Registered Retirement Income Funds (RIF)

RRIF accounts can be opened at any bank, credit union, trust company, insurance company, investment dealer and some mutual fund companies directly.  The investments that individuals have in an RRSP are simply carried over to the RRIF – in other words, you don’t have to sell and reinvest.  All the investments eligible for an RRSP, such as GICs, bonds, guaranteed investment funds, mutual funds and stocks are also eligible as RRIF investments.

A RRIF requires you to make minimum annual withdrawals that depend on such factors as your age and when you opened the account. The younger you are, the less you need to withdraw. The longer the money stays in the account, the longer it is protected from tax. Many account owners make the best of this by choosing to base their account on the age of their (younger) spouse in order to continue to take advantage of this tax deferral.   There are no maximum limits to the amount of funds that can be withdrawn from a RRIF on a yearly basis. 

Individuals do not have to transfer or convert their RRSPs into RRIFs as many individuals believe.  RRSP funds and assets can be used to purchase an annuity. An annuity is a product that provides a regular income for a specified period of time, either for a set period of years or up to the time you die. An annuity also defers tax.

Annuities are generally associated with life insurance companies.   One advantage of an annuity is that investors receive guaranteed income for the period of the annuity. Two disadvantages are that there is no flexibility to the amount of money investors will receive as income – potentially a difficulty if unexpected expenses crop up. Also when the annuity is offered, it will be based on interest rates prevailing when you purchase the contract.

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