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Back to Retirement Income section Learning Centre - Retirement Income
The basics: Retirement options Questions & Answers

For most people, the thought of retirement is a pleasant one. It represents a much anticipated time when we will finally be able to take part in the activities of our choice and after working hard to contribute to our RRSPs for so many years, we have earned it. But along with retirement comes the necessary step of converting our RRSP or pension plans to a different type of plan; one that provides us with the funds needed to enjoy that trip to a warmer climate or to purchase that car of our dreams.

Many options exist for those about to embark on this important time in their lives. It pays to take the time to investigate all possibilities to ensure that enough income will remain to provide a comfortable lifestyle not only now but for the duration of your retirement.

Retirement Information


What is a RRIF?

What is a LIF?

What is CANSIM?

What is a LIRA?

Why do I have to transfer my funds to a RRIF or LIF?

Can I continue to contribute funds once my RRSP has been transferred to an RRIF?

At what age can I establish a RRIF or LIF?

At what age can I begin to make withdrawals from my RRIF or LIF?

Where can I purchase a RRIF or LIF?

What happens to RRIFs and LIFs if a marriage breakup occurs?

What happens to a RRIF if the planholder dies?

What happens to a LIF if the planholder dies?

Retirement Information

A Registered Retirement Income Fund (RRIF) is an investment vehicle used to produce income during the years following retirement. It is established by transferring the accumulated funds from an RRSP into a RRIF, where they continue to grow in a tax-sheltered environment. The owner of the RRIF is then required to start making minimum withdrawals from the RRIF, which are subject to income tax, by the end of the year after the RRIF is set up. The minimum withdrawal level is determined by the Canada Customs and Revenue Agency (CCRA, formerly Revenue Canada) and is based on age in whole numbers at the start of the year as well as the value of the RRIF at that same time. There is no maximum limit to the amount that can be withdrawn at any one time.

What is a LIF?

A Registered Life Income Fund (LIF) is an investment vehicle that is similar to a RRIF in that it provides income for the retirement period. It is, in essence like a locked-in RRIF, transferring funds from a locked-in pension plan or Locked-in Retirement Account (LIRA) and it requires minimum withdrawals to be made by the end of the year following the year that the LIF is established. LIFs however, are different in that any funds that remain in a LIF at the end of the year in which the planholder turns 80 must be converted to a Life Annuity. Also, unlike RRIFs, legislation exists that limits the maximum amount that can be withdrawn at one time to ensure that there is enough money available to provide reasonable income after age 80. The minimum withdrawal level is calculated to be the same as a RRIF but the maximum withdrawal amount is determined by a formula using CANSIM rates (Government of Canada marketable bond average yield).

What is CANSIM?

The Canadian Socio-Economic Information Management System (CANSIM) is Statistics Canada's computerized database and retrieval service. It contains over 700,000 time series which contain lists of chronological data relating to a particular theme. CANSIM is comprised of information dating as far back as 1914. The data is updated weekly and provides a profile of Canada's people, industries and economy.

What is a LIRA?

A Locked-in Retirement Account (LIRA) is a plan that can be established if you are a member of a pension plan and leave your employer or if your employer terminates your existing pension plan. If you find yourself in these circumstances, you will be given the option of rolling the commuted value of your benefits into a LIRA.
In many ways, a LIRA is very similar to an RRSP and can be invested into in the same manner. The difference is that there are restrictions on how the funds in a LIRA can be used. Unlike an RRSP, legislation exists that requires that the funds in the LIRA be used to provide retirement income for the planholder and their spouse. This means that the LIRA can not be cashed in or be used for programs such as the Home Buyers Plan. In addition, any attempt to change a locked-in plan such as a LIRA to a regular RRSP can be met with stiff penalties.
However, at the end of the year in which the planholder turns 69, they are still required to transfer the funds from their LIRA to a LIF or purchase a Life Annuity.

Why do I have to transfer my funds to a RRIF or LIF?

RRSPs are designed to assist you in the accumulation of funds to be used to provide an income stream after you have stopped working for a living. The rules of RRSPs and locked-in pension plans state that you must transfer the funds that have accumulated in your plan by the end of the year in which you turn 69 since most people are no longer working at that point and require some form of income to live on. Failure to do so can result in the entire amount being considered as income in one year and if this happens, you will be taxed accordingly since the money has been growing in a tax-sheltered environment. This will probably eat up a large portion of your accumulated funds.

Can I continue to contribute funds once my RRSP has been transferred to an RRIF?

At age 69, once the funds from an RRSP have been converted to a RRIF, you can no longer contribute additional funds. At this point, the RRIF begins acting like an RRSP in reverse, paying you on a regular basis that is decided by you. However, the funds in you RRIF still have the opportunity to grow as they remain in a tax-sheltered environment until they are withdrawn.

At what age can I establish a RRIF or LIF?

A minimum age restriction does not exist for those interested in setting up a RRIF, although for most people, it makes more sense to wait until they are retired and need the income. For those interested in establishing a LIF, it can generally be done any time between the ages of 54 and 79. However, regardless of when the LIF is established, the funds still must be used to purchase a Life Annuity by the end of the year in which the planholder turns 80 years of age.

At what age can I begin to make withdrawals from my RRIF or LIF?

Planholders can begin making withdrawals from their RRIF as soon as it has been established. On the other hand, they have the option of putting off the first withdrawal until as late as the end of the following year in order to let the funds continue to accumulate for as long as possible. With LIFs, planholders must wait until at least age 55 before making any withdrawals.

Where can I purchase a RRIF or LIF?

RRIFs and LIFs can both be purchased from the same sources and locations as RRSPs including banks, insurance companies, investment firms, and trust companies. In fact, it can give an added security and comfort of knowing that you are leaving your retirement funds with the same trusted financial institution or advisor that managed your RRSP.

What happens to RRIFs and LIFs if a marriage

occurs?

In the case of both RRIFs and LIFs, upon the breakup of a marriage, the remaining balance must be split according to provincial legislation of the province of residence. In most cases, the former spouse can transfer their portion of the funds to a permitted retirement vehicle.

What happens to a RRIF if the planholder dies?

If a RRIF planholder dies, their life circumstances determine what will happen to the funds in their RRIF. If the planholder has named a spouse or common-law spouse as beneficiary, the funds can be rolled over tax free into a RRIF or RRSP (if they are under age 69) for them. Upon the death of the surviving spouse or beneficiary, the remaining funds would be considered as income, taxed accordingly and passed on to their estate.
If a beneficiary other than a spouse or common-law spouse is appointed, the remaining value is paid out in a lump sum and taxed. Similarly, if a beneficiary has not been appointed, upon the death of the planholder the remaining funds would be considered as income, taxed and would go to the estate of the deceased.

What happens to a LIF if the planholder dies?

If the owner of a LIF dies prior to purchasing an annuity at age 80, the funds remaining in the LIF are paid to the surviving spouse. If there is no surviving spouse, the funds would be directed to the designated beneficiary or to the estate of the deceased planholder. In the case of the transfer of funds to a spouse, depending on the provincial rules in the province of residence, the funds remaining in a LIF can usually be paid out directly to the spouse or transferred to a retirement vehicle of his/her choice. If this is not allowed, and the funds must remained locked-in to provide retirement income for the remaining spouse, the funds must be transferred to a LIF, Life Annuity or Locked-in RRSP in the name of the surviving spouse.

Notice:- Fiscal Agents Financial Services Group are not engaged in rendering tax, accounting or legal professional services or advice. The comments in this Executive Overview are not intended, nor should they be relied upon, to replace specific professional advice. Before acting on material contained herein, readers should seek advice that is appropriate to their personal circumstances from a professional advisor.





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