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Maximizing Retirement Income
As you're enjoying retirement, we can help you balance your need
for safety and security with your desire for higher income.
To help you maximize your retirement income, we offer:
Strategies for Boosting Your Income Stream
When you're retired, we can help you maximize your retirement income
stream in a number of ways. Some of the key strategies your Investment
Advisor might recommend include:
- Delaying conversion of your Registered Retirement Savings Plan
(RSP) until you are legally required
- Withdrawing the least amount possible from your Registered
Retirement Income Fund (RIF) to maximize the tax-deferred growth it
provides
- Enhancing the longevity of your savings with an element of
growth
The RSP Maturity Option that’s Right
for You
Although you can convert all or part of your RSP at any time, all your
RSP assets must be converted by December 31 in the year you turn 71. You
have three main options for converting your RSP:
- Registered Retirement Income Fund
Generally the most popular option, a RIF is essentially an extension of
your RSP. Your RSP’s assets can be transferred to a RIF on a
tax-deferred basis. Plus, you enjoy the same flexibility and control
over how your investments are managed as you do with your RSP. The key
difference between an RSP and RIF is that you must withdraw a certain
amount of income every year from your RIF.
- Annuity
You can receive a guaranteed stream of income for life, or for a fixed
term up to age 90, by converting all or part of your RSP into an annuity.
An annuity offers stable income, but you lose flexibility by locking in
at a specific interest rate. There are several different types of
annuities that may be appropriate depending on your situation, including
insured annuities. You may even wish to convert a portion of your RSP
into an annuity, while putting the rest into a RIF.
- Cash
Simply "cashing-in" or "deregistering" your RSP is
the most costly maturity option. This is because the entire amount is
fully taxable at your marginal rate.
When it comes time to convert your RSP, your Investment Advisor can
help you decide which option is right for you.
Investments with the Potential for Higher
Income
There are several alternatives that can help you maximize your
retirement income. Some of the options your Investment Advisor might
recommend include:
- Corporate Bonds
Carefully selected high-quality corporate bonds can provide higher
interest payments compared to a government bond, without substantially
higher risk.
- Income Trusts
Income trusts are publicly traded equities that distribute most of the
cash earned from underlying assets directly to investors. Income trusts
can provide much higher income than bonds, but the distributions are not
guaranteed and can vary.
- Dividend-Paying Stocks
You can also boost your after-tax income with dividends from Canadian
corporations, which are effectively taxed lower than interest income due
to the dividend tax credit.
- Insured Annuities
Compared to a traditional Guaranteed Investment Certificate (GIC),
insured annuities typically offer higher after-tax income. An insured
annuity pays a steady, guaranteed income for life. The income is a
combination of return of capital and earned interest. Since the interest
portion is taxable, some of the payment is used to pay taxes. Another
portion funds an insurance policy, which provides a tax-free benefit to
your beneficiaries when your estate is settled. As with any annuity, an
insured annuity is irrevocable once purchased.
Locked-In RSPs/LIRAs for Your Pension Payout
If you need to receive a lump sum payment from your company's Registered
Pension Plan (RPP), your Investment Advisor can help you determine whether
you can transfer the accumulated benefits to a Locked-In RSP or Locked-In
Retirement Account (LIRA).
A Locked-In RSP or LIRA is very similar to a regular RSP except that
funds can only be withdrawn by converting to a:
- Life Annuity
Available in all provinces, a life annuity gives you a steady lifetime
income stream fixed at a certain rate.
- Life Income Fund (LIF)
Also available in all provinces, a LIF gives you control over how your
assets are invested. There are minimum and maximum amounts of income you
must receive from a LIF. In addition, you must convert your LIF to a life
annuity before you turn 81.
- Locked-In Retirement Income Fund (LRIF)
LRIFs are available in Alberta, Saskatchewan, Manitoba, Ontario and
Newfoundland. They are similar to LIFs, except there is no requirement
to convert remaining funds to a life annuity after you turn 80.
- Prescribed Retirement Income Fund (PRIF)
Locked-in accounts under Saskatchewan pension legislation have another
option called a PRIF. Only those annuitants who are at least age 55 (or
the early retirement age established by the plan where the money
originated) are eligible for the PRIF. The main advantage of the PRIF
compared to the LIF and LRIF is that the PRIF has no maximum withdrawal
limits. However, minimum withdrawals are still required.
Take the next step…talk to an advisor.
Our Investment Advisors are here to help recommend the solutions that
are best for you. To learn more, please
contact an advisor today. Or,
ask an advisor to contact you.
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