RIFs, LIFs and Annuities **, ***

Enjoy Your Hard-Earned Money

Knowing how to manage the money you've saved is central in providing for a pleasant retirement. Taking the correct steps translates into your money lasting longer, with less worry and hassle, leaving you to enjoy your retirement.

To accomplish this, it is important to keep in mind the trends of recent decades. For instance, Canadian life expectancy in 1950 was just 66 years (source: Stats Canada). Today it's growing past 81 years. Astoundingly, there are over 200,000 people over age 90 in Canada! (source: Stats Canada) Plus, with better health care, more people are conquering their illnesses and living longer. In 1980, cancer survival rates were generally 50%; today they are nearly 70% (source: Stats Canada).

All of this means that retirees have a significantly greater need to maximize their incomes, and be smarter with the way they manage their money. In these times, the right financial advice is critical. FTIC can direct you in the right path when it comes to retirement, maximizing your earnings and benefits.

Today, the most common forms of retirement income are RIFs, LIFs and life annuities.

An annuity is simply a periodic (usually monthly) income you receive from an investment. A life annuity may be purchased with your savings from an insurance company (banks don't offer these) to provide you with capital for the rest of your life.

Prescribed annuities are more prevalent and may be purchased with non-registered funds. These annuities have a level taxable portion that stays the same throughout their lifetime. For example, an annual taxable portion might be $2500, and this is the only amount available for taxation every year. Thus, prescribed annuities save you on taxes, resulting in larger benefits.

At a time when the economy is worryingly unstable, and the number of defined benefit pension plans have dropped dramatically, investors are looking for more risk-free options with larger yields and less taxable income. One powerful solution offered by FTIC uses insured annuities, where a portion of the annuity is used to contribute to insurance premiums. In the long run, this amounts to greater income, reduced taxes, and also provides the security of life insurance.

RIFs and LIFs are types of annuities that result from your RRSPs. RIF is a Retirement Income Fund while LIF is a Life Income Fund. Both of these allow you to continue growing your previous RRSP contributions while also receiving an annuity.

RIFs have no withdrawal limit and you may withdraw money as you wish. LIFs are designed to last you for the rest of your life and so, have a maximum withdrawal amount. Usually, RIF is utilized for individual RRSPs while LIFs are for group RRSPs and Locked-In Retirement Accounts (LIRA). The great thing about RIFs and LIFs is that your money continues to grow tax-free, as they would in an RRSP. The only difference is that you may no longer contribute funds, and instead, withdraw them

FTIC can help you manage your savings to maximize your income while you enjoy your retirement. Call us today!

Request a Free Quote

Frequently Asked Questions