Helping you make the right choice

You have three main options for converting your RSP: cash, an annuity or a registered Retirement Income Fund (RIF). You can convert all or part of your RSP at any time, but all your RSP assets must be converted by December 31 in the year you turn 69. An Investment Advisor can help you decide which option best meets your needs.

Factors to bear in mind when deciding upon a maturity option:

• Your personal income needs
• Your family's income needs
• Your estate objectives
• Your desire for flexibility
• Flexibility versus guarantees
• Your wish to minimize income taxes
• Your needs for countering inflation

Though the most obvious, simply "cashing-in" or "deregistering" your RSP, because of the tax implications, is also the most costly maturity option. The entire amount is fully taxable at your marginal rate.

When an RSP is deregistered, the full value is included in your taxable income for that year. As Canada has a progressive tax system, you will likely be taxed at the highest marginal rate on the amount you cashed out. Furthermore, Canada Customs and Revenue Agency applies a withholding tax on RSP funds at the time of deregistration.

Annuities

You can receive a guaranteed stream of income for life by converting all or part of your RSP into an annuity. An annuity offers stable income, but you lose flexibility by locking in at a certain interest rate.

Advantages of annuities

• You are guaranteed not to outlive your income.
• You aren't required to make any investment or management decisions.
• You can spend every income payment without worry because your future income is fully guaranteed.
• Annuities may pay higher incomes than the minimums or maximums for RIFs or LIFs.
• Due to shortened life expectancy, men receive higher payments annually from an annuity than women.

• The decision to annuitize is permanent and cannot be reversed - it must be carefully considered.
• Most annuities cannot be cashed or altered after income has commenced.
• Payments cannot be adjusted to reflect changing needs.
• Due to longer life expectancy, women receive lower annual payments from an annuity than men.

Retirement Income Funds (RIF)

A RIF is essentially an extension of an RSP, allowing you access to the same array of investments and funds. The key difference is that you must withdraw a certain amount of income from a RIF. Of all the maturity options, RIFs offer you the greatest degree of flexibility, giving you control of the management of your assets, flexibility of annual income and potential tax minimization.

Investments held in your RSP can be transferred directly into a RIF account. Upon conversion, you will be required to receive a minimum payment from the plan each year, based upon your age and the value of the RIF at the end of the previous year.

Combining RSP maturity options

It is quite possible - and often preferable - to "mix and match" different options to tailor a retirement program to suit your circumstances.

To learn more about RSP maturity options, please contact an Investment Advisor or ask an Investment Advisor to contact you.