The Plan by Investors Group^TM

No aversion to RRSP Conversion

As you approach retirement, your focus changes from saving money to addressing how you will manage your money once you retire. When you turn 71 years of age your Registered Retirement Savings Plan (RRSP) will have to be converted to retirement income by the end of that year, and knowing the three basic options will help you make the proper decision. It is also important to have a convenient way to manage your income once you retire*.

Simple as 1, 2, 3

Your three basic RRSP roll-over options include:

1. Choose to do nothing

If you do not act before the end of the year that you turn 71, the full value of your RRSP will become taxable income in the following year—and will likely be taxed at the highest marginal rate. For the majority of Canadians, this is not an attractive option.

2. Choose an annuity

You may choose an annuity, which offers the simplicity of guaranteed income in set payouts, either for your lifetime or until age 90. Be aware that your payments will be fixed and won't increase to compensate for inflation or increased living costs.

3. Choose a RRIF

More Canadians choose Registered Retirement Income Funds (RRIFs) than any other option because you retain control over the investments in your RRIF and can review and revise asset mixes to cushion against future inflation. However, there is a minimum annual withdrawal that is set each year.

"One cautionary note regarding RRIFs is that depending on the total wealth you have accumulated, your capital could run out during your retirement," warns Dave Ablett, Senor Tax and Retirement Planning Specialist, Advanced Financial Planning Support at Investors Group. Keep in mind, too, that there's no financial advantage in converting early—even if you haven't been making annual contributions each year. "Capital in your RRSPs continues growing on a tax- deferred basis," Ablett adds. "In fact, the greatest growth should take place in the final years of your plan."

Consolidation keeps it simple

There are definite advantages in consolidating your registered investments into a single annuity or RRIF. Your administration costs are often lower and paperwork is usually far less complex, with just one statement to file instead of many.

Managing your monthly income when you are retired

Converting your RRSPs* is only one piece of the retirement planning puzzle. When you retire you could find it increasingly difficult to manage your monthly income because payments are coming from many different directions including company pension plans, Canada Pension Plan, Old Age Security, RRIF income, withdrawals from a TFSA and investment income from your non-registered investment portfolio. A simple cash management solution is to utilize a Retirement Paycheque^TM strategy that can maximize your investment potential and provide you with the convenience of a single source of income. This strategy helps ensure your retirement cash flow is the amount you need to live the lifestyle you desire today and on into your retirement.

For more information on RRSP conversion and creating a Retirement Paycheque^TM, talk to your Investors Group Consultant.

*If you have a locked in RRSP, your options will differ depending on the applicable provincial "lock in" legislation.

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This article, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.

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