The alphabet soup of retirement

There are the ABCs of retirement – Always Be (financially) Comfortable – and then there’s RRIF, LIF, SWP, GIF, LIB and more … an alphabet soup of acronyms and abbreviations that every retiree must wade through. What do they all mean?

There are the ABCs of retirement – Always Be (financially) Comfortable – and then there’s RRIF, LIF, SWP, GIF, LIB and more … an alphabet soup of acronyms and abbreviations that every retiree must wade through. What do they all mean?

RRSP – Registered Retirement Savings Plan An effective way to save for retirement while enjoying tax deductions on your contributions and compound tax-deferred growth inside your plan, you can contribute to your RRSP up to the end of the year in which you reach 71 – and then you have some decisions to make:

Cash in your plan – the least advisable route because you’ll likely pay tax on the entire amount at the highest marginal tax rate.

Convert your RRSP to a RRIF — Registered Retirement Income Fund. RRIFs are very much like RRSPs with two exceptions: No further contributions are allowed to your RRIF once it has been established; and you are required to withdraw a minimum amount each year based on your age and the value of your RRIF.

Buy a life annuity that will pay you a specified income, usually monthly, for the rest of your life.

Buy a term-certain annuity that guarantees payments to you until you turn 90.

By the way, life annuities and term-certain annuities are the two main types of fixed annuities and can be obtained in many variations. Another type of annuity to consider is the joint life/last survivor annuity that will continue payments to your spouse after your death.

Here’s some more alphabet soup to wade through:

LIF – Life Income Fund/PRIF – Prescribed Retirement Income Fund Similar to RRIFs in that you are required to withdraw a minimum amount each year but withdrawals are also ‘capped’ by pension legislation. You decide what amount to withdraw within the allowed range.

GIF – Guaranteed Income Fund or Guaranteed Investment Fund Also known as a segregated fund policy, a GIF is a form of insurance that combines the growth of investment mutual funds with the features of an insurance policy to provide you with the security of a guaranteed income for life.

LIB – Lifetime Income Benefit A GIF that provides a predictable, guaranteed income for life and is available to individuals at least 50 and under 91.

SWP – Systematic Withdrawal Fund A mutual fund feature that allows you to withdraw income at specific times – usually monthly or quarterly – while your invested capital continues to grow. Works like dollar cost averaging in reverse — you redeem more units when prices are down and less when they are higher.

There’s more, such as CPP, QPP, OAS, and all this alphabet soup stuff can seem a little deep at times. Your professional advisor can help dish up the tastiest solutions for your lifestyle and retirement goals.

J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc.. His column appears every Wednesday.