When you retire, you have to decide how to convert your RRSPs, Locked-In RSPs, Locked-In Retirement Accounts (LIRAs), Tax-Free Savings Accounts (TFSAs) and non-registered savings into retirement income.
The choice isn’t always easy. Some people prefer to keep complete control over their investments, while others seek out a steady and secure guaranteed source of income.
You are allowed to contribute to and keep your RRSP, Locked-In RSP or LIRA until the end of the year in which you turn 71. After this point, they must be converted into income.
What would you like to do?
- Transfer an RRSP to an investment I can continue to manage and make withdrawals from it as needed : Registered Retirement Income Fund (RRIF)
- Transfer a LIRA or locked-in RSP to an investment I can continue to manage and make withdrawals from it as needed : Life Income Fund (LIF)
- Get guaranteed monthly income without having to worry about managing my investments : Annuities
- Get regular guaranteed monthly income and the benefits of potential higher returns offered by financial markets : Placements garantis liés aux marchés
- Transfer funds saved outside a registered plan and make periodic withdrawals from it as needed : Regular Income Term Savings
- Transfer funds from an employer-sponsored retirement plan : Locked-In Retirement Account (LIRA) and Locked-In RSP
- Withdraw funds from time to time and not on a regular basis : Lump sum withdrawal or series of withdrawals
Case studies – Three different strategies
Peter, Colleen and Mary are all turning 60 and retiring.
After seeing their advisors, each decides to convert his or her $100,000 RRSP as follows:
Peter, who has always invested independently in order to have complete control over his investments, decides he also wants to manage his retirement savings. He converts his RRSP into an RRIF and elects to receive regular income for a period of 20 years.
Colleen wants to keep control over a portion of her savings to have a bit of flexibility, and receive guaranteed regular income for life for security. She converts $50,000 of her RRSP into an RRIF and $50,000 into a life annuity with a guarantee period of 15 years. She will receive monthly income of $400 from her RRIF.
Mary wants guaranteed regular income until age 90. She converts her RRSP into a fixed-term annuity.
Here are the results of the three pensioners’ choices:
| Peter | Colleen | Mary | ||
| Retirement income option | RRIF 20-year period |
RRIF Payments of $400/month |
Life annuity with 15-year guarantee | Fixed-term annuity |
| Capital invested | $100,000 | $50,000 | $50,000 | $100,000 |
| Monthly income | $707/month for 20 years, after which RRIF will be depleted. | $400/month for 16 years and one month, after which RRIF will be depleted. | $316/month for life. | $589/month for 30 years, up to her 90th birthday. |