As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. Some people choose to invest into personal registered retirement saving plans in Canada or 401k plans and IRA plans in the US. In this article, we will discuss RRSP, 401k plan maturity options.
I. Take all in Cash
a) In Canada at 69 years of age, depending on the amount of your RRSP account, you may have to pay up to 50% of tax if you take all money of the RRSP plan in cash.
b) Before April 1 of the year following the year in which you reach age 70½ you can transfer your 401 k plan to your IRA plan with out paying tax, but minimum withdrawal is required.
c) You can cash out your 401k and IRA plans with 20% tax withhold of amount withdrawn.
II. Purchase an annuity for your 401k plan and RRSP
This option requires you to give up all control of your funds in return for receiving a fixed and regular annuity income from an insurance company. The income annuity is based upon the current interest rate and the amount of annuity investment you purchase.
III. Other options
a) In the US, your 401K can remain invested in your employer-sponsored plan, if your former employer allows it. It avoids current taxes and penalties, and may offer other advantages unavailable elsewhere but minimum withdrawal is required every year. The IRS allows a number of options under which you can calculate your MRD. Make sure that the plan allows you to select the method that is most advantageous to you.
b) For IRA plans, minimum withdrawal is required at maturity.
c) In Canada, you can invest your RRSP like other investment programs in registered retirement income funds. Minimum withdrawal is required every year.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
Kyle J. Norton