Converting Your RRSP

Annuities

A Retirement Income Option
Stable Income
Life Annuity
Term-Certain Annuity

A Retirement Income Option

Under the law, you may keep your RRSP until the end of the year in which you turn 69; you must transfer your RRSP into retirement income before December 31 of that year. You have several retirement income options: A RRIF, an annuity or a combination of the two.

The capital in your RRSP may be used, in full or in part, to buy an annuity.

It's simple. Use your capital to purchase an annuity from a financial institution. You will receive regular payments. You can purchase the annuity with money held in your RRSP as well as non-registered funds outside of your RRSP.

The annuity amount is based on:

• the amount of capital used to purchase the annuity: the higher the amount, the higher the payments
• interest rates at the time of purchase
• your age at the time of purchase
• the number of years you will be guaranteed of receiving your payments

As long as you receive payments, your capital will bear interest equal to the rates in effect at the time of purchase; this rate will never change. This way, you will always be protected from plummeting interest rates. You may also guard against inflation and opt for an indexed annuity.

The main advantage of an annuity is its stability. When you purchase an annuity, you know exactly how much you will receive. This makes it quite easy to manage your budget!

• You may only purchase a life annuity from a life insurance company like Desjardins Financial Security.
• You will receive predetermined payments for the rest of your life and, in some cases, your spouse will receive payments too.
• The payments may be guaranteed for a certain period of time: in the event of death during this period, your spouse will continue to receive the annuity until the end of the guaranteed period. If there is no surviving spouse, the designated beneficiary or beneficiaries will receive an amount equal to the present value of the payments for the remaining period.
• The contract may include a survivor clause where, after your death, payments will be made, in full or in part, to your spouse for his or her lifetime.

• A term-certain annuity guarantees regular payments until the end of the specified period or until the age of 90.
• If the annuity was purchased with your RRSP capital, it is automatically guaranteed up to age 90; if your spouse is younger than you, you can use your spouse's age to calculate the guaranteed payment period.
• If death occurs before the end of the guaranteed payment period, the payments will be made to your spouse until the end of this period. If there is no surviving spouse, the estate will receive an amount equal to the present value of the payments for the remaining period.

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