What is an RRIF?

A RRIF is established by a financial institution to provide retirement income to an individual. A RRIF is set up by directly transferring money from registered retirement savings plans or registered pension plans. Each year the RRIF holder must withdraw a set portion of the money in the fund and pay tax on it.

The Strategy

RRIFs are the most popular option for converting RRSPs. That's because a RRIF is like a continuation of your RRSP. Your funds remain tax sheltered, and you continue to choose how your funds are invested. But instead of putting money into a RRSP, the RRIF is designed to pay money out as income for you to live on.

Advantages of the RRIF:

->	Control - A RRIF allows you to retain control over your investment.
->	Investment Flexibility - RRIF's allow you to hold a wide range of investment products including - mutual funds, stocks, bonds, GIC's, T-Bills... You also have complete control over your investments' foreign content as well. These elements of diversification, both among investments and geographic distribution, help to prevent the erosion of your capital during retirement.
->	Withdrawal Flexibility - The only thing you have to worry about is withdrawing your minimum amount every year. The decisions of when the money comes out (annually, semi-annually, monthly), and where it comes from (which investment the money will come from) are left entirely up to you. You may even choose a lump sum withdrawal any time during the life of the plan.
->	Fight inflation - You can earn higher returns through your RRIF, because you control how your funds are invested. And higher returns help you fight inflation by protecting the purchasing power of your money.
->	Leaving an estate - A RRIF is also a good choice if you want to leave an inheritance for your children. Since you only have to take a minimum amount out of your RRIF each year, you can still leave a substantial amount to your beneficiaries when you die.

Income Withdrawals

RRSP's must be wound-down (closed) by the end of the year in which you turn 71 years of age, but you can actually convert your RRSP to a RRIF any time before you turn 71. Once your RRIF is established, you must withdraw a minimum amount every year, after the first year. This amount is based upon two elements - when the RRIF was established, and your age when you begin withdrawing the funds.

RRIF Investing with an Advisor

Please contact Peter McNally, Certified Financial Planner at McNally Financial and Insurance Group to find out which retirement income strategy is right for you.