|
Retirement Income Alternatives
Withdraw cash from your RSP savings
This is rarely recommended, because the total amount accumulated in your RSP ends up being fully taxed as income at your marginal tax rate in the year
it is withdrawn.
Potentially, you could lose as much as half of what you have accumulated to taxes. To continue deferring tax, you must convert your RSP into an annuity and/or Registered Retirement Income Fund (RIF).
Back to top of page
Annuities
Available through life insurance companies and their agents, annuities offer a fixed income for life or for a specified period. How much income you receive depends on the interest rates at the time of purchase and the type of annuity you choose.
Payments from an annuity are taxable when received. You can select a fixed-term annuity that provides income for a fixed term , or a life annuity that makes payments for life. The longer the term or life expectancy is, the smaller the payments. Your payments are further reduced if you name a spousal (successor) annuitant or beneficiary.
With some annuities, there is no remaining value for your estate upon your death, regardless of how much money has been paid out to you. Once set, annuities offer virtually no flexibility or control over payout amounts – which only works in your favour if interest rates are high.
Back to top of page
Non-Registered investment savings
If you have non-registered investments, you can use this money to supplement your income. BMO Term Investments and BMO Mutual Funds can be structured to pay you an income on a monthly, semi-annual or annual basis, depending on the type of investment you choose.
Learn more about BMO Term Investments
Learn more about BMO Mutual Funds
Note: If you have both registered and non-registered investments, it is better to generate the income you need from non-registered investments before converting your RSP into a RIF (if you have not reached age 71). This allows you to continue to tax-shelter your RSP funds until they are needed.
Back to top of page
Use the equity in your home
If you have considerable equity in your home, but aren't interested in selling, consider the BMO Bank of Montreal Canadian Home Income Plan (CHIP). CHIP is available to homeowners 62 years and
older. It provides access to between 10% and 40% of the appraised value of the property.
More information
A Homeowner's Line of Credit is another option. By using the equity you have in your home, you can obtain the lowest possible rate of interest on a
variable rate line of credit.
Other pension sources
By living and working in Canada, you qualify for Canada's retirement income system: Old Age Security and the Canada Pension Plan. Public pensions are not intended to meet all your financial needs at retirement. Rather, they provide a modest base for you to build upon with additional, private savings.
More information
Your employer may also help you build your retirement savings with a pension plan. Talk to your employer to find out if this applies to you.
Back to top of page
| 
