Do you have the majority of your Retirement Income sheltered inside an RRSP?
Do you know how much Income your RRSP will produce for you in your retirement years?
Are you worried about how long your Savings will Last?
These are three things we help Investors understand when we meet with them, because when you turn the age of 71, you must take your lifetime savings vehicle (RRSP) and now turn it into an Income source (RRIF).
The reason why, is that the Government would now like to get the taxes back that have been sitting inside your RRSP for all those years. Remember when you were younger and contributed into your RRSP and you received the tax break from the Government, well at the age of 71 it is now time to start repaying that tax obligation you received many years ago.
Not only do you have to pay the tax back, but more than likely your tax obligation has grown, along with your account value in most cases. So the $1.00 you received in tax deductions earlier in your life has more than likely grown to $3, if not $4 of obligations into retirement!
And at age 71, you must now take your savings out, and repay the taxes, and not on your own terms, but on the Governments Prescribed Withdrawal Rate. Even if you do not need the income sitting inside your RRSP or RRIF, there is a minimum schedule the Government has set up to make sure you give them their money as quickly and efficiently as possible.
The prescribed rate of withdrawal starts at about 5% in the first year of Retirement, and Increases Annually every year after that. Even if you don’t need the money, you must take it out of your RRIF every year after the age of 71. What is shocking is that you must take out more and more of your income every year, and when you are in your 80’s the prescribed rate can be as high as 9-10% of your account value, whether you need it or not!
This is a major concern of most retirees as they are worried about running out of money later in life, either due to longevity, or in some cases the high cost of Long Term Care, and even poor market performance and Low GIC Rates can certainly have a negative effect on your RRIF.
By using a GMWB RRIF, you can know exactly what your minimum amount of income is, at the day of retirement Guaranteed for the rest of your life. Even if you live to the age of 100 and your RRIF has been exhausted, you will always receive the minimum amount of Income, Guaranteed. A GMWB has the attractive Guarantees of a Life Annuity for a lifetime of income, no matter how old you are. But with a GMWB whatever you don’t use in your account, will go to your beneficiaries and not the Insurance Company…
Download the Income Stability Report to learn more about how a GMWB is a great way to compliment your Retirement Income, and remember, you don’t have to put all your money into a GMWB, but a portion of it may make Financial Sense to you and your spouse if your worried about outliving your RRIF…