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