Your RRSP Maturity Options
At some point you’ll want to use the money you’ve
accumulated in your RRSP for income in retirement. By law, you must
convert your RRSP to a retirement income option by December 31st in the
year you celebrate your 69th birthday. Be sure to review your options
carefully before maturing your RRSP.
Your retirement income options
will be required to take a minimum amount into income each year no
matter which retirement income option you select. Canada Revenue Agency
allows you to choose one or a combination of the following:
Which retirement income options you choose will depend on your
income from other sources, the amount of income you need from your RRSP
assets and your tax situation.
- A lump sum cash withdrawal. This amount will be fully taxed in the year you receive it.
life annuity. This is a contract that guarantees a fixed income payment
for the rest of your life. It is based on your age and the interest
rates when you enter into the contract.
- A Registered
Retirement Income Fund (RRIF). An RRIF lets you continue to control how
your funds are invested. You have the same eligible investments as with
your RRSP. While there is a minimum withdrawal, there is no maximum
limit. An RRIF gives you the most flexibility in managing cash flow in
What happens to your registered savings when you die?
your death the remaining fair market value of your RRSP or RRIF is
included as income in your final tax return. For many people, this
pushes them into the highest tax bracket, often causing them to pay more
tax in the year of death than when living. Is this what you want for
your registered assets?
Name your spouse as beneficiary
to transfer the remaining funds to your spouse tax-free by naming him
or her as the beneficiary of your RRSP or RRIF. At your surviving
spouse's death any remaining value is fully taxable in his or her final
Insure against the tax liability
can purchase life insurance to cover the tax liability of your
registered assets. The cost of life insurance can be a fraction of the
cost of paying the tax that will be due at death. And either you or your
heirs can pay for the policy.
To learn more
you'd like to preserve the value of your registered assets, consider
life insurance as a cost-effective solution. To learn more about this
strategy, we can introduce you to one of our Estate & Insurance
Advisors. For more information or to arrange an appointment, please
contact us directly: Helen Fraser (905) 455-2753