At this crucial point in your life, it's important to make the best choices possible in order to take full advantage of a well-deserved retirement. When it comes time to "talking turkey", you can depend on Desjardins Financial Security Independent Network to be familiar with all the investment and retirement options available.

 

• Provide Income Suited to Your Needs   
• Avoid Tax Traps  
• Simplify Your Life  
• Ensure Your Peace of Mind  
• RRIFs or Annuities? 
• I need advice
   

Provide Income Suited to Your Needs
 
To be able to draw income to meet all your needs for as long as you live
 

• Think about combining your RRIF with a life annuity that will provide you with the income required to cover your basic needs (food, clothing, shelter) for the rest of your life.
  
  
• Only make the RRIF withdrawals required to maintain your budget. As the funds in your RRIF accumulate tax-free, make additional withdrawals only in case of need.
  
  
• This strategy will also give you some leeway when it comes to your RRIF investments and the security that comes with a guaranteed income stream (annuity).You can use all or a portion of your RRIF to purchase an annuity at any time. 
  
  
• If withdrawing only the minimum amount prescribed by law, calculate it based on the age of your spouse (if he or she is younger) so as to lower the withdrawal amount and protect the capital in your RRIF.
  
  
• If your RRIF represents your main source of income, make withdrawals on a monthly basis, establishing the amount of these withdrawals based on any other amounts you may be receiving (public or private pension plans).
  
  
• Otherwise, think about making annual withdrawals (at the end of the year) so your capital can grow tax-free.
  
  
• If you're under age 71, you can convert your RRIF into an RRSP. However, you must withdraw the mandatory minimum for the year in question before making such a transfer. 
  
  

Avoid Tax Traps
 

• Your first RRIF withdrawal must be made by the end of the calendar year following the establishment of the plan. If, for example, you decide to convert your RRSP into a RRIF on January 1 of a given year, you'll have until December 31 of the following year to make your first withdrawal.
   
• There are no source deductions on the minimum amount prescribed by law. It would therefore be wise to put money aside for taxes.
   
• Think about designating your spouse, children or grandchildren as beneficiaries, as this strategy has certain tax advantages.
   
• You should make any withdrawals from investments other than your RRSPs or RRIFs before taking moneys from these registered plans; their capital growth is tax-sheltered, while income from your non-registered investments increases your annual taxable income.
   
• Furthermore, a higher taxable income could also mean that you lose certain tax credits as well as your eligibility for some social programs.
   
• Remember:  RRIF income is eligible for the $2,000 pension income credit ($1,500 for Quebec). The tax credit is 15% at the federal level, and 20% for Quebec
  
   
  • At the federal level, the amounts coming from a RRIF are eligible for this credit once the annuitant turns 65. However, if these amounts are rolled over to a person following the death of his/her spouse, they are eligible for this credit even if the beneficiary spouse is not yet age 65. The amounts from a registered pension plan are eligible for this credit regardless of the annuitant's age.
     
  • In Quebec, there is no minimum age for this tax credit, but it may be reduced or even eliminated based on family income.
    
    
    
• If you took advantage of the Home Buyers' Plan (HBP) before converting your RRSP to a RRIF, you should consult the Repayment heading under the HBP section.
   
• Starting in 2007, look into whether it would be to your advantage to split some of your pension income
   

The big winners in the implementation of this new measure are couples with a single eligible pension income where the spouse or common-law partner without a pension income is a low wage earner.
 
Simplify Your Life
 

Ensure Your Peace of Mind
 

• Examine your RRIF investments and make sure they correspond to your investor profile (i.e., your personal goals, risk tolerance, and investment horizon).
   

RRIFs or Annuities?
 

• The choice between a RRIF and an annuity depends on your situation and personal goals.  Some people even use both vehicles in planning for retirement. A life annuity to ensure you get constant and guaranteed income that will cover your basic needs until you die and a RRIF so you can be flexible.
   
• What percentage of your RRSP income will be used to cover your main expenses? If you anticipate having to use it all, an annuity providing a constant income could be the right solution for you.
   
• On the other hand, if you have a certain amount of discretionary income, a RRIF, possibly combined with an annuity, could give you more leeway when it comes to your investments.
   

To find out more about this product, Desjardins Financial Security offers you various possibilities:   Call us at 1-866-838-7553 or e-mail us. Complete the form Please Have a Representative Contact Me

Note: This text is intended for information purposes only, and in no event should be considered or used as professional tax advice.