Planning for the future and putting money into an RRSP -- saving money and reducing your tax burden in your highest-income years. Now comes the question in retirement: how do you get it out?
If you have been contributing to an RRSP throughout your career, in your retirement years you will need to start drawing an income from your retirement savings plan. This happens through the Capital Group Registered Retirement Income Fund (RRIF).
The beauty of the RRSP traditionally is flexibility -- you can just withdraw your money at any time (although you'll pay tax on it). But the Federal Government really looks at RRSPs as a tool to save for retirement. As part of that, the rules say that you can defer paying tax while you're contributing, but you can't defer it indefinitely. By the end of the year that you turn 71 you have to start taking it out. How do you do that? With the Capital Group RRIF.
The Capital Group RRIF gives you access to the same kinds of funds you were invested in as part of your Capital Group RRSP -- it's as simple as contacting us and letting us know that you want to change your RRSP to a RRIF. Part of this process is consolidating your RRSPs from various places -- you'll need to do this to know how much you need to withdraw. So what many people will do is transfer existing RRSPs from banks and other investments into their Capital Group RRSP (taking advantage of the reduced fees in the Capital program) and then convert the whole thing into their Capital Group RRIF.
How much do you need to withdraw?
The biggest advantage to the Capital Group RRIF is flexibility. You can roll all of your different retirement savings into one pool of money. You take out your minimums and beyond that it is up to you how much to withdraw -- you control the "tap" on how much flows out.
One thing to be aware of with any RRIF, though, is that any money you take out above the minimum will be subject to withholding tax.
If you decide you don't need the money right now, you can still take out your minimum withdrawal and roll it into your Capital Group TFSA. You'll still pay income tax on taking it out, but it will immediately start to grow tax free -- you won't pay taxes on it again!
Contact us today to find out how to convert your RRSP savings into a Capital Group RRIF!
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