When you turn 71, you have some choices where your retirement savings are concerned.
The Canada Revenue Agency (CRA) requires you to convert your RSP to a retirement income option by December 31 of the year you turn 71. This can either be done with an annuity or a Retirement Income Fund (RIF).
With an annuity, you pay a lump sum up front, and get a guaranteed and fixed amount of money back each month for a set period of time. Annuity payments can continue for your lifetime, or for a chosen period of time.
With a RIF, your income options are more flexible, as you can make withdrawals as often as you like, and can withdraw more than the minimum amount set by the CRA – so you’re in control of your retirement income. Plus, your money will continue to grow tax-sheltered, meaning it keeps working for you.
You don’t contribute to a RIF – rather, you take minimum payments out every year. The amount of those payments is determined by a calculation based on your age and your assets. Payments can also be based on the age of your spouse. You can withdraw more than your minimum amount, if you like, and receive your payments according to your schedule – annually, semi-annually, quarterly or monthly.
Any retirement income – whether it’s from a RIF or an annuity – is considered taxable in the year it is withdrawn, so keep in mind it will be added to your other sources of income at tax time. RIF payments are also subject to a withholding tax, the amount of which varies depending on how much you withdraw and where you live.
The table below lists the annual minimum withdrawal percentages as they stand today.
With a RIF from Oaken, the funds you transfer from your RSP can remain tax-sheltered while you continue to earn tax-deferred income, giving your savings the opportunity to keep growing. Plus, you benefit from the security provided by the guaranteed principal and interest features of our GICs that are eligible for Canada Deposit Insurance Corporation (CDIC) coverage, up to applicable limits.
Creating a seamless income stream in retirement is something that many Canadians find challenging. One strategy to consider is to open multiple GICs across several terms – this way, your investments mature at different times, giving you access to funds over time instead of all at once.