Retirement income

Government rules require all RRSPs to be cashed in or converted to income by December 31 of the year you turn 71. You can choose to do this earlier, if you wish.

You have 3 choices:

1. Use the money to buy an annuity.
2. Transfer the money to a registered retirement income fund (RRIF) product.
3. Take the value of your RRSPs in cash.

Most people prefer not to cash out because all the money will be taxed in 1 year.  

Sun Life product types that offer RRIF registration are:

• Segregated fund contracts
• Mutual funds
• Insurance GICs
• Guaranteed Investment Certificates (GICs)

The options you choose depend on what you need and whether you want a guaranteed income stream. Many people find that using a combination of these options best fits their needs.

A "locked-in” RRSP may also be called a “locked-in retirement account (LIRA)”, depending on the jurisdiction in which your money is registered. But whatever the account is called, locked-in money originally came from an employer or association pension plan and has rules attached.

“Locked-in” money is treated differently than money in a regular RRSP, because the government wants to ensure that money in a registered pension plan will only be used for retirement income. If you put your locked-in money into a LIF or LRIF, there is a minimum amount that you must take out and a maximum amount that you can take out from the plan each year. These rules vary by province.

Locked-in money can be put into an annuity or any of the following income products that offer LIF or LRIF registration:

• Segregated fund contracts
• Mutual funds
• Insurance GICs

You may have assets outside of registered accounts that can also be used to help fund your retirement:

• Non-registered investments. These include mutual funds, segregated fund contracts, guaranteed interest products, stocks, bonds or bank accounts.
• Real estate. Some people who own their homes choose to downsize and free up some of the value of their home. One of the advantages of this strategy is that there is no tax on the gains when you sell your primary residence.
• Inheritance. For some, the prospect of an inheritance can make a big difference in their retirement planning.

Because money from these sources is not registered, you can do whatever you want with it, including:

• Buy an annuity or a segregated fund contract that guarantees your income for life (or a fixed number of years).
• Buy investments that provide income in the form of automatic withdrawals.