Rights & Money

How to Manage Your RRIF?

I’m 69 and own four different RRSPs at different institutions, amounting to a total value of about $300,000. These RRSPs hold a variety of investments including stocks, mutual funds, GICs, and bonds. I know I’ll have to collapse all these plans by the end of the year I turn 71. My plan is to put about one-third of the money into a life annuity and the rest into RRIFs. I want to keep my portfolio diversified, but I’d rather not have to deal with making withdrawals from several different plans and institutions—could I put all the money into a single RRIF but keep a diverse portfolio?

By Olev Edur

Certainly you can put all $200,000 ($300,000 less the amount going into the annuity) into a single RRIF, and there’s nothing to prevent you from keeping your existing investment diversity within a single RRIF. You’d need to use a self-directed RRIF, which allows you to choose whichever investments you want (just as you can with a self-directed RRSP). Putting some of your money into an annuity is probably a good idea, too—it will provide you with guaranteed payments to help cover your basic needs at all times, while the returns from a diversified RRIF portfolio can vary over the short term.

You needn’t be in any hurry to buy that annuity, though. Annuity payments are largely based on current interest rates and interest rates are low right now—you’d be locking in these low rates permanently.

Also, annuity rates are based on age—the older you are, the larger the payments will be because, in actuarial terms, the less time they’ll need to be paid.

Given the enormous debt the government has incurred to combat the economic effects of the pandemic, it seems likely that interest rates will have to rise as the economy recovers. If you put that annuitybound money into safe investments such as GICs for the time being, with a mind to buying an annuity with those monies a year or two down the road, you’ll have lost nothing and could gain considerable extra annuity income at that time.


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