What happens when I turn 69?
If you are turning 69, you must collapse your RSP into an approved retirement income option by the end of the calendar year in which you turn 69.
It’s important to remember that if you do not take action, the financial institution where you hold your RSP will be required to collapse your RSP for you according to Canada Customs and Revenue Agency (CCRA) regulations. That would result in you being taxed on the full amount in a single year. If you’ve been saving for your retirement for years, you won’t want to lose half of it to the government.
10 helpful tips to help you maximize returns in your RIF
1. Make sure your Investor Profile hasn’t changed since you retired. Speak to your financial advisor about your asset allocation to ensure you have the right asset mix.
2. Ask your financial advisor about consolidating your non-registered and registered investments into just two accounts so that you can more easily manage your asset mix, income withdrawal, and foreign content limit.
3. If you need to use your capital, in most instances, its advisable to use your non-registered assets first. Because your registered investments are tax-sheltered, it makes sense to leave them intact for as long as possible.
4. If you need to take income from your RIF, decide how often you’ll need it monthly, quarterly, semi-annually or annually. If you’re only withdrawing the annual minimum payments (AMP), withdraw it at the end of the year so that you enjoy the greatest tax-sheltered growth. If you have a younger spouse, use your spouses’ age to calculate the AMP. This will allow you to withdraw less.
5. Laddering (proportioning your investment dollars evenly across bonds or GICs of differing maturities) the maturities of your fixed-income investments such as GICs and bonds are an effective way to make sure all your money doesn’t come due at once when interest rates may be very low.
6. If your income needs vary and you find that you don’t need as much money as you had previously thought, ask your advisor about changing the payment schedule to lower amounts or less frequency. Otherwise, you’ll be paying tax on money that you don’t need.
7. Depending on your investment time horizon, personal tolerance for risk, investment knowledge and other factors that make up your Investor Profile, it could be important to have some growth in the form of stocks and equity funds in your RIF. This strategy may be right for you to help protect against inflation and ensure that a portion of your capital continues to appreciate it.
8. Be diversified – it’s just as important to be diversified now as it was before you retired.
9. When possible, keep your interest income investments in your RIF where they can accumulate in a tax-deferred account, and your growth and dividend-paying investments outside your RIF capital gains and dividends are taxed at a lower rate.
10. Finally, this may go without saying, but don’t gamble with your retirement investments Look at options to protect your investments and take a lifetime perspective.