As you plan your Registered Retirement Income Fund (RRIF) withdrawals, you’ll be thinking a lot about the income you need today. You also need to think about what things will be like 10, 20, or even 30 years from now. A lot of things can change.
Four things to think about when you plan RRIF withdrawals
- How will you handle inflation? As prices rise, the buying power of your RRIF savings will fall. To put it another way, $100 will buy more today than it will in five years. Some people set up their RRIF payments so that that they go up automatically with inflation. This keeps their income on track.
- How will you handle unexpected bills? What if you have a health emergency, or you’re hit with a big surprise bill? Suddenly, your regular RRIF withdrawal may not be enough. You may need to take out some extra cash. Some RRIFs charge a penalty for this. Others let you change your payment schedule or the number of payments you get free of charge. Make sure you understand how your plan works before you sign up. Some people don’t need the flexibility, but many do.
- What if your RRIF income is not enough? If you find your RRIF doesn’t give you the income you expect, or your savings don’t last, you may need to find other income sources. For example, you may want to cash in any investments you have outside your RRIF. If that’s not an option for you, you can consider different ways to get income out of your home.
- What if you want a more secure income as you get older? Some people keep their RRIFs going until the day they die. They believe they get the best value for their savings. They like to control their own investments and withdrawals. Other people want a more secure income and convert to an annuity. The great advantage with an annuity is that you know what your income will be, and you don't risk losing your savings on the wrong investment.
Remember: When you set up your RRIF, you need to plan for both the short term and future.
As time goes on, you may find you need to review other options for your savings. At least you’ll have a clear sense of direction and some guidelines in place.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.