There are several well-deserved reasons for the popularity of the RRIF as a vehicle to deliver income from RRSP proceeds, including:
• a variety of income options
• an ability to change income amounts
• an ability to make lump-sum withdrawals
• much greater flexibility than an annuity
• account balances that transfer to a surviving spouse without taxation
• potential for the account balance to become part of the estate
• smooth transition from RRSPs
When acquiring an annuity with RRSP proceeds, your holdings or investments are sold and the capital is used to purchase the annuity. When creating a RRIF account, existing RRSP investments can remain the same if that is what you wish. Your existing RRSP investments just move “in kind” (as is) into your RRIF account Think of it like taking a number of cars and pulling them out of one garage called an RRSP and moving them into a new garage called a RRIF. The cars remain the same; they are just housed in a different building.
With RRIFs, ongoing investment decisions will be required, but they also provide a great deal of flexibility. There is no limit on how many RRIF contracts you can own. You may wish to employ a number of plans with different withdrawal options to meet specific objectives. For example, you may have a need for a RRIF plan that delivers a core stream of income for month-to-month cash flow. You also may wish to have a RRIF that provides an additional monthly amount for the four months of the year when you are ...