Understanding Your Options at Retirement
If you’re confused about retirement income alternatives, you’re not alone.
How do you know what to choose? How do you know which product is right for you?
Well, it all depends on the type of savings you have...read on.
One of the most important factors in determining what products are available is whether the money was accumulated in a pension plan or a savings plan.
In this post, we will focus on the options available to pension plan investors at retirement. These options would apply to you if you currently belong to, or have ever belonged to, an employer sponsored pension plan. The products that are available to you also depend on which province you reside in, as pension legislation differs in each provincial jurisdiction.
The following provides an outline of some of the key features of each product and where they are available.
LIF - A Life Income Fund (LIF) is a type of RRIF (Registered Retirement Income Fund) under which the owner of the LIF must withdraw, each year, a minimum amount up to a maximum amount prescribed by the pension legislation. The LIF is available in all jurisdictions (except PEI).
LIRA - A Locked-In Retirement Account (LIRA) is a type of RRSP where the funds are subject to pension legislation. These funds must be used to purchase a life annuity or be transferred to a LIF or an LRIF by the end of the year during which the owner of the LIRA reaches age 71, at the latest. The LIRA is available in all jurisdictions, with the exception of British Columbia, Nova Scotia and federally regulated pension plans. These three jurisdictions provide for the locked-in RRSP, which is very similar to the LIRA.
Locked-in RRSP - A locked-in Registered Retirement Savings Plan is a type of RRSP where the funds are subject to pension legislation. These funds must be used to purchase a life annuity or be transferred to a LIF by the end of the year during which the owner of the locked-in RRSP reaches age 71, at the latest. The locked-in RRSP is available in British Columbia, Nova Scotia and to federally regulated plans.
Life Annuity - You can also purchase a life annuity with your locked-in savings. This retirement income alternative offers a guaranteed income during your lifetime and your spouse’s lifetime, provided the annuity has been set up on a joint and last survivor basis.
Do you have a better idea of which product is right for you?
Stay tuned for 'Your Options at Retirement - Part II', where we will look at the options available for assets accumulated in a savings plan.