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The Money Management Newsletter: Retirement Income Planning
What to look for in a RRIF
Here are some of the features and benefits you should be considering.

Flexibility of Payment Options. RRIF rules dictate that a minimum withdrawal be made each year however you can choose to receive any amount over the minimum if you want more income. Look for companies therefore that design their products so that income streams can be tailored to fit the changing needs of their clients over the lifetime of the contract. Some examples of the available options are payments that can be increased with inflation, or the ability to change the payment date and frequency (ie mthly to annually) without penalty.

Probate Protection. If a beneficiary(s) is named in the RRIF contract rather than leaving this option blank or naming your estate, there would be no need for the RRIF balance to be included in any application for probate. The named beneficiary(s) would receive the funds directly and no probate fee (now called estate administration tax) would be incurred.

Automatic continuation to Spouse as Successor Annuitant. Instead of designating the spouse as beneficiary under the RRIF, naming him/her as a Successor Annuitant allows the continuation of the existing contract terms, conditions and payments without the need to execute a new contract at a stressful time. The Successor Annuitant option includes the same probate protection feature noted above.

Lump sum Withdrawals. Some but not all RRIFs allow for unscheduled lump sum withdrawals at any time. If your cashflow needs are uncertain or you just want the extra flexibility, look for companies that offer this option without any penalties.

Creditor Protection. There is no guaranty that any RRIF policy will be exempt from creditor claims as each situation will be individually scrutinized by the court system. However there is a greater chance of protecting your RRIF assets from creditors if the policy is issued through a life insurance company, has an immediate family member named as the beneficiary, meets the required time periods and cannot be shown to have been deliberately set up to avoid such claims.

Numerous Investment Options. Normally, unless you use a self directed RRIF, your GIC RRIF contracts would be issued separately from any mutual fund or segregated fund contracts. Some Insurance companies however can offer what they call a portfolio RRIF which is a combination of both GICs and segregated funds within a single RRIF policy.

Based on Spouse's Age. RRIF payments can be based on the age of the Annuitant or that of their younger Spouse! Using a spouse's younger age reduces the minimum required yearly payment amount, which also reduces the income tax payable! There is no limitation on how young the spouse can be.

Maximum Foreign content. International diversification of investments is available in RRIF contracts. No limititation apply, therfore RRIFs can be held with foreign content to take advantage of economic opportunities across the globe! (updated 2006)

Provides an Estate. Unlike many Annuities, a RRIF contract can provide an Estate value. An Annuity has to have a specified guaranty period in order to create an estate value whereas any remaining balance of a RRIF can be paid out to the estate or named beneficiaries.

Delay the Payments until after the first year. The RRIF rules do not require that income begin immediately after purchase as they allow for the minimum payment to be made any time before the end of the next calendar year. If the client does not need the money, this policy allows the RRIF funds to continue to grow on a tax-sheltered basis for as long as possible, and gives one extra year of tax relief.

Segregated Fund Guarantees. Unlike a mutual fund RRIF, segregated funds can provide both a death benefit guaranty and a maturity guaranty. Although the benefits will differ among various trustees, it is not uncommon for a life insurance company to guaranty anywhere from 75% to 100% of the original invested amount less withdrawals at death or maturity of the contract. The maturity date is usually 10 years from the date of issue.

For more information on how to convert your RRSP into a RRIF, please talk to your Fiscal Agents advisor or call Fiscal Agents Ltd. at 905-844-7700.

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25 Lakeshore Road, Oakville, On L6K 1C6.
(905) 844-7700

 





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