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Choosing A Retirement Option: The Self Directed RRIF

By Daniel Saikaley

The Registered Retirement Income Fund (RRIF) has been around since 1978, and after significant changes were made in 1986 and again in 1992, it is now a popular maturity option for your RRSP. You must select an RRSP maturity option before December 31 of the year you reach age 69*. If you don't, your RRSP will be automatically de-registered and the entire amount will be fully taxed. With greater growth potential, tax advantages and flexibility, now is the time to consider a RRIF.

A RRIF is a maturity option, which provides for the repayment of accumulated retirement savings plan assets. While a RRIF shares many features of an RRSP, it actually works in reverse. The difference is that you use an RRSP to accumulate, but you use a RRIF to provide a source of retirement income from those savings. Instead of making tax-deductible contributions to an RRSP, you take fully taxable annual withdrawals from a RRIF.

Although you may transfer your RRSP to either an annuity or a RRIF at any age, it is recommended to delay as long as possible in order to accumulate tax deferred savings in your RRSP for as long as possible. Maintaining tax deferred compounding investment returns helps to build increased wealth, and avoids generating unnecessary taxable income. For this reason, it is advisable to delay the transfer until that time that you require additional income.

Transferring your RRSP assets into a RRIF enables you to continue to enjoy both the benefits of a tax shelter and direct control over your own financial destiny. The Self Directed RRIF allows the flexibility to assemble and alter an investment portfolio from a wide variety of investments, and permits you to withdraw (within specified minimums) a customized retirement income stream that meets your individual needs.

The Self Directed RRIF is essentially a tailor-made portfolio to provide a variety of income options as well as periodic lump sum withdrawals, if necessary. The Federal Government regulates which investments you may hold and minimum amount of income you must withdraw each year.

While payment flexibility and potential inflation protection are two of the advantages of a Self Directed RRIF, tax deferral benefits, estate planning opportunities, control and flexibility, and subsequent opportunities to earn a higher rate of return, and the option of transferability are also important features to note.

When you retire, you are embarking on a new career, a career that gives you all your money up front. It is paramount that you consider your retirement income options carefully, and that you employ the help of a retirement professional to help you do so.

A RRIF offers flexibility and control for tax and investment planning purposes, and, if handled carefully, can be a valuable source of retirement income.

*If you turn 69 this year then you must choose an RRSP maturity option before December 31 of this year.

Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.

Daniel Saikaley, CA CFP EPC - Investment Advisor, CIBC Wood Gundy
50 O'Connor St., Suite 800, Ottawa ON K1P 6L2 - Ph. 613.783.4674 Also, visit my website: and click on This Month's Featured Solution.

CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of Canadian Imperial Bank of Commerce and Member CIPF. The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only. Clients are advised to seek advice regarding their particular circumstances from their personal tax advisor.

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