funds in
your RRSP. Just as you do when you buy a new car or refrigerator, you
can shop around for a Life Annuity, making your purchase on the basis
of the company offering the largest income and the largest payment
upon your death. You might also consider the reputation and financial
stability of the insurance company. NOTE: Lump sum cash withdrawals
are not available with annuities.
The Life Annuity offered will vary in payment from one insurance
company to another, but all will consider the following factors:
Age
How many years can the insurance company expect to pay you an income?
Current Interest Rates
How much can the insurance company expect to earn from your funds?
Gender
Traditionally, women live longer than men, meaning their annuity
payments tend to be lower. Some insurance companies are offering
unisex rates for Life Annuities.
RRSP Funds
More funds purchase bigger annuity payments.
Single or Joint Life
If an annuity purchased to provide an income for a couple guarantees
continued income for the surviving spouse, payments are adjusted
according to the spouse's gender and age.
Type of Annuity
There are two kinds to choose from.
See "Single Life" and "Joint And Last Survivor" details below.
Two Types of Annuity
The two basic types of Life Annuities available are Single Life, and
Joint And Last Survivor.
Single Life annuities are based entirely on your age and gender, and
cease entirely upon your death - whether this occurs twenty days or
twenty years after you purchase the annuity (but see Guaranteed
Payments below). The advantage of a Single Life annuity: It provides
the highest payment amount.
Joint And Last Survivor annuities ensure an income for the surviving
spouse. Payments cease upon the death of both spouses. If desired, you
can arrange a Joint And Last Survivor annuity that reduces payments
upon the death of one spouse, providing more money while both are
alive.
Additional Features in Annuities Add Flexibility.
Insurance companies offering Life Annuities continue to add more
flexibility to their products in order to compete with RRIFs. Here are
some features that enable you to adjust your annuity according to your
anticipated needs:
Guaranteed Period. This option ensures that payments will continue
should you die within the period selected by you. You can choose
guaranteed periods from 5 years up to age 90; the longer the
guaranteed period, the lower the payments. If you die before the
period ends, your RRSP annuity payments continue throughout the
guaranteed period to your spouse, or an amount is paid to your estate.
You can even combine Guaranteed Period and Joint Life features in your
annuity, which may provide an estate should both spouses die within
the guaranteed period.
Integrated Income. If you retire before age 65, when you would
traditionally begin receiving Old Age Security payments, you could
purchase a Life Annuity, which decreases at 65. This would generate a
higher income prior to age 65, with the OAS funds making up the
difference after 65.
Indexing for Inflation. Over the years, inflation can "eat away" at a
fixed income. To overcome this, you can build an indexing factor of I
% to 4% annually into your annuity payments, increasing their amount
each year to accommodate inflation. Be aware, however, that this can
substantially reduce your income in the initial years of your annuity.
Commutable Life Annuities: Some insurance companies offer life
annuities that can be cashed-in prior to death. These are subject to
restrictions and penalties if the annuity is terminated.
A Simple Tax Formula for Annuities.
All income received from an RRSP annuity is considered taxable, and
must be claimed as such when you file your annual tax return.
Withholding tax is not deducted from annuity payments.
Term Certain Annuities to Age 90 (TCA 90)
DESCRIPTION: A RIO that pays out the full amount of principal and
income earned in regularly scheduled payments by age 90.
MOST APPEALING QUALITIES: The security of an annuity with some
investment control; at death, amounts are available to survivors.
BEST SUITED FOR: People seeking security for their investment with the
chance to react to changing economic conditions.
Designed to provide regular income until you or your spouse reach age
90, TCA 90s generate payments from earned interest plus portions of
the principal. If you choose a TCA 90, the payments to you would be
based on a combination of three factors: Your age; the amount
originally invested; and the rates of interest earned during the terms
of the annuity.
In the event of your death prior to age 90, a TCA 90 may continue to
make payments to your spouse until what would have been your 90th year
or paid as a lump sum to your spouse, depending on the terms of the
annuity. If there were no spouse at the time of your death prior to
age 90, the full value of the annuity would be paid in a lump sum to
your estate.
As an alternative when you purchase the annuity, you may direct
payments to continue until your younger spouse turns 90. This
decreases the amount of annual payments but increases the number of
years.
Decisions, Decisions
A basic TCA 90 will pay a guaranteed amount through the term of the
annuity.
You may choose, however, to have limited investment control over the
way your funds are deposited so that the annuity earnings and payments
are periodically adjusted with changes in interest rates. If you
choose this option, you must make a key decision, which directly
affects the income earned for the rest of the annuity:
How long is the term for the annuity deposit?
Once chosen, this term is automatically renewed over the life of the
annuity; it cannot be changed. For example, if you choose a fixed rate
five-year term deposit, the annuity will earn that amount for five
years. When renewed, the interest rate in effect at that time will
continue for the next five years, and so on.
Be aware, when choosing a TCA 90 with limited investment control, that
your income is subject to changing interest rates. For example, a
fixed rate five-year term at 6% may look unattractive now. But in five
years, when the term is automatically renewed, the interest may be
much higher and your income could increase accordingly. (It could also
be lower, resulting in a drop in income.) The guiding rule: Be
prepared for fluctuations.
NOTE: You can always switch from a RRIF to an annuity if you wish by
"spending" the capital in your RRIF to buy the annuity. In some cases,
you may also be able to convert an annuity to a RRIF; check the terms
of your annuity before signing to see if this option is available to
you.
All payments from TCA 90s are taxable income, reported on a T4A form
mailed to you at the end of each year. TCA 90s can be purchased from
insurance companies as well as some credit unions, banks and trust
companies.
Life Income Funds (LIFs)
DESCRIPTION: Provide payments for life by acting as a RRIF to age 80;
by then, the balance must be converted to a Life Annuity.
MOST APPEALING QUALITY: Flexibility in the early years of your
retirement, security in later years.
ONLY AVAILABLE FOR: Those with "locked-in" funds in RRSPs or
Registered Pension Plans seeking a choice of investments and income
level (not available in Prince Edward Island).
Life Income Funds (or LIFs) combine the features of a Life Annuity and
a RRIF, and were introduced as an alternative to Life Annuities for
pension funds.
In many ways, a LIF is a two-act play. In the first act, between the
time you start your LIF until your 80th birthday, the LIF functions
like a RRIF providing you with flexibility in both your investment
decisions and amount of payment made. On December 31 of the year you
reach your 80th birthday (or before then, if you so choose), Act Two
begins and the LIF must be converted to a Life Annuity, generating a
fixed income.
Three Sources of Funds for Your LIF.
If you have saved for retirement in one of the following types of
plans, a LIF may be ideal for your needs. The plans are:
1. Registered Pension Plan (RPP)
2. Locked-In RRSP
3. Locked-In Retirement Account (LIRA)
Participation in one of the above plans does not automatically ensure
that you can convert it to a LIF upon retirement even if you reside in
a province with legislation that permits LIFs. Check with your pension
administrator.
What to do? First, decide whether the benefits of a LIF match your
needs. If so, ask your pension plan administrator if LIFs are an
option for your pension amounts.
LIF Investment and Payment Options.
A Life Income Fund can be purchased from credit unions, banks, trust
companies, insurance companies and other organizations approved by the
regulator of pensions in your province.
If you choose a LIF, you must withdraw minimum payments according to
current RRIF levels; maximum payments vary from province to province.
Within these limits, you can make annual adjustments to the payment
amount and frequency according to the agreement with the carrier
administering the LIF. The rules ensure that a certain percentage of
your funds remain at age 80.
When you reach age 80 and funds have been converted to a Life Annuity,
all LIF payments are governed by the conditions of the annuity.
What investments can you choose for your LIF? Essentially the same
ones available for RRIFs. Some restrictions apply from province to
province, but do not concern common investments such as term
deposits, mutual funds*, etc. LIFs have been introduced in all
provinces except Prince Edward Island. In addition, each province
controls the design of LIFs for its residents, creating differences in
their characteristics.
Taxation and Estate Considerations of LIFS.
Your income from a LIF is taxed as though you were receiving payments
from a RRIF.
No withholding taxes are applied except on income above the Minimum
Payment level.
If you should die before your LIF has been converted to an annuity,
your spouse assumes ownership of the plan. In most provinces the
locked-in restrictions do not apply to spouses - allowing full control
of funds. If a spouse does not survive you, the funds are paid out to
your estate or a named beneficiary.
Once the plan has been converted to an annuity, however, payments
continue to your spouse according to the terms of the plan.
Locked-in Retirement Income Funds (LRIFs)
DESCRIPTION: A RRIF that must make payments for life by regulating the
maximum payment withdrawn in any year.
MOST APPEALING QUALITIES: Flexibility of income and investments
throughout the entire ten-n of the plan; at death, the balance is
available to survivors.
ONLY AVAILABLE FOR: Those with "locked-in" funds governed under
Alberta, Saskatchewan or Manitoba pension regulations seeking a choice
of investments and income.
Searching for a wider range of retirement income options, the
provinces of Alberta and Saskatchewan introduced the Locked-In
Retirement Income Fund (LRIF) in 1993. The key difference between a
LIF and a LRIF is the elimination of the need to convert the plan to a
life annuity at age 80.
A LRIF functions like a RRIF with one exception: The plan must provide
payments for life; it cannot be terminated before you die. Cash
withdrawals are permitted, however, as long as the total of any
withdrawals and regular payments does not exceed a maximum allowable
payment each year.
Source of Funds for Your LRIF.
Funds for a LRIF can come from the following types of plans:
1. Registered Pension Plan (RPP)
2. Locked-In Retirement Account (LIRA)
Participation in one of the above plans does not automatically ensure
that you can convert to a LRIF upon retirement even if you reside in a
province with legislation that permits LRIFs. Check with your pension
administrator.
Some provinces refer to a locked-in RRSP (one which does not permit
withdrawals prior to your retirement) as a LIRA. If you have a LIRA,
you must convert the funds to a LRIF, a LIF or a Life Annuity by
December 31 of the year you reach 69 years of age. Like an RRSP, a
LIRA gives you control over the investments in your fund.
Lots of Flexibility in Investments and Payments.
If you convert your LIRA to a LRIF, you have a wide range of
investments to choose from. They include:
Variable and fixed-term deposits (including guaranteed Investment
Certificates and Term Deposits)
Mutual funds*
Qualified stocks and bonds
Arms-length and non arms-length mortgages.
(In Alberta, all the above qualify except for non arms-length
mortgages.)
Once you've converted your funds to a LRIF, you must begin receiving
payments no later than the following year. But here's an interesting
option:
Until age 69, you can terminate your LRIF and convert it back to a
LIRA. This would be an appealing option if you retire at age 60, with
extra income anticipated from OAS, CPP and other pension sources when
you reach 65. You could receive an income from your LRIF until then,
convert the plan back to a LIRA to build value, and reactivate it as a
LRIF whenever you choose (although this must happen by the end of the
year you reach 69).
Payment options with a LRIF are a little complex.
You can choose any amount between the annual Minimum Payment and
Maximum Payment.
To calculate the Minimum Payment (the amount you must withdraw each
year), use the RRIF formula.
To calculate the Maximum Payment, for the first two years of your LRIF
the amount is limited to the greater of:
- The total of the investment income earned in the previous calendar
year
OR
For Year One, 6% of the value of the LRIF when it commenced and for
Year Two, 6% of its value on January 1.
In all subsequent years, the maximum payment cannot be greater than
the total investment income earned in the previous year, until the
minimum RRIF payment exceeds this amount.
Confused? Talk to someone who can work out sample figures for you,
such as qualified staff members of your credit union.
Taxation and Estate Considerations of LRIFs.
LRIF payments are taxed identically to those received from a RRIF.
Withholding tax is applied only to that portion of income above the
Minimum Payment level. You will receive a T4RIF form at the end of
each taxation year recording the amount withdrawn and the withholding
taxes paid.
In the event of your death, your surviving spouse assumes ownership of
the LRIF. In most provinces the locked-in restrictions do not apply to
spouses - allowing full control of funds. If there is no surviving
spouse, any funds remaining in your LRIF are paid to your estate or
named beneficiaries.
Where to go from here!
May we suggest to your credit union?
Qualified staff will be pleased to discuss any aspect of your
retirement options that were not covered in this here - or explain in
more detail some of the plan features and options. The Credit Union
booklet "Planning For Your Retirement" may also be of interest to you;
it's free for the asking.
Above all, don't be overwhelmed by the choices listed here. In many
ways, this wide range is designed to benefit you by providing
flexibility to meet your individual and changing needs.
You've worked hard to reach a point where you can take control of your
retirement income.
Your credit union wants to work just as hard to ensure
that you choose the ideal plan for you.
*Mutual funds are offered through Credential Asset
Management Inc. Unless otherwise stated, mutual fund securities and
cash balances are not insured or guaranteed and are not covered by
the Canada Deposit Insurance Corporation or by any other government
deposit insurer that insures deposits in credit unions. Their values
change frequently and past performance may not be repeated. |
