Converting your nest egg into income is going to be very important when you retire.Most people invest in a registered retirement savings plan (RRSP). The best way is to transfer funds from your RRSP to RRIF. A Registered Retirement Income Fund (RRIF) is used to withdraw income during your retirement. It can be thought of as an extension of your Registered Retirement Savings Plan (RRSP). RRIFs are similar to RRSPs in several respects. Each allows for tax–deferred growth, offers several investment options and is government regulated. A major difference between an RRSP and a RRIF is that with an RRSP, you can make annual contributions as long as you have earned income and contribution room available. Withdrawals are optional and will be taxed. With a RRIF, contributions are not allowed and you must make minimum mandatory withdrawals each year.
Canada’s tax laws require you to convert your RRSP when you turn 71. However, you can open an RRIF before that if you want to. That way you can keep contributing to your RRSP and move money to RRIF. You can hold a variety of investments within an RRIF. RRIF provides steady income during your retirement. You can invest the unused portion of your RRIF to grow tax-sheltered just like an RRSP. You can also assign a beneficiary to get your RRIF payments after you.
Taxes may not be entirely avoidable but with careful planning RRIF can be structured to minimize loss and enable easy withdrawals. With over thirty years of experience in retirement and financial planning, The Majdoub Group, Ottawa can help you invest in the right retirement savings plans ensuring your income stays steady and the tax impact stays low.